Friday, December 04, 2015

Chuck Donalies: The Frugal Planner's Weekly Dispatch, Issue 11 - "I've moved to WeWork!"

From: Chuck Donalies, CFP® On Behalf Of Chuck Donalies, CFP®
Sent: Friday, December 4, 2015 9:00 AM
The Frugal Planner's Weekly Dispatch, Issue 11

I've Moved!
Big news this week: I moved out of my home office! I now work at the WeWork building located in the Shaw neighborhood of Washington, D.C. It's a great space in an old Wonder Bread factory. I'll miss the short commute to my basement office, but I'm extremely excited to have an office and several conference rooms to choose from.

Rise of the Machines

By now you've probably heard of or read about robo advisors. No, they're not Terminators designed to give you financial advice. Robo advisors are basically automated investments in stocks, bonds, ETFs, etc. They make it easy to trade and rebalance portfolios - and they are terrifying to some investment managers.

I, for one, welcome our new robot overlords because they bring positive changes to the financial services industry:
  1. Accessibility: Robo advisors make it easy for anyone to invest in a diversified portfolio. It's no longer necessary to have hundreds of thousands - or millions - of dollars to invest as you would with a traditional investment manager.
  2. Downward Pressure on Fees: The automated nature of robo advisors removes the need for an investment manager, who often charges 1.00% of assets under management. Anything that lowers costs for consumers is a good thing.
For now there are limits to what robo advisors can do. Artificial Intelligence (AI) has a long way to go before we'll have Siri, Alexa, or Cortana dispensing financial advice. Those AIs can't give advice about retirement, taxes, estate planning, or market volatility.

Robo advisors are commoditizing the process of investing. More importantly, they enable financial advisors to focus on true financial planning. Investments are important, but they're only one piece of your financial puzzle.

I believe the smart move for financial advisors is to embrace robo advisors and create a human/robot hybrid - like the *Borg from Star Trek. Resistance is futile.

*Yes, I'm a geek. And proud of it.
Ultron would be a terrible financial advisor because he'd try to kill you.

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