The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
Subscribe to the Flinchum File
View Archives

No To Robo ?

“Robo-advisors” refers to canned software programs that claim to do your financial planning at a nominal cost.  That software does a decent job of retirement planning but a lousy job with the rest of the planning issues.  It has been especially popular among Millennials, who argue a real financial planners just takes your data and uses the same software anyway.

There is considerable consternation among real financial planners that they are being replaced by a computer.  The latest data suggests just the opposite.  Millennials are more likely to pay for a real financial planner than expected.  That is because they have learned:

Information is free but wisdom has value!
As a small boy, I remember my mother buying me a 20-volume set of the Encyclopedia Britannica.  I thought that was all the information in the known world and revered it for many years.  While I don’t remember the cost, I recall it took her twelve months to pay if off.  Today, all that information and more is available free everyday on the internet.  Information is free indeed!
Wisdom is knowing what you don’t know!

Millennials do have a few differences.  As “digital natives”, only 23% of Millennials care if their planner is located in their geographic area.  They put more emphasis on experiences, over things.  Once they experience a 2008/9 global financial crisis as adults, they will have gained some wisdom!  As their responsibilities increase and their available time decreases, they will also learn:
Wisdom is knowing what you cannot do!

To my fellow Certified Financial Planner (TM) professionals, I would remind you of how frightened CPAs were with the introduction of TurboTax software.  They feared being replaced by software.  Today, there are more CPAs than ever before, and they are busier than ever before.

Millennials are less trusting of financial advisors than their parents were, and that is a good thing.  Once Millennials understand the fiduciary rule, they will come to real financial planners.  Millennials may be slow in getting to us, but they will come . . .