Robo-advisers cannot compare to humans

While automating our investment options works well in some ways, we still need that interaction with an adviser when things go wrong.

Gary Clement for The National
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The Spillikin. Watch the theatre production if you get the chance. It is a love story. A fantastical exploration of relationships with yourself, your partner, friends, and – those of a more technical kind. There is a ­robot. The android and the protagonist develop a deep, co-dependent relationship. But it is doomed.

For one thing, the robot can pretty much live forever. Not the case for flesh and blood. But there are other reasons too.

There is only so much humanhacking an algorithm can do. Which brings me to the rise of robo-advisers.

Automating management and investment options of our money is great news in some ways: advice is impartial – emotion does not enter into anything. Plus fees come down – think 0.25 per cent instead of 1 per cent of assets being managed by humans. This is especially good news – remember, it is the drip-drip of fees paid that dents our chances of making decent money.

But good investments and profitable portfolios are not only about this. They need to be the right thing for the unique you and me. We are complex beings.

This is one of the reasons that some investment companies that went all-out on tech-Tony, backtracked and hired human interfaces again. These so-called hybrid firms are the ones set to do well. Why? Because we really do need someone to talk to. Some one – not some “thing”.

For example: when there is a big swing, or bad news. This is when we jam company lines wanting answers, advice, a feel for what’s going on.

It is our money and we want to talk things over. We have nuanced questions and concerns. Things that cannot be articulated in black and white, yes or no of definitive online questionnaires – where “it depends” isn’t an option on offer. Neither is “yes but”.

This is another reason “advice” imparted by a computerised model shouldn’t be the only way we invest. Robo-advisers operate a one-size-fits-all system. One that does not take into account your individual life, problems, aspirations or way of living. Think of how your needs and plans will change if you have a baby that wasn’t planned; a child who is disabled; discover your spouse wants a divorce or want to throw in the towel and live on a remote island. Tech-Tony is about the here and now of number-soup versus your age, risk appetite and other variants it seeks to standardise and average out.

Add to this that there is no critical thought or insight either. Take a bubble building up, for example – say in index funds. The very asset allocation the algorithm is recommending for you.

This is why the investment companies set to do best are those that cut down overheads and offer us automated financial guidance. But still have the human form for us to chat things through with.

Hybrid investment companies are predicted to manage US$3.7 trillion worth of assets worldwide by 2020 and $16.3tn by 2025. That is 10 per cent of all investable worldwide assets. Contrast this with 1.6 per cent of global wealth expected to be managed by pure robo-advisers by 2025.

Robo-advisers are here to stay, and grow.

These are not actual robots, of course – but firms that claim they can do a better job managing your portfolio using computers. ‘Tis the era of technology influenced services. Financial services included.

But hybrids are not the definitive answer. Because we want more. We want a person who knows us, our story and our ambi­tions. Getting different people on the other end of a phone or online video conference isn’t the kind of human interaction we hanker for.

Relationships are where it is at, and we will have to wait for a model that gives us dedicated advisers with automated-territory and low-fee structures.

On this note, I leave you with news out this week about a man in China who married the robot he built. Unlike the Spillikin one, a companion that could hold a conversation, sing, is loaded with human memories and can learn; his "wife" does nothing and is a hefty 30 kilograms that he carries around for company.

A tad extreme perhaps, but it goes to show the varying ways our lives can intertwine with manufactured mates.

Tech and robots are with us for the long run. Just make sure they are not running – and pot­entially ruining – your life.

Nima Abu Wardeh describes herself using three words: Person. Parent. Pupil. Each day she works out which one gets priority, sharing her journey on finding-nima.com

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