The Fate Awaiting Advisors Who Assume Too Much

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As an advisor you counsel your clients to be aware of confirmation bias and to avoid the temptation to favor information that confirms pre-existing beliefs. Yet, many of you suffer from the same bias. Here’s why:

You underestimate the impact of technology

There are many articles that support the view that technology will not impact the way you do business. For example, you don’t have to look far to read that:

  • Robos are only suitable for the uninformed or those with modest assets.
  • Technology that is one size doesn’t fit all.
  • Robos won’t hold your hand during the next market correction.

I don’t buy it.

The arguments trivializing the impact of robos are not persuasive. Robos can be suitable for knowledgeable investors who understand the impact of low costs on returns and the benefit of broad diversification.

But robos have portfolios for investors at all risk levels, and don’t shoehorn everyone into a “one size fits all” portfolio.

Investors are a lot more sophisticated than they were before the Great Recession. They understand long-term risk and return data. I find it ironic that advisors who pride themselves on guiding their clients into the right portfolio, after extensive discussions and disclosures about the historical highs and lows of that portfolio, are the most concerned about how their clients will respond to a market correction.

Investors today are better educated and more self-reliant. Don’t count on them placing much value on having you hold their hand.