Red Bank, N.J., May 13, 2019 – When it comes to the robo-advisor (ROBO) versus human-financial-advisor debate, the professionals at Withum Wealth Management note that the choice is not a zero-sum game, nor is it a winner-take-all-proposition. While ROBOs are helping to fill a void among small account balances, human advisors retain the advantage when it comes to creating total financial integration for clients.
“In essence, the distinction between a digital and human advisor is being shaped by a marketing-driven ‘Man versus Machine’ debate that is simply the wrong conversation,” said Jim Ferrare, managing principal of Withum Wealth Management. “Each has their own advantages and requires the same due diligence when choosing a platform.”
By definition, ROBOs provide digital financial advice based on mathematical rules or algorithms that are devoid of emotion and virtually any human intervention. As a result, these self-guided platforms are a less expansive means to allocate and manage assets.
In contrast, human advisors possess the ability to evaluate the full range of variables influencing investments. “This is especially evident in times of heightened volatility when client emotions are tempting them to do the exact opposite,” said Ferrare. “A wide range of scenarios, which are quite common over the course of an investment cycle, have the potential to tip the scales toward choosing a go-to human advisor or advisory team.”
These include an upcoming change in the tax code or individual tax status, pending business sale, short-term deficiency in cash flow, concentrated investment, change of employment or marital status, dove-tailing 401 (k) plan, prohibited investments and specific customization, to name a few.
“Of course, it is imperative to be mindful that ROBO and human advisors are not mutually exclusive,” added Ferrare. “In some cases, each may represent the smarter choice for the greatest gains. Asset levels, complexity and the need for human interaction are the strongest considerations when choosing between the two.”
Withum Wealth is a private wealth management firm co-founded by Pinnacle Associates Ltd., in collaboration with top-ranked advisory and CPA firm WithumSmith+Brown PC (Withum). Specializing in lifestyle planning, personalized wealth counsel and tax-sensitive portfolio management, the firm advises clients in investment management matters as they navigate each new stage of life. These include business transitions, retirement planning, divorce, death of a spouse and inheritance.