Automation Is an Asset—Not an Answer


We’ve all been in that stressful situation where the cable is on the fritz or a laptop isn’t turning on. And when we call the technical support number for help, we’re greeted by a robotic, impersonal, electronic voice. My heart still sinks every time I hear “press one for …” anything. When I am experiencing stress, nothing assuages that feeling more than the calming presence of a knowledgeable person guiding me through the issues.

That concept applies to more than technical difficulties, though. It’s the primary reason I advocate human-to-human connections in financial services, rather than a strict reliance on robo advisors. The promise of technology is exciting and certainly a vital part of a sophisticated advisory or financial planning practice, as mentioned in Financial Advisor IQ’sRobos Creep on Financial Planning.” But artificial intelligence is still a very long way from handling the emotions of stressed out clients.

Using technology to build better portfolios through a deep and intellectual understanding of the relationships between the utilized asset classes is a very good thing. However, the challenges that result from this approach, in my mind, are twofold. First is negative selection bias. Many of these tools are just backward-looking Excel spreadsheets that use predominately U.S.-based market indexes from the past 100 years.

This type of tool virtually eliminates so many other valuable return streams—private equity, long/short and global macro—just to name a few. The second issue I have is that current technology, and even contemplated future technology, still has no answer for the emotional nature of human beings.

When it comes down to it, it’s the implementation of a fully diversified portfolio by a trusted mentor who understands how to lead people in times of stress—not an automated algorithm—that is most equipped to stand the test of time.

Frank Muller

As CEO of Provasi Capital Partners, Frank Muller brings nearly 30 years of experience in building and managing multi-channel distribution services. Frank has been a featured contributor in numerous industry publications, bringing his unique insights and perspectives to relevant issues impacting financial advisors and their clients.

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Frank Muller