Robo Advisor? Yes, but with a human touch

Artificial intelligence is now among us, and there are an increasing number of areas where this revolutionary innovation is finding application. The financial advice market is no exception: for the past few years, so-called Robo Advisors have been gaining popularity. What are they? Sort of automated advisors, that is, technological platforms capable of offering, on the basis of mathematical formulas or algorithms, automated financial advice. To tell the truth, Robo Advisors do not always completely exclude human intervention, but are mostly based on the autonomous operation of software.

Here comes the virtual advisor

The first Robo Advisors (also often referred to as “virtual investment advisors” or similar formulas) emerged in the United States in 2008. More recently they have also spread to Italy, but not yet in a big way. The basic idea behind this new way of managing one’s savings is that the ability of machines to process a large amount of data and to proceed objectively determines better results than those guaranteed by flesh-and-blood advisors, who are naturally prone to get carried away by emotions or make mistakes of various kinds.

But how is this really the case? Can we really consider Robo Advisors a viable alternative to financial advisors? Or can we even consider them such an efficient system that they will retire traditional methods of asset management?

The limitations of Robo Advisors

Let’s start by saying that Robo Advisors are certainly an interesting option for all savers who have so far made their investment decisions in a totally “do-it-yourself” way: virtual advice can certainly provide them with valuable guidance and reduce the risk of catastrophic mistakes.

More controversial, however, is the idea of using a “robot” as a substitute for a real financial advisor. In favor of the machines play, as mentioned, the great computational capabilities and “scientific coolness” of reasoning. On the other hand, Robo Advisors also show several limitations, according to experts. First, their predictions are based solely on past statistical data and not, for example, on current or upcoming sociopolitical events that can change the scenario. Second, they generally do not take into consideration the portfolio the saver already has or any components of his or her financial profile other than securities. Moreover, lacking a true and thorough explanation of the suggested moves, the client risks making choices he or she does not understand the meaning of or not following good advice from the Robo Advisor because he or she does not recognize it as such. The last of the main observations against virtual investment advisors concerns the necessarily standardized form of the proposed solutions.

THE IMPORTANCE OF A REAL (AND TRAINED) ADVISOR.

In conclusion, we can say that although Robo Advisors represent an interesting and in several cases useful innovation in the asset management landscape, the experience and sensitivity of a good financial advisor who can look you in the eye still remains most of the time irreplaceable. And this is all the more true if the saver’s choice falls on companies that can offer highly personalized solutions and are able to entrust the human touch of their advisors with the most advanced technological tools.