Do We Have Proof Roboadvisors Aren't Advisors?

Do We Have Proof Roboadvisors Aren't Advisors?

Roboadvisors often claim to solve poor investor behavior through their automated way of investing. I have always disagreed, and suggested that investors would not be able to hold on at the next correction - regardless of a Roboadvior platform. In other words, I claim that investor behavior and our biases influence us regardless of the platform we use to invest. We may have some received some evidence of that on Monday.

As you can see from the headline, Roboadvisor websites crashed. Why? Because people were logging in en masse. Why? Well, probably because they wanted to sell. Or in Robo speak, they would change their risk preference to something more conservative...causing the automated program to sell stocks and buy bonds. In other words, these investors were looking to sell.

Perhaps the magic elixir of the Robo platforms is that they crash easy, thus ensuring no investors can make knee-jerk financial decisions. Their technology (breakdown) may have saved many of their investors from making poor decisions. But what if the market keeps going down, wouldn't they have done a disservice. No!

Related: 10 Simple Ways to Improve Your Messaging

Contrary to opinion, success in investing is not calculated based on short-term outcomes. We can only measure success in the short-term whether the investors followed their investment process/plan. Example: selling stocks in October 2008 appeared to be the right thing to do for several months, but if that investor never got back in, or got in much later, it ended up being a bad decision.

The bottom line is that there is no easy cure to combat our biases and emotional impulses. Optimism, overconfidence on the way up; anxiety and fear on the way down. Investors expecting a simple platform to change their behavior may be up for a rude (and very expensive) awakening.

Jay Mooreland
Behavioral Intelligence
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Jay is a passionate advocate for progress, both personal and professional. He founded The Behavioral Finance Network, an exclusive group of financial professionals, to provide ... Click for full bio

Most Read IRIS Articles of the Week: Feb 19-23

Most Read IRIS Articles of the Week: Feb 19-23

Here’s a look at the Top 11 Most Viewed Articles of the Week on, Feb 19-23, 2018

Click the headline to read the full article.  Enjoy!

1. Don’t Get Pinged by the Social Security Earnings Limit

I’d like to introduce you to Peggy. Born in 1956, Peggy will be 62 in 2018. She has worked in retail her whole life, the past twenty-five years spent in management. Peggy divorced from her husband 14 years ago, is still single and has no children. — Dana Anspach

2. We're Back to “Bad News is Good News” and “Good News is Great News”

This week the markets shrugged off last week’s fears and went back to the slow and steady melt up, despite economic news that looked likely to once again rock the boat. — Lenore Elle Hawkins

3. Q1 2018 Factor Views

Themes established in 2017 across a wide range of markets and factors continued to resonate through the fourth quarter. Economic growth was strong and supportive of equity markets across the globe, a range of volatility measures reached all-time lows, and business and consumer sentiment remained elevated. — Yazann Romahi and Garrett Norman

4. A Beneficial Basket of Commodities

Advisors and investors that feel they are hearing more and more about commodities and the corresponding exchange traded products in recent months are right. That is a natural result of dollar weakness and yes, the greenback is floundering again in 2018. — Tom Lydon

5. 3 Trends Shaping the Future of Asset Management

As the industry works to cope with new regulation, wades through an outpouring of new products, learns to satisfy investors’ shifting priorities and manages the active-passive debate, the viability of business units will be questioned, and at times radical measures will be taken. Peter Hopkins

6. 5 Ways Advisors Leave Money on the Table, and What to Do About It

My hope is that this article points out some opportunities for you to make more money and serve your clients at a higher level and that you decide to do something about it. — Bill Bachrach

7. The Market Has Gone Wild! Is It Time to Change Your Investment Strategy?

Whether the market is flying high or taunting your emotions with new lows and some bumpy volatility, here are four things every investor should keep in mind ... — Lauren Klein

8. How to Deepen Client Relations and Capture New Business Using Engaging Content

Why financial advisors NEED to understand much more clearly the power of good digital market. With tools like AdvisorStream, it’s easier than ever to get the content you need to drive leads and referrals today! — Kirk Lowe and Matt Halloran

9. Three Ways The Most Successful Gain Big Attention

How do some firms and ideas go from nowhere to everywhere in a few short months? All of a sudden a restaurant becomes popular, a gas station gains a cult following, or a Broadway show becomes too popular to get a ticket for years. — Maribeth Kuzmeski

10. Who Are the Hottest FinTech Firms and Influencers Around the World?

"Worldwide, $27.4 billion poured into fintech startups in 2017, Accenture reports, up 18% from 2016. With so much in play, it’s not surprising that 22 companies are new on this, the third edition of our list."  — Chris Skinner

11. The New Stock Market Normal Is Not What You Think!

Many sensational headlines have been written the past few weeks about market declines, but two things have increased for sure: the viewership and the ad revenues of financial media organizations — Preston McSwain​​​​​​​

Douglas Heikkinen
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IRIS Co-Founder and Producer of Perspective—a personal look at the industry, and notables who share what they’ve learned, regretted, won, lost and what continues ... Click for full bio