Can we really trust the robots with our money?

While automation can boost the economy as a whole, it is about to wipe out one tenth of world’s jobs in next few years. As per a report published by Oxford Economics, robots may displace as many as 20 million manufacturing jobs by 2030.

That might be good topic for discussion another time, how robo-advisory is changing the way we are doing everything is an issue of concern.  Good or bad, to each his own. 

From ordering a pizza to recharging our phone, each day we are becoming more reliant on automation. In a few days, our cars will be driven by robots and the traffic lights would be controlled by robots too. As we have become used to our cellphones, we will get used to that practice too. 

But think of a situation – sometimes in  2050, on a Monday morning, a fleet of cars driving by robots are running in co-ordination on a busy road. A technical glitch happen at the traffic control room which is again controlled by another fleet of robot and you can imagine what kind of havoc can happen on the streets. Only human intervention can only stop such a situation. (it is another thing that in 2050, most of us will be working from home and all things possible will be available at our doorstep, so there will be hardly any cars on the road. Also, the technology will be so advanced that all car will be synced together to avert such accidents). 

Speaking in terms of investments, in the U. S. alone assets worth $200 billion is managed by robots.  World over, it will hit the $2 trillion by 2020, as per the same report. More than the processes being convenient, the services are dearth cheap.  All you have to do is to download an app and services are available at your convenience.

But what if there is a glitch..? It’s a matter of our hard earned money. Also, when we choose products through a website or an app, it often lack expert guidance.

Robo- advisors are not bad but they have limitations and they can never replace the skill, experience of good advisors. It can not offer the benefit of discussion, understanding and lone term relationship which a client can have with his/her financial planner.

Robo advisory suggestions are based on an algorithm and it does not take into consideration actual financial situation of any investor. Investors needs and financial situation changes with the change in their lifestyle, job, income sources, location, dependents and status. In addition with life changes, market conditions also changes with economy, politics or other factors.

Therefore, after a point robo advisory can not help you with changing situation. Also, it does not take into consideration that every individual investor has different needs.

It’s always recommended to go with a good financial planner who offer services as per individual needs/goals. One good advisor can save you from making mistakes and getting stuck into wrong products.

Though, investors who are new to investing or investors who want to start with small investments can go through Robo-advisory but ‘low cost’ does not always mean its good or profitable service.

As per several studies across the board, about 70% to 80% of retail investors are losing money and that is mostly because of DIY approach. The technology needs to improve far more before we can trust the robots completely.

Robo-advisory works best when they compliment the financial advisor’s work. Through computation, the best numbers can be churned out. Using those numbers, financial advisors can provide more accurate answers. At the world we live in today, we are yet to trust the robots completely.