The Blue Blaze

Newly Moneyed Millennials Want Robo Investors. Really?

Posted by Frankie Corrado


According to Bloomberg Businessweek, a venture backed startup is banking on the notion that millennials with money to invest want options that align closely with their social values and that they would rather use a robo advisor than a flesh and blood financial expert.

“Instead of buying stocks through index funds, as the other robos do, OpenInvest uses individual stocks. Users click through a series of menus to create an “issue profile,” checking boxes to select investment themes—such as gender equality or reduced carbon emissions—as well as groups of companies to exclude. The preset screens lean left. Users can nix weapons manufacturers, tobacco companies, and even those whose executives have backed Donald Trump.”

No doubt that service would be appealing to many investors looking for a passive option, especially in today’s political climate.

But do millennials really want more automation in their lives?

While automation  has its perks, if you are automating something incorrectly, the adverse effects on your portfolio are multiplied over time until the situation is corrected -- if it’s corrected.  I often fondly recall a good friend who told me how he once thought he set his GPS to Richmond, NH, but in reality it was Richmond, VT. The result was an extra couple of hours in the car before he realized he was going in the wrong direction.

Lesson: Automation has its perks, but it is prudent to have “checks” on the automation.

And even if an investor’s initial choice is for passive investing, is that really the best choice for him or her? Are millennials, or anyone else, truly realizing their goals for impact with a point-and-click strategy?

Limiting the concept of investing to picking stocks excludes the investments we all long to make in our own lives. We want to build families, companies, skills. We want to climb mountains, surf waves, enjoy life. All those desires are easily lost when we walk alone with just the tyranny of the urgent and a really great app.

We need a trail guide for the journey. Someone who knows the summits we want to reach and who has an eye on the weather, our weaknesses and our motivations.

What if, in addition to reflecting your values in your stock portfolio, you had a guide that helped you put your values and dollars to work in a localized manner so you felt an actual, real sense of fulfillment through your action. That could be through investing in or lending money to a local business, or identifying the what and how of getting involved with local charities. Having someone help you put all of this into perspective is important.

You can tell a robo advisor, “I don’t want to invest in companies that contribute to climate change.” But that computer program isn’t going to turn to you and say, “Ok – so climate change is an important value area for you. In addition to NOT doing something (investing), what are some other things that you can do/control to feel fulfillment in this area?”

A real-life financial guide might suggest some offline options that would add real value to your life (not just your portfolio) like help you:

  • Develop a sustainable climate science donation strategy
  • Learn the cost/benefit of involvement with local environmental committees or groups
  • Participate in the thousands of eco-clean up efforts around the country
  • Explore tax credits available to upgrade the energy efficiency of your home

A financial life guide would also be interested in helping you incorporate those values into all aspects of your life. If my client was committed to climate change I might ask,“Is this a mission that you feel so passionate about that you would consider  changing your career to help achieve lasting goals in this area?  How would that fit in with your other life goals?” And if the answer was, “Yes,” I would follow up, “Well, then let’s see what it will take to get there.”

All a robo says is – “Got it – no climate change investments”…this is literally 1/8th of the puzzle!!

I’m all for bots making my life easier (I wouldn’t mind one driving me around), but when it comes to important life decisions I’d prefer a person to talk them out with me. And I don’t think I’m unusual in feeling this way. In our own firm, I value our strategic partners who help us see our goals objectively. Hearing someone reflect your goals and challenges back at you is illuminating.

Working with a robo advisor, the first thing someone will do is sign-up and create a username and password. Working with a human financial life guide is an entirely different experience. To do that best for our clients, we have to get to know them. When we sit down with a new client, the first thing we do is get what we call the FORM picture of their ideal life. That is, what is their ideal (though not perfect) vision for their:

  • Family
  • Occupation
  • Recreation
  • Motivation

This helps us see where the client’s heads at, and it also helps the client organically see his or her values and in turn see their purpose for managing their finances. Through the guided process, our clients see what their ultimate values are so that they can manage, save and spend their money with purpose.

Then it’s time to come up with practical solutions for their investments, taxes, organization, savings. We equip them with a plan, tools, encouragement and accountability to get to those ideal goals and together we walk the trail toward their goals.

Through this deep, personal understanding of what makes the client tick, we can say, “This is what we hear you want, this is what we’re going to have to do (x,y and z) to get you there.”

Try getting that from a robo advisor.

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Topics: Financial life guidance, Financial Services, Millennials