Decades ago, it was pretty much impossible to do much investing without a personal financial advisor.
Now — and especially in the last few years — apps and artificial intelligence have made it easy to throw as little as $1 into an investment account without needing to talk to anyone at all.
But while taking humans out of the equation can make things faster and easier, removing the human touch may not be the best way to invest.
First, a few definitions. Robo-advisors and AI financial advisors are not the same! Robo-advisors use automatic systems like AI advisors do, but the AI version might also try to help you analyze market trends, recommend investment moves and more.
The pros and cons of using robots and AI:
There are definitely benefits to using robo-advisors or AI for retirement: You may be charged lower management fees with robo-advisors than with a traditional, human personal financial advisor, and that means you can invest a little bit more. Over time, that extra money will grow. It can also remove some barriers to entry for young and less experienced investors, because you can just invest without vetting a person and having sometimes difficult conversations about your investment style, goals and plans.
However, a robot or an AI system may not be able to account for nuances in your personal financial situation. If you own a business, for example, a robot may not take advantage of all the benefits and deductions that a well-educated financial professional can find for you. The same applies if you have a complicated estate plan, a trust, or you need to make plans to take care of children or parents in the future.
In addition, the advice you get from AI will be less personalized than guidance you can get from a trusted, human advisor, who can help you navigate the emotional side of investing.
Also, beware: Robots and AI advisors can make mistakes by accessing inaccurate information or outdated tax rules. You could also run into fraudulent situations or privacy violations when you give your personal financial information to a non-human.
The pros and cons of talking to a human:
Studies have shown that many members of younger generations actually try to avoid talking on the phone and prefer automation for assistance. But there are real benefits to talking to a human being!
While using a human might be a little more expensive, a great investment advisor will more-than pay for themselves. A human can provide personal financial planning that AI and robots can't do yet. They can consider your debt, income, family responsibilities, retirement and other goals and create a system that works for you and your family. In addition, when the stock market suddenly drops or when you get worried about the future, a human can provide an educated perspective and insight. They can help you avoid making mistakes that could cost you!
Using the best of both worlds is possible!
The best way to go may be to find a personal financial advisor who you know, like and trust. A great advisor can help customize your plans, give you advice that fits your unique situation and then use AI in a way that is safe, legal and helpful. A trained, educated financial advisor can use AI, but they will be able to catch errors and help you avoid any bad advice from an AI system.
How do you find this person?
The first step toward finding the right human personal financial advisor for you is by figuring out what you want to focus on. Are you most interested in talking about retirement savings, tax strategies, saving for education or all of the above? Once you know your biggest goal (and your biggest challenge), look for someone who is an expert in those areas.
Your next step: Contact us at CommonWealth One! We have a variety of professionals who can help you with investments, retirement planning or college planning. Every advisor in the CommonWealth One Financial Network is educated, credentialed and will act in your best interest, always.
With anyone you consider, you'll want to ensure that the person is a fiduciary, who is legally obligated to always act in your best interest. Some unscrupulous financial advisors get bonus commissions for recommending certain investment products, and the worst ones might push you toward products that are not necessarily the best for you. A fiduciary won't do that.
You should also check to ensure that your advisor is experienced and credentialed with a CFP or CFA designation. You can look them up at adviserinfo.sec.gov and at brokercheck.finra.org to see if their credentials are current and if they have been subject to any disciplinary proceedings.
We're here for you, for life, through every possible stage of your financial journey. We're just a call or a click away and we're happy to help you find the best financial advisor for you.