In January, I brought on a new client who fits the target market of all the Robo-advisors popping up across the country. Read part one here to see how and why he came to us in the first place and the results of Round 1 here.
Our combatants have gone another 3 months, so let's see where we stand after the 2nd quarter of 2018. A reminder that after round 1 the tally was Robot 0 - Human 3.
Our client is away for an extended trip to New Zealand (which we provided comprehensive travel insurance for, Robot 0 - Human 4) so there hasn't been too much action other than the market returns. We have received periodic deposits (aka his winnings, remember he's a professional poker player) over the last 2 months, but the robot can accept those to, so no points awarded. Over the last 6 months, our robot competitor has returned -1.37%. If we take into account their fee of 0.5%, the loss is now -1.87%, up 0.50% since last time we looked, but still in a losing position. Our properly placed portfolio, based on a financial behaviour risk assessment, has returned 0.40%, and don't forget, that INCLUDES our fee. (For all of those concerned, here are the disclaimers that I am required to post after the mention of returns.) Of course, these returns are not going to make our friend rich, he's taking care of that doing what he does. Our job is to make sure that he has the money available for when he needs it. In his case, that's a mighty long time considering his age.
Robot 0 - Human 5
The more I research these firms, the more I understand how they operate and who they are good for. Yes, you read that right, I do think there is a place for a Robo-advisor in this world, but you need to ask yourself, do you want new, sexy, cheap and hands off or do you want professional, empathetic, sort of hands off and quality? It turns out, you really can't have it both ways.
On an interesting side note, I got a little traction from this series thanks to all of you sharing and it managed to make its way to the head office of our robot competitor. They were intrigued with what I had done and wanted to know more about me. After a few minutes of small talk, they essentially offered me a job. I respectfully declined. #stillahuman
Kenneth Coombs CFP CHS RRC
Ken has 13 years experience in the financial services industry, is a Registered Retirement Consultant and a Certified Financial Planner. Ken has written financial planning columns and has been a guest on financial radio and podcast programs.