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Good financial Advice is important to good investment

Good financial Advice is important to good investment

Today, technology may have taken over a majority of aspects of our life. However, good advice in investment still is and will always remain a high touch business.

Offering advice to people based on their requirements and financial goals is one of the foremost tasks of a financial advisor. Financial advice is taken seriously as people generally know what they want but not what they need. A piece of good advice in investment will help them evaluate their financial condition better and choose options.

According to a survey by Wells Fargo/Gallup Investor and Retirement Optimism Index survey that covered 1029 US adults, financial advisors will always be needed. The respondents invested approximately $10,000 or more in mutual funds, bonds or stocks, and 84% of them said that financial advisors cannot be replaced by automated invested technology.

Like most industries, technology has disrupted the advisory and investment space as well. Robo-advisors and algorithmic trading are attracting clients like never before. These advisors offer investment advice at a low cost without human intervention.

Additionally, some apps or platforms offer easy sign-up, digital payments, several investment options like ETFs, mutual funds, direct stocks, etc. Despite the progress in technology, good advice is much sought after even today.

Let’s understand the importance of good advice with an example.

Suppose, a first- time investor registers with one of the investing apps/platforms. Thanks to the easy sign-up, the registering process is smooth and even the funds can be transferred through UPI. After the registration process, the investor can be bombarded with hundreds of investment options. Typically, the investor may select an investment based on the star ratings or choose a large asset management company. The investor may also avail of help from robo-advisors (if available) to make a better decision. Logically, this may look like an ideal scene where the investor is in control and has a great start to his/her investment journey. However, it is not.

Though the app/platform attracts users, the right approach is to know much the investor is willing to invest as a percentage of their net worth in these platforms. In most cases, the share wallet of these apps/platforms is low. The reason for this behavior is fairly simple. When it comes to investing money, most people are not comfortable sharing their fears and insecurities with robots. Also, the chances of blaming someone else are very slim in case you invest via a bot.

Interestingly, wealth advisor giants such as Wealthfront and Betterment after much experimentation have started offering plans where investors can speak to a real person instead of a bot.

What should your portfolio include?

Just like every individual is different a portfolio is also different. No one portfolio will fit all. A portfolio depends on an individual- risk appetite, financial needs, time horizons, and emotional triggers. An experienced financial advisor will ensure that you have a great combination of investment in your portfolio.

A few passionate investors who are personally involved with their investments regularly may utilize the robo/AI driven platforms. These investors are well-informed about the market and investments. Apart from being well-informed about their investments but also are experienced in judging what works and what doesn’t for them. However, these types of investors are a minority and most investors belong to the working or business class who have little or no knowledge about investment. Such investors require good investment advice without any doubt.

Difference between technology and genuine advice

While the bots/robo advisors can bring about a significant change in the financial market and bring in new investors, serious money will always come through good advice. Technology may bring down costs but cannot replace intuitive and context-driven advice.

Technology does not offer an advantage to the first mover and sooner or later all the platforms will offer the same benefits.

Owing to the tough competition, investment platforms will find it difficult to make money for themselves. Most apps/platforms offer advice at a low price or for free and unless they scale up, they will find it hard to become profitable. The largest US platform –Betterment is yet to make a profit despite having over $10 billion AUM.

People are willing to pay for trustworthy and competent advice.


Technology will become indispensable in the years to come but it will not be able to replace good financial advice. A financial advisor will always offer advice based on your psychology, financial requirements and risk appetite.


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