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Human-Robo Hybrid For Financial Planning

Jonathan Swanburg
By: Jonathan Swanburg
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Last week I was interviewed by Murray Coleman from the Financial Times to discuss how Guided Wealth Management uses technology to execute financial planning strategies that exceed the capabilities of a standalone robo-advisor like Betterment.

My goal during the conversation was to convey the idea that there are two elements to financial planning. One is rules based. These are concepts like applying tax law, future value calculations, and Monte Carlo simulations. Here computers and robo advisors work tremendously well at applying automation and we rely heavily on technology to execute in these areas at Guided Wealth Management. On the other side, you have human preferences. Understanding the way a client feels about money or their family, the emotional attachment they apply to specific assets, or the way they react when their account values begin to drop. For these uniquely personal items, computers and robo advisors fall short and a human advisor needs to be there to craft a solution that is correct for the client. (You can check out our recent seminar covering the financial planning tools we use).

The article was published in Financial Advisor IQ under the title, How Some Savvy FAs are Overtaking ‘Basic’ Robos. At the bottom of the article it reads:

Advisor Jonathan Swanburg in Houston isn’t writing special algorithms. But his employer, Tri-Star Advisors, finds it can achieve similar results automating more areas of clients' comprehensive plans by taking advantage of new algorithms being embedded in core prepackaged financial planning suites.
Tri-Star, which also offers Betterment’s robo to investors with smaller accounts, uses as its main planning tool eMoney Advisor from Fidelity.
“The beauty of dealing with areas like tax and estate planning is that in many cases there are legal requirements which make answering specific questions a rules-based proposition,” says Swanburg, whose firm manages about $150 million.
He’s finding broad-based planning software often comes equipped to compare — sometimes even recommend — different strategies in minutes.
Creation of trusts, modeling charitable contributions and changes in estate tax situations are just a few of the planning tasks eMoney’s algorithms can help handle, Swanburg says.

That’s all well and good but the last sentence is my favorite. During the interview I feel I said something like:

“Everyone has technology on the investment side of things now. It is table stakes for competing as an RIA. To add value to a client, you need technology that covers the planning side of things and human guidance to address the non-rules-based issues the computers miss.”

Unfortunately, metaphors don’t always translate well and the article ends a little but more succinctly:

“Everyone does the investment side of things now,” he says. “It’s like putting steak on the table as your main course – you need to do more than the Betterments of the world.”

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