Of Robos and Retirement

I recently attended a wealth management conference in Phoenix at which the rise of robo-advisors was a hot topic. The conference theme was “Where Disruption Meets Opportunity.” Robo-advisors, as you may already know, are online wealth management services that provide automated, algorithm-based investment advice, generally without the aid of human intervention. Prominent robo-advisor firms have been successful in attracting assets from traditional banks and investment companies, which is causing old-line wealth management practices to reconsider their current business strategies and adapt new technologies.

No doubt, robo-advisors are changing the way certain investors – mostly younger savers – are receiving investment advice. But there is a limit to their effectiveness, especially for retirees. Here are a few reasons why.


Successful retirement planning draws on many financial disciplines. It forces you to make significant, life-changing decisions and requires constant oversight and management. In short, this is not a simple matter.  Think for a moment on the many possible aspects of your own retirement plan:  income and expense projections, Social Security claiming strategies, Medicare and Medi-gap policy planning, IRA rollovers, pension distribution options, tax efficient withdrawal methods, etc.  Plus, the decisions you make one year may need to be reevaluated the next due to changing priorities or updates to tax laws.

If there was ever a time to involve professionals it is when retirement draws near. Your financial advisor is trained in all aspects of personalized retirement planning and is much better equipped than a software program to help you set priorities, weigh consequences and make the best decisions for your unique situation.

Emotional Support

A significant life event, like retirement, creates uncertainty and is understandably emotional. Not everyone suffers an existential crisis when punching the clock for the last time, but common questions retirees grapple with include:

  • What will I do with all my time?
  • How will I stay connected to my former associates?
  • How do I maintain a sense of purpose when my career is over?

Your financial advisor wears many hats, one of which is “Counselor.” And counsel involves active listening, questioning and a host of other soft skills. Oftentimes the conversations we have with our clients are not about money but about life’s ups and downs and the emotions that go with it. You certainly can’t turn to an algorithm when you need reassurance about tough financial decisions or to help sort through a thorny family situation? Not everything in life is binary.

Fiduciary Protection

A robo-advisor is generally adept at building a portfolio and keeping it in line with your risk tolerance. Pretty simple stuff. That said, one of our concerns about robo-advisors is that they may not embrace the highest fiduciary standards. As one of the first trustees certified by the Centre for Fiduciary Excellence, we have served as a model for fiduciary best practices. And we pose the question: Given all the complexity of retirement and with your financial future at stake, can you really afford to work with a service provider that is not acting in your best interest.

Robo-advisors may be disrupting the investment management landscape, but there are better opportunities to set yourself up for success, especially for those nearing or in retirement. Technological advances in wealth management make it easier and more cost effective for us to deliver high quality solutions to our clients. It’s important to embrace innovation but there is a human element to financial planning that is just as important. Work with a financial advisor who acts as your fiduciary, your confidante and who guides you through your toughest retirement decisions.