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Can a Robo-adviser replace my human fiduciary financial advisor for wealth creation?

Updated: Feb 21

Robo-advice provides automated financial advice online. It uses AI algorithms to generate personalized investment recommendations based on a client's individual circumstances and goals. Robo-advice is typically more cost effective than traditional financial advice, as it does not require the same level of human interaction.

Overall, robo-advisors can be a good option for investors looking for a low-cost, easy-to-use way to manage their investments. However, it is essential to be aware of the limitations of robo-advice before deciding.

  • Limited personalization and flexibility: Robo-advisors provide general financial advice based on predetermined factors, such as risk tolerance and investment goals. However, they may be unable to consider your unique circumstances, such as your tax situation, family situation, history of financial success or failures, or personal values. The advice can lead to recommendations that don't fit your needs.

  • Limited investment options: Robo-advisors typically offer limited options, which keep costs down. Consider a human fiduciary financial advisor if you are looking for a broader range of investment options.

  • Not suitable for complex financial needs: Robo-advisors are ideal for simple situations. If you have complex financial needs, such as estate planning or tax planning, you may need to speak to a financial advisor who can provide more specialized advice.

  • Lack of human interaction: Robo-advisors provide a different level of human interaction than a traditional fiduciary financial advisor. Suppose you are experiencing a significant life change, such as starting a family, job loss, divorce, or retirement. In that case, you should speak to a human fiduciary financial advisor who can help you navigate the financial & emotional implications of these changes.

  • Lack of accountability: Robo-advisors have different accountability standards than human fiduciary financial advisors. You may have less recourse if you are unhappy with the advice you receive from a robo-advisor.

  • Lack of behavioural checks and balances: limited safety measures to stop clients from making emotionally driven decisions, actions that may not result in the best financial outcomes, e.g., selling after a market crash and buying back in well after the market has recovered.

Overall, robo-advisors can be a good option for investors looking for a low-cost, hands-off approach to financial advice, but be aware of the limitations before using one. Might the future change as AI develops? AI is a powerful technology that can potentially transform the Australian financial services industry. Robo-advice is just one example of how AI is being used to improve the experience of Australian consumers. In the meantime, consider a fiduciary financial advisor if you have complex financial needs or prefer to speak to someone about your finances. Email clientservice@providencegroup.com.au if you want access to our “Robo vs. Human” advice profiling tool, which can help you determine the most suitable choice.

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