Robo-advisors, digital platforms offering automated financial planning services, are gaining traction due to their low costs and accessibility. These platforms utilise algorithms to manage and balance investment portfolios, often for a fraction of the cost of traditional human advisors. They are particularly popular among younger investors and those with less complex financial situations.
Despite their rising popularity, experts argue that robo-advisors cannot fully replace human financial advisors. While robo-advisors excel in areas like portfolio management and tax-loss harvesting, they typically lack the personal touch and holistic approach of human advisors. Human advisors can consider a client’s complete financial picture, including estate planning, insurance, and retirement, and provide tailored advice based on individual circumstances and goals.
Critics also highlight the limitations of robo-advisors during market downturns. Unlike human advisors, robo-advisors cannot reassure clients or prevent panic selling during volatile market periods. However, some hybrid models are emerging, combining the benefits of both robo-advisors and human advisors. These models offer automated investment management with the option of consulting a human advisor when needed.
In conclusion, while robo-advisors offer cost-effective and accessible investment management, they are not yet equipped to completely replace the comprehensive service provided by human financial advisors.
Go to source article: https://www.cnbc.com/2022/01/16/robo-advisors-are-gaining-popularity-can-they-replace-a-human-advisor.html