Why Some Financial Decisions Can’t Be Handled by an Algorithm

Imagine two people with very similar lives. Both are busy professionals with demanding careers. Both have two kids. Both are actively involved in their communities and in their kids’ activities.

After they’ve completed all the extra stuff after school and work, each still has to cook dinner, clean up the kitchen, and help with homework before checking a few final work emails.

Finally, it’s 11:00 p.m., and here’s where the lives of these two people diverge. One goes to bed, while the other sits down to manage the family finances.

This second person faces the following six questions:

1- How do I invest?

2- Do I have the right kind of insurance?

3- Do I need to hire an estate attorney?

4- Have I saved enough to help the kids with college? Do I have enough saved to retire?

5- Should I worry about what’s happening in the market this week?

6- How do I know when it’s time to make a change to any of these things?

This person spends hours reading books, checking websites, and reviewing reports. He tries to understand every aspect of his financial life so he can make smart financial decisions. It’s a never-ending process that he repeats each night before going to bed.

Now, we know the process of financial planning is incredibly important, so how can the other person just go to bed without a second thought?

She picked a different path. She built a fantastic wealth-management team, worked out a plan with their help, and communicates regularly with them. As a result, she can spend time on all the other important things, like her career, her family, and staying on top of all her other priorities.

Looking at the difference in the lives of these two people, I have one question for you: 

What’s that worth?

Our industry often gets painted as a group of people out to take hard-earned money from other people. You and I know better. We know that real financial professionals are focused on providing peace of mind so people can worry about everything else in their lives.

However, we haven’t always done a great job of communicating our value.

Instead of shying away from discussions about "robo-advising" taking over the world, we need to jump in and explain why some financial decisions can’t be handled by an algorithm.

An algorithm may show somebody that they shouldn’t cash out of the stock market, but it can’t stop it from happening. If that same person calls a trusted advisor in a panic about the market, however, a conversation can occur that shifts the focus from what’s happening right now to what that person wants to happen in the future.

What’s that worth to a client?

The next time someone accuses our industry of stealing people’s money, we need to share our stories of colleagues who are doing amazing work for their clients.

I know many of you. And I also know you’re doing great things for your clients. You know people who are doing the same. The more we tell these stories, the more we can do to counter the impression that people have of our industry, and the better our chances of being able to help even more people reach their goals.

What’s that worth to you?

We have value, and it’s time we helped everyone else understand our value, too.

If you liked this article, I think you will LOVE what I am building at The Society of Advice.