Frank Johnson | February 15, 2023
This article is reprinted with permission from Esq. Wealth Management, Inc.
With advances in artificial intelligence and automation, robots are increasingly part of our daily lives. If you drink a vodka tonic every day at the same time, a robo-bartender might do the trick. But if you want a custom drink that fits your level of energy, if you’re buying drinks for your table, or if you want to leave the tab open for certain friends, a human bartender might suit you better.
Managing your investments, minimizing your taxes, planning for your retirement, and figuring out how to leave a legacy for your heirs can be an arduous task. If you’re considering whether to go with a financial planner or a robo-advisor, the right choice likely depends on your own familiarity with investments, tax laws, and the complexity of your estate.
Robo-advisors are based on a digital platform that uses algorithms to invest with very little human supervision. Since the launch of the first robo-advisors during the Great Recession, they’ve gained popularity as cheaper alternatives to financial advisors. If you have very simple investment needs, robo-advisors may be a better option. However, they can be a poor option for individuals who want to tackle complex issues, such as minimizing taxes and estate planning. No matter your financial situation, there are benefits to working with a financial advisor that the robo-advising process can’t easily replace.
1. Setting and planning for goals
Financial advisors can help you establish financial goals and implement strategies to help you achieve them. At the outset of working together, a financial advisor will typically go through a discovery process where they ask you questions about what you hope to accomplish with your money. Some goals may be relatively simple like saving for a down payment on a house or a child’s college education. Others may be more complicated, such as leaving a legacy or ensuring a dependent child will be taken care of after you’re gone.
Once your advisor understands your goals, they can help you choose the right strategies to accomplish them, from maximizing savings in retirement accounts to helping you implement an estate plan or trust.
As you age, changes in career, marriage or the birth of children may lead to shifts in your financial goals. Regular meetings with an advisor can help you keep tabs on your changing needs, and your advisor can help you make adjustments to your financial plan as necessary.
2. Keeping you on track
Financial advisors don’t just set up a plan with you; they help you stick to it along the way. No matter how rational you think you are, emotions can influence your personal financial decisions, often to a surprising degree. Letting emotions get in the way can lead to counterproductive investment choices, such as panic selling — selling assets after they’ve dropped in value, rather than staying in the market and taking advantage of an eventual recovery.
Your financial advisor is your sounding board, and when you get worried about changes in the market, you can voice your concerns. Your advisor can provide an objective point of view and information on how short-term volatility might affect your long-term financial plan.
A financial advisor can also provide a sense of accountability that can help you stay on track, making you less likely to do things like put off saving or empty your investment accounts on a whim.
3. Building a team of experts
The benefits of a financial advisor go beyond wealth management. Your financial advisor can assemble a team of professionals around you to deliver expertise and services in other fields. Access to CPAs, attorneys, and insurance brokers can help you address all your financial needs in a coordinated, holistic way.
Whether a financial advisor or robo-advisor best fits your needs will depend on your individual circumstances. Making an informed decision requires an understanding of the range of benefits unique to financial advisors. It’s important to bear in mind, too, that when it comes to access to new machine learning technology, it’s not an either-or proposition.
EsqWealth is a wealth management firm that, in conjunction with its affiliated professionals and alliances, is made up of experienced lawyers and financial professionals with advanced degrees, certifications, and first-hand life-experience in taxation, asset protection, and high-net-worth wealth management. We use advanced digital tools to analyze portfolios and market data, so you can enjoy the advantages of a personal touch without forgoing the benefits of technology.
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The information above is not intended to and should not be construed as specific advice or recommendations for any individual. The opinions voiced are for general information only and are not intended to provide, and should not be relied on for tax, legal, or accounting advice. To discuss specific recommendations for any unique situation, please feel free to contact us.