Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Need for Human Advisors
Old 03-07-2016, 10:13 AM   #1
Thinks s/he gets paid by the post
 
Join Date: Jul 2002
Posts: 1,041
Need for Human Advisors

Just an interesting article:
Can robo advisers replace human financial advisers? - MarketWatch




"Investors’ preference for human advice is further evidenced by the decline of self-directed investors — those who want to handle their own portfolios and aren’t looking for advice. Since 2010, the population of self-directed investors has declined to 38% from 45%, even as the tools for monitoring and managing portfolios have steadily improved. Why is this happening? I believe that investors are using these tools to get a basic understanding of their situation and then turning to providers of professional advice once the complexity exceeds their comfort level."

Surprised by the stat that fewer folks consider themselves self-directed investors, would have thought the trend would be the other way.
__________________

__________________
RE2Boys is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-07-2016, 02:02 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,626
I think the survey is bogus or cooked. No self-respecting DIY investor would even respond to such a survey in the first place.
__________________

__________________
LOL! is offline   Reply With Quote
Old 03-07-2016, 02:09 PM   #3
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,487
Quote:
Originally Posted by LOL! View Post
I think the survey is bogus or cooked. No self-respecting DIY investor would even respond to such a survey in the first place.
Well, it was conducted by an asset management firm.
__________________
MichaelB is offline   Reply With Quote
Old 03-07-2016, 05:19 PM   #4
Full time employment: Posting here.
gcgang's Avatar
 
Join Date: Sep 2012
Posts: 928
I'm surprised that an asset management firm admits that so many investors are DIY. frankly, I'm surprised there is such a high % DIY.
__________________
In theory, there's no difference between theory and practice. In practice, there is. YB
gcgang is offline   Reply With Quote
Old 03-08-2016, 02:47 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
mickeyd's Avatar
 
Join Date: Apr 2004
Location: South Texas~29N/98W
Posts: 5,884
While most of us here are quite comfortable with DIY investing, most of the folks in the rest of the world are pretty lame or lazy and feel that they need a bit of hand-holding to get over the fear of making a "mistake" when investing on their own.

I think that what they really are looking for is someone to blame it on when their numbers go south for a while and panic ensues. Folks here expect it to eventually go south and then go north.
__________________
Part-Owner of Texas

Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx

In dire need of: faster horses, younger woman, older whiskey, more money.
mickeyd is offline   Reply With Quote
Old 03-08-2016, 04:11 PM   #6
Recycles dryer sheets
 
Join Date: Jan 2010
Posts: 143
In the article, they define self-directed investors as "those who want to handle their own portfolios and aren’t looking for advice."

But in theory there is a middle ground: people who want to handle their own portfolios but seek occasional advice on an hourly fee basis, rather than relinquishing assets to someone else to manage.

I say in theory, because as I clean up my portfolio and prepare to integrate it with inherited assets I'm striking out on finding someone willing to look at a portfolio containing retail products and to critique the allocation, the strategy for rebalancing/integration, the inherited RMD strategy, etc. The ones I've been referred to all want to take complete control my assets -- at a hefty price. They want to be my "wealth managers."

So maybe the hourly fee-only adviser is a dying breed, to be replaced by the robot?
__________________
BarbWire is offline   Reply With Quote
Old 03-08-2016, 04:42 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
braumeister's Avatar
 
Join Date: Feb 2010
Location: Northern Kentucky
Posts: 8,620
Quote:
Originally Posted by BarbWire View Post
I'm striking out on finding someone willing to look at a portfolio containing retail products and to critique the allocation, the strategy for rebalancing/integration, the inherited RMD strategy, etc. The ones I've been referred to all want to take complete control my assets -- at a hefty price. They want to be my "wealth managers."

So maybe the hourly fee-only adviser is a dying breed, to be replaced by the robot?
Alas, I think you may be right. Several years ago I had the idea that it might be useful to get a good, experienced second pair of eyes to look at my situation. So I went searching and found a couple dozen "fee-only" planners within 100 miles of me. Every single one wanted to charge me a percentage of AUM instead of a flat fee, although most of them used some very creative language to make it sound as if they weren't doing that. A couple of them even went so far as to insist on basing their fee on 100% of my total net worth, not just my investments. Where do these people come from?

