One of my favorite things to do when I get a quiet moment, is to sit with a cold beer and read my Forbes. Recently, the cover story was about yet another millennial who is going to change the world. Only this time, it is my professional world. The recent rage is that you should just find a suitable website with a modern website design to manage your investments. Hundreds of millions of dollars are pouring into these companies from private equity firms. They are often referred to as “robo-advisors” committed to delivering the lowest-cost solution for portfolio management. They believe that an algorithm can be so smart that it may change the way financial advice is delivered for generations to come. They claim your advisor may not be worth the fees he or she is charging you.

Is it a good idea to shake up the industry a little? Of course. Change has a way of filtering out some of the less valuable pieces of any industry. In this particular case, it will force many advisors to finally refine, or in some cases define their service model. Is it going to put us out of business? No. Why? As far as I know, a computer cannot yet calculate and interact with emotion. Yet, every financial decision of substance will involve that very factor. A conversation with a computer is a series of one-way communications. You input something, for example your response to a question about risk. The computer offers an output, in this case a portfolio allocation that matches your perceived tolerance for risk. Often, this happens in a conversation between an advisor and client but the advisor’s recommendation also values other inputs, such as cash flow, job security, family matters and as important as anything, our perception of a client’s behavioral finance personality. Fast forward to the days/weeks/months that the stock market is falling. You can log in to your investment account and now give a totally different answer about your willingness for risk and get a completely different portfolio recommendation from your robo-advisor. Is that really what you want to happen? The robo-advisor can only process the inputs you provide. It cannot step back, reflect on a series of conversations and offer some additional questions for you to ponder. Nor can it have a conversation with you about your other changing circumstances.

Think about all the major financial decisions you have ever made (buying a house, deciding to start a family, taking a new job, starting a business, etc). Could any of those decisions been made merely by inputting them into a formula? Doubtful. Instead, you likely gave great thought to a host of other considerations and potential outcomes. And when the decision was finally made, it likely came with some doubt still. Now, try to recall if you sought counsel from anyone else. I’m almost positive you did. The people you spoke to probably talked with you about a series of things that went far beyond the monetary implications. That’s what we do for our clients. We bring so many tangible and intangible points together that allow you to confidently make a sound decision. Find me a computer capable of that.

So before you unplug your financial advisor in favor of an algorithm, be sure you don’t have any financial decisions in the future that will involve emotion. Best wishes for continued success!