Are Human Financial Advisors Still Needed?
A large percentage of the population wants to work with a person that they trust to make investment and financial planning decisions. The average person needs help connecting the financial dots. What do I mean by connecting the financial dots? I’m talking about connecting all the dots in the areas of insurance planning, investment planning, retirement planning, tax planning, education funding, and estate planning. There is no doubt that in modern times the average person can open a web browser and become somewhat financially educated by reading a never-ending supply of financial information. This form of financial education does not, however, provide an individual with all the required tools to handle their own financial, tax, insurance, and estate planning matters. One could also argue the point that readily available software systems could replace human advisors (Robo platforms, free financial planning software, etc.). Financial planning and automated portfolio management software systems are great, but they do not connect the financial dots. I cannot find one financial planning software system that can replace the magnificent human brain of the financial advisor.
To illustrate my point, let’s consider eMoney financial planning software. My firm uses eMoney and our clients benefit from it. eMoney allows us to organize our client's financial planning information, run retirement, and education funding scenarios, etc. All these things are great but software systems such as eMoney do not connect all the financial dots that are necessary to provide actual (real-life) planning for an individual, family, or business.
eMoney cannot provide specific recommendations for a client, the advisor must do this. eMoney cannot tell me if a client qualifies for a Roth IRA contribution and if they should contribute or not. I have never been able to get eMoney to tell me if the client should contribute all their 401(k) deferrals to Roth or Traditional 401(k). It’s never told me if the client should consider eldercare estate planning as opposed to buying Long-Term Care Insurance. It’s never told me if a client’s withdrawal from their IRA account will cause their Medicare part B premium to increase. eMoney has never told me which account is the most efficient to take a client withdrawal, nor has it told me which assets to sell in a client’s portfolio to provide needed cash for a withdrawal.
Last, but not least, eMoney has never told me how to calm a client down that is about to make a big financial mistake (like selling their stocks in a panic and buying them back after stocks recover). Software systems are most definitely valuable, but they do not connect the financial dots needed to bring a financial plan to reality! Human advisors are the only ones that can do this with the most advanced technology on planet earth, the awesome human brain!