We are living in an age of brilliant technology advances. Computers fly airplanes, control elevators, and soon, may drive your car. Not long ago, it took an entire room to house a computer as powerful as the one in your cell phone. So it should not come as surprise to see financial services firms introduce a computer designed to manage your financial life.

Roboadvisors are a service designed to provide an asset allocation strategy, based on responses to a series of questions asked of the investor. This service is available at reduced fees—typically 0.25%—and uses low-cost investments like exchange traded funds to populate the portfolio. For the cost-conscience, this may seem like the perfect solution.

However, computer programs are only as good as the inputs and the data available. If a consumer does not provide accurate answers, or fails to take into account the appropriate levels of risk for their financial situation, the results could be less than favorable. Moreover, investors are often their own worst advisor. In 2014, the S&P 500 had a return of 13.7%. Yet the average equity mutual fund investor experienced returns of only 5.5% that year, according to a Dalbar investor behavior study. Further, a recent study by Russell Investments found that over the 30 year period from 1984 to 2014, ‘do-it-yourself’ investors had an average annualized portfolio return of 9%, which when compared to the Russell 3000 index return of 11% for the same period, shows a long-term investment behavior gap of 2% annually. The timing of buy and sell decisions of investors has been the subject of many behavioral studies over the years, often concluding that investors struggle to consistently make objective and sound investment decisions.

Financial advisors act not only as a provider of financial solutions, but they also provide the needed advice and guidance to help investors make educated decisions. Further, many offer additional services such as retirement and education planning, insurance, and estate planning. The value of having someone across the desk, or on the other end of the phone, asking questions and listening to your answers has real tangible value. Advisors are trained on the principles of markets, tax rates, economic cycles, and planning techniques. 

In addition, they provide something even more valuable:  Someone willing to listen to investors’ personal and financial goals and needs. Portfolios and financial plans are then designed around those goals and needs. Finally, financial advisors provide emotional support during extreme market fluctuations and stressful family situations. 

Technology has made the world smaller through improved communication, has lowered the cost of many products and services through manufacturing efficiencies, and has expanded our understanding of what entertainment can be. Certainly, technology has been a boon to investing as well; making it easier for financial advisors to deploy the advice they give to their clients. A vast amount of research is available at the tip of an advisor’s finger, and adjustments can be made to financial plans and portfolios almost instantaneously. However, a computer cannot replace the empathy, understanding, and skill that a financial advisor can bring to the table. In the end, technology is best used as a tool, not a solution.