Robo-advisers can't handle complex decisions

Critical thinking that requires human reasoning spells an opportunity for human advisers

Feb 22, 2015 @ 12:01 am

By Troy Onink

As the old saying goes, prospects don't care how much you know until they know how much you care.

Notwithstanding Hal 9000 in the film “2001: A Space Odyssey,” we all realize that computers can't care. We therefore are able to deduce that prospects won't care how much the computer knows because it is incapable of caring about them.

Yet a disruptive wave of algorithm-driven, low-cost investment platforms known as robo-advisers is increasingly being paired with commoditized knowledge and packaged as an auto-pilot investment solution and sold directly to investors and fee-based advisers.

Has the robo-adviser force turned that old saying on its head?

Worse. Investors are saying, “I don't care what you know or if you care. I don't need you anymore.”

Joshua Pangborn, a talented software developer and my partner, puts it this way: “Computers excel at quickly executing multiple repetitive tasks simultaneously to arrive at a solution. Humans are good at recognizing fuzzy patterns in and across those tasks to fit the pieces of the solution together and form a strategy.”


Joe Duran, InvestmentNews guest blogger and chief executive and founding partner of United Capital, states that most digital solutions are best-suited for situations that are not very complex and where the cost of being wrong is low.

“Robo-solutions work great for buying branded products and commodity items at the best price. They work well for finding an alternative to a cab or finding a nice restaurant,” Mr. Duran wrote in a Dec. 4 post titled “Clash of the titans: Bionic advisers vs. robo-advisers.”

However, he continued, “when either of these two conditions changes, either because decisions are more complex or there is a lot to lose if you make a mistake, human interaction becomes more important.”

I agree with Mr. Duran on another vital point.

As competition from robo-platforms, mutual fund complexes, banks and big brokerages intensifies, independent advisers cannot aim to merely remain relevant. They must become trusted, indispensable counselors engaged in planning niches that are too complicated and have too high a cost of failure — emotionally and financially — to assign to a robo-platform.

The one area of financial guidance where investors want a knowledgeable, caring adviser is in helping them determine at which college their children can be accepted, receive aid and afford tuition.

How to fund a college education is by far the most complex financial decision investors make involving the ones they care about most.

Parents want to know their best strategy to pay for college so they can preserve assets and income for retirement. With a four-year degree at an elite private college costing over $250,000 per child these days, parents want to know that they are maximizing financial aid and tax savings to reduce costs and pay for it as wisely as possible.

A client's best strategy is a unique blend of college selection, financial aid, taxes, investing and financial planning. That complexity presents a chance for advisers to differentiate themselves and win the whole client relationship.


Computers don't build relationships. Computers don't care, and computers don't love what they do. They just do it. There is no human element. There is no passion.

Providing late-stage college planning — that is, paying for college, not saving for it — is a wide-open opportunity for advisers to offer a differentiated and unique client experience that is all-encompassing, engaging and personalized.

What are you waiting for?

Troy Onink is the chief executive of, where he leads the new College InSource Partner Program.


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