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Imagine the stock market gets volatile during the runoff to the next presidential election. You want to make sure your retirement accounts are protected. You open a chat window to communicate with your brokerage, or you hop on the phone and begin discussing your worries, hoping to come up with a solution. You’re not working with a robo advisor that uses algorithms or bots to make decisions about your investments. But you aren’t talking to a human either. It’s a cyborg of sorts — a human financial advisor who is aided by super-powered technology used by robo advisors. This may sound far out now but it’s already happening at some of the top financial firms. If trends continue, when it comes to planning your retirement cyborgs will be the ones managing your money in the not-too-distant future.

The Growth of Cyborgs in Financial Management

Over the last few years, robo advisors have become popular, due in part to their low cost and in part to the standards requiring financial advisors work for their client’s best interests, first and foremost. If you’ve never used one, robo advisors work by asking a series of questions to assess your investment goals and risk tolerance. They then use the answers to automatically move your money around while respecting your expressed preferences.

Companies can pass on low fees to their customers because it’s efficient and inexpensive to create a bot or run an algorithm versus hire a financial advisor. Robo advisors typically charge 0.25 percent per year, or even less. In comparison, financial advisors set their fees at 1 percent per year.

While robo advisors are good for their limited purpose, they don’t readily offer a way to think through the more complicated decisions of planning your retirement, such as when to retire or how to handle retirement accounts if, for instance, you decide you want to work part-time during your retirement.

Cyborgs in Financial Advising: What it Means for You

With a lot of financial basics available online, and the growing rise of bots in financial advising, financial advisors have a golden opportunity to prove their worth through superior investment advice. Rather than spend time on basic tasks that can be capably handled by algorithms, advisors can provide next-level services including asset allocation or developing a draw down strategy ahead of retirement. A study from Morningstar showed that retirees can earn 23 percent more in retirement funds by working with a financial advisor.

Cyborgs allow people to access human advice for these complicated decisions. Advisors can use tech tools to model different scenarios for their clients, say, showing a client what it might look like once they begin to draw down their retirement funds, or what could happen if they decide to hold off on claiming their Social Security for another few years.

Cyborgs or Robo Advisors in Planning Your Retirement

Vanguard waded into the cyborg frontier with its Personal Advisor Services, which earned the financial firm $12 billion in assets in just seven months. As a comparison, strict robo advisors like Betterment earned less than one-quarter of that amount in the same time frame. Clearly, when it comes to money, people like knowing there’s a real person involved in their financial decisions.

For Vanguard, clients who had managed their investments themselves during their careers wanted guidance as they prepared to retire. The cyborg service allowed them to get the help they needed while keeping costs low. In addition to working through retirement planning, the Vanguard cyborg helped clients save for second homes and set up college funds for grandchildren.

Ultimately, it benefits investors to have more options in determining how to manage their money. In order to keep costs low, you may choose to start with a robo advisor approach, such as those offered with Betterment or Wealthfront, when you’re just getting started planning your retirement and switch to a more expensive cyborg financial advisor as you’re generating more wealth or come closer to approaching retirement.


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