Technology has taken leaps and bounds to augment and enhance what financial planners do, and since 2009, a new breed of technology firms threatens to challenge advisors as well.
The rise of the so called “robo advisor”—online startup firms that aim to replace traditional financial advisors has begun.
Many critics, including Michael Kitces, a CFP at Pinnacle Advisory Group in Columbia, Md., have derided the start-ups, insisting that technology is no replacement for the human connection.
“It is doubtful that they will really make a dent in what real advisors do; in fact, the scope of what most robo advisors do is too narrowly focused on delivering passive, strategic, low-cost index portfolios. With that said, I would venture to say that their greatest competition is not from comprehensive financial planners, but from do-it-yourselfer alternatives like Vanguard and Schwab.
The real test for the robo advisors is yet to come. Will clients really be willing to stay the course through turbulent markets because a computer told them to do so?” (Hard to believe)
“However, the real reason why robo advisors are not a threat to real advisors is that the services they offer are nothing like the comprehensive financial planning process offered by a true financial planner.”
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