OTOH, I have had some wonderful and useful discussions with my personal Fidelity rep, and that has cost me less than nothing (he also gives out perks such as free TurboTax, lunch seminars, etc.).
__________________
braumeister is offline   Reply With Quote
Old 03-08-2016, 04:59 PM   #8
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 1,712
I suspect that what many people are paying for when they use a FA is a perceived "Peace of Mind" as opposed to pure financial advice.

Their FA tells them everything will be okay and eases their anxiety.

-gauss
__________________
gauss is offline   Reply With Quote
Old 03-08-2016, 05:22 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Location: Kerrville,Tx
Posts: 2,725
At one time it was felt that folks needed travel agents to arrange domestic travel before the web. I wonder if the FA business is just begining the transformation that occured in the travel industry.
__________________
meierlde is online now   Reply With Quote
Old 03-08-2016, 05:25 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
I'd say there's a real need for good, human, financial advisors with an emphasis both on human and on good.

For most people investing in panicky assets is an emotional thing. And most people really do need some hand holding when things get scary. Just go back and scroll through the threads on this forum back in 2009 to see how freaked out many previously self-assured DIY investors where when the poo hit the fan for real. And how many ended up hitting the eject button at a bad time?

We even had some hint of that recently with the latest little market hiccup at the beginning of the year.

So an advisor who helps people create a reasonable strategy to meet their specific goals and helps them stick with that strategy even when every one of their instincts tells them it's time to engage flight mode is something that is going to be in demand long after it's technically possible to replace that person with an algorithm.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 03-08-2016, 07:36 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,626
Instead of peace of mind, maybe folks want someone to blame for the performance of their portfolios. They want someone they can give a piece of their mind to.
__________________
LOL! is offline   Reply With Quote
Old 03-08-2016, 08:10 PM   #12
Dryer sheet aficionado
 
Join Date: Nov 2015
Posts: 27
Quote:
Originally Posted by Gone4Good View Post
So an advisor who helps people create a reasonable strategy to meet their specific goals and helps them stick with that strategy even when every one of their instincts tells them it's time to engage flight mode is something that is going to be in demand long after it's technically possible to replace that person with an algorithm.
I think the question is not whether such a good advisor is worth *something* rather than nothing, but precisely how much? An occasional modest fee? Yes. One out every three or four dollars I spend annually (that is, 1% of AUM when I'm safe-withdrawing 3% - 4%)? Not so much.
__________________
Skeptic is offline   Reply With Quote
Old 03-08-2016, 08:46 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Location: Kerrville,Tx
Posts: 2,725
Quote:
Originally Posted by Skeptic View Post
I think the question is not whether such a good advisor is worth *something* rather than nothing, but precisely how much? An occasional modest fee? Yes. One out every three or four dollars I spend annually (that is, 1% of AUM when I'm safe-withdrawing 3% - 4%)? Not so much.
The question is is the suggested once in a while advisor business one that an advisor could live on? In particular imagine and advisor is nothing but an advisor and gets say 4 to 5 hours a year of work. That means that the advisor needs several hundred clients at a minimum. It may be that the advisory business model is broken, as hinted in some of the responses to the fiduciary rule proposal. that advisors cant make the money they think they deserve in the model.
__________________
meierlde is online now   Reply With Quote
Old 03-08-2016, 08:48 PM   #14
Full time employment: Posting here.
gcgang's Avatar
 
Join Date: Sep 2012
Posts: 928
Quote:
Originally Posted by LOL! View Post
Instead of peace of mind, maybe folks want someone to blame for the performance of their portfolios. They want someone they can give a piece of their mind to.
It seems very difficult for an hourly advisor to survive, especially taking the above into account and wondering what kind of liability you subject yourself to for taking in a few hundred dollars "advising". You'd probably have to charge much more to cover costs and make a good living.


