Automated financial planning - Will robots replace financial advisers?

User Written by Duncan Taylor on November 16, 2017.

Automated financial planning - Will robots replace financial advisers?

Developments in technology and artificial intelligence will inevitably have a major impact on employment and productivity in every market sector. McKinsey and Company released a report earlier this year which estimated that 60% of all occupations could have at least one third of their activities automated by technologies already in existence.

The financial services sector is no exception. In fact we are already seeing a move towards increased automation and away from human interaction with the emergence of automated financial planning in the form of Robo-advisers.

It’s not hard to understand the economic argument behind this, a one-off investment in technology is more cost effective for business than paying monthly salaries but the question is whether a reliance on these fintech tools will be good for your financial health.

While Robo advice is suitable for some situations, due to the complexity of planning needed and multi jurisdictions our clients operate in, my hunch is that when it comes to making important decisions with regard to your investment portfolio, particularly in times when the market is volatile or in crisis, talking to a qualified financial services professional is going to remain vital in the future.

Investment decisions which will impact your finances are not to be taken lightly – your future financial security is at stake. Automated financial planning tools and robo-advice can crunch data and suggest decisions based on that data but they are unable to take into consideration the sometimes complex personal situations.

Take the question of risk tolerance for example – an absolutely key factor to be taken into consideration when working out an investment strategy and something which regulatory bodies insist upon. While a client could tick a box on a screen to say that they are looking for investments with a ‘moderate’ level of risk, understanding the true meaning of that answer is not something that can be done simply by ticking boxes. An adviser can drill down into the detail on this by asking, for instance, whether the client could cope with a 15% drop in the value of their portfolio or whether that would be too much.

And what about dealing with sharp market declines? Experts are predicting that one is on its way soon so how would an automated programme deal with that? The most likely scenario would be that a client would be advised to sell certain badly performing stocks. But would it take into account the fact that historically, it is common for sharp market declines to be followed by growth so that losses incurred can be recuperated in a relatively short space of time? Selling at the wrong time could mean losing out on the rebound. Take the Brexit vote for example – financial markets went into turmoil immediately after the vote crashing by 8% but calm quickly returned and three months after the vote was back up to pre-vote levels.

Of course, computers are better and quicker than humans at generating and analysing data but they lack the judgement of a person and cannot provide the hands-on, in-depth service that a financial professional can.

While I understand that the march towards automation in my industry is inevitable, I believe that we will be adding value to our clients’ financial planning for many years to come. If you’d like to see what we can do for you, get in touch at

Duncan Taylor

Duncan Taylor

Posted on November 16, 2017 in Financial Planning.