But I don't think many people would pay a $500-1000/hr fee even it would cost less than what they are currently paying under the % of assets model. They are in denial, not aware of what they are "paying" as long as they don't have to write a check.
__________________
In theory, there's no difference between theory and practice. In practice, there is. YB
gcgang is offline   Reply With Quote
Old 03-08-2016, 08:55 PM   #15
Dryer sheet aficionado
 
Join Date: Nov 2015
Posts: 27
Maybe would-be advisors should combine financial advice with some other "side hustle" to make it into a business---tax preparation or life coaching or personal finance classes or something.
__________________
Skeptic is offline   Reply With Quote
Old 03-08-2016, 09:10 PM   #16
Dryer sheet aficionado
 
Join Date: Nov 2015
Posts: 27
I should say that, as another poster has noted, I think software will improve and human FAs will go the way of travel agents and bank tellers. IMHO, what's holding the transition back is that software for financial planning is currently written by financial planners, in an effort to drive business to themselves.


Sent from my iPhone using Early Retirement Forum
__________________
Skeptic is offline   Reply With Quote
Old 03-08-2016, 09:47 PM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by Skeptic View Post
I should say that, as another poster has noted, I think software will improve and human FAs will go the way of travel agents and bank tellers.
I don't see it. At least not until AI replaces most human thinking.

There are so many financial questions where there's no right answer. Just click on over to the Social Security Math thread for a live example. Not everything yields to a simple optimization approach.

Even deciding "easy" things like an appropriate Asset Allocation is an incredibly human decision. Sure, an algorithm can tell someone that they should have 60% of there portfolio in stocks but unless the investor fully understands what that means and is prepared to live with the consequences, that is probably not going to be a good answer for that person.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 03-09-2016, 05:59 AM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,626
Quote:
Originally Posted by Skeptic View Post
Maybe would-be advisors should combine financial advice with some other "side hustle" to make it into a business---tax preparation or life coaching or personal finance classes or something.
You mean like their current side hustle of selling whole life insurance and annuities?
__________________
LOL! is offline   Reply With Quote
Old 03-09-2016, 07:52 AM   #19
Thinks s/he gets paid by the post
jIMOh's Avatar
 
Join Date: Apr 2007
Location: Milford, OH
Posts: 2,085
Quote:
Originally Posted by RE2Boys View Post
Just an interesting article:
Can robo advisers replace human financial advisers? - MarketWatch




"Investors’ preference for human advice is further evidenced by the decline of self-directed investors — those who want to handle their own portfolios and aren’t looking for advice. Since 2010, the population of self-directed investors has declined to 38% from 45%, even as the tools for monitoring and managing portfolios have steadily improved. Why is this happening? I believe that investors are using these tools to get a basic understanding of their situation and then turning to providers of professional advice once the complexity exceeds their comfort level."

Surprised by the stat that fewer folks consider themselves self-directed investors, would have thought the trend would be the other way.
I worked as a financial planner for about 3 years. The flaw I saw with the "business" is 75% of advisors get paid close to the same way (% of assets under management or a fee for executing transactions). Meaning most advisors make money advising on "asset allocation" in some degree- managing assets.

However the problems people have - dealing with volatility, SS strategies, withdraw rates, tax planning are much different than how the advisor gets paid.

Advisors having a CFP can add value to some of those areas- basic tax knowledge, volatility for example. But SS strategies are not something the CFPs I met understood (the average person on this board is likely to know more SS strategies than the CFPs I have met).

Investments give an advisor a reason to get in front of clients and talk, so it doesn't make sense to automate it from a sales perspective.
__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
jIMOh is offline   Reply With Quote
Old 03-09-2016, 12:26 PM   #20
Dryer sheet aficionado
 
Join Date: Nov 2015
Posts: 27
Quote:
Originally Posted by Gone4Good View Post
I don't see it. At least not until AI replaces most human thinking.
Don't underestimate (as the late lamented travel agent industry maybe did) the appeal of giving folks somewhat fewer options at vastly improved convenience and price.
__________________

__________________
Skeptic is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
2 financial advisors' plans for my MIL - need some better advice WM FIRE and Money 9 05-15-2007 01:56 PM
Do you think that the folks that followed Hitler were truly unique human beings? Cut-Throat Other topics 92 05-28-2006 09:57 PM
Human Search Engine riskadverse Other topics 12 03-02-2006 01:42 PM
800# Cheat Sheet - Speak to a Human Being Honkie Other topics 0 12-30-2005 12:28 AM
Of Human 'Bond'age JOhn Galt FIRE and Money 7 02-10-2005 07:00 AM

 

 
All times are GMT -6. The time now is 10:26 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.