Robo-Advisors Replacing Humans: Will it Ever Come to That?

Financial advice can be a sensitive topic – those giving it don’t want to mislead customers, while customers are wary about the level of trust they can place in their advisers. Nonetheless, done correctly, investing can be a very beneficial way for someone to use their funds. This November we are exploring all the aspects of wealthtech and how the industry has developed this year.

Having explored how AI can make the wealthtech industry more reliable, we now look at robo-advisors’ impact on traditional financial advisors and explore whether they will ever completely replace humans.

The future is hybrid

Harry Folloder, chief digital and technology officer at Alorica, the customer experience solutions provider, identifies pros to robo-advisors but explains that the lack of “emotional IQ” is ultimately what holds the technology back and will stop it from completely replacing human advisors.

“Robo-advisors bring undeniable value with their cost-efficiency, scalability, and accessibility, offering financial guidance to a broad demographic, often at a fraction of traditional fees. They excel in routine tasks, like portfolio rebalancing, and provide data-backed recommendations in real-time, appealing especially to tech-savvy investors.

“However, the complete replacement of human advisors is highly unlikely and ill-advised. Human advisors offer a personal touch, understanding clients’ nuanced needs, life circumstances, and emotional reactions to financial changes—something AI struggles to replicate – call it a special kind of emotional IQ that only humans can deliver.

“While robo-advisors may handle transactional advice well, humans provide in-depth, holistic financial planning and reassurance during market volatility and offer that soft-skill touch that many customers still find solace in. Ultimately, the future likely lies in hybrid models, where AI handles routine processes while human advisors focus on complex, relationship-driven advisory roles, allowing clients to benefit from both technological efficiency and a personalised journey.”

Aiding not replacing

Offering a similar opinion, Slav Kulik, CEO and co-founder of Plan A Technologies, a software development and digital transformation company, also notes that the most effective way for AI to be used in financial advice is by helping advisors, not replacing them.

“In the near term, it’s pretty unlikely robo-advisors will completely replace human advisors.

“To be clear, robo-advisors offer incredible benefits. Robo-advisors can analyse data with a speed and thoroughness human advisors simply cannot. Humans are prone to bias: ‘Going with your gut’ is a nicer term for ‘guessing’. Robo-advisors make recommendations based on the data, without bringing in their own personal baggage. They are also a more affordable option than traditional financial advisors. Some people will certainly want to rely entirely on robo-advisors, but I think most will still want a human being involved.

“I think many people view their financial advisor’s job as part psychologist and part wise friend. Good advisors have to be patient, taking the time to really talk things through, to recognise that financial decisions can be very stressful and people have different levels of financial understanding. (Indeed, many clients just nod and don’t like to admit either ‘I don’t really understand what the heck I’m seeing right now’ or ‘This is complicated and boring and I don’t want to spend time on this.’)

“In the near term, robo advisors will continue to arm these human advisors with exciting new ways to engage and help their clients.”

The benefits of robo-advisors are also their downfall

For Robert Johnson, PhD, CFA, CAIA chairman and CEO at Economic Index Associates, the developer and licensor of active index strategies, the biggest drawback of robo-advisors is that they are largely a one-size-fits-all solution. He explains: “If two individuals are of the same age and indicate that they have the same risk tolerances, robo-advisors will provide similar solutions. But, we are all different, we have different other asset holdings and customised solutions are necessary.

“The biggest advantage of utilising a human advisor is that when the market exhibits volatility, the advisor can reassure the client that they are on the right path. My belief is that the greatest contribution of an advisor is to explain why a certain strategy is correct and to talk the individual off the ledge in times of market turmoil. And, that is the biggest disadvantage or relying on a fintech application. Robo-advisors can’t provide that same assurance.”

Long term relationships

Arj Kumar, founder of Taxd, the tax return service, remains open to the idea that robo-advisors might one day replace humans. However, it does not have enough data yet that it can be reliable long term. He says: “It will be difficult for robo-advisors or AI to fully replace human advisors. But, this depends on individual risk appetite or the kind of risk involved.

“Typically, advisors build relationships with clients and get to learn a lot about them. This gives them unparalleled insights into their long-term goals, priorities and financial situation. As a consequence, an advisor can adjust their advice depending on the type of retirement a client may want or how much money they want to pass onto their children. Unlike AI, advisors’ view of their clients’ money is often shaped by context and by years of relationship building.

“In the long term, this kind of relationship-building is important to ensure that finances are managed in a way which aligns with a client’s lifestyle and personal choices. Currently, this isn’t something which AI can do to a satisfactory level. However, this may be possible in future.

“As it stands, AI can effectively be used for straightforward questions such as ‘how to invest £10k every year’. In these situations, we will likely see AI advisors quickly becoming more common. But, for long-term financial planning and complex situations, traditional financial advisors will be preferred by the majority.”

Are better prices enough?

Kian Sarreshteh, co-founder and CEO of InvestiFi, the Crypto-as-a-Service investment solution, also believes that a human touch is needed when dealing with large sums of money. He explores how robo-advisors are cheaper but do not offer the same service as traditional advisors.

“I do not believe that robo-advisors will completely replace human financial advisors as there will always be consumers who require a personal, human touch – especially for investors who have a lot of money and/or are planning for retirement. When used well, robo-advisors can complement in-branch human advisors, serving as a lead-generation tool for those advisors to identify growing accounts.

“Robo-advisors have an array of benefits, such as serving investors unable to meet the minimum amount of funds to gain access to human advisors, which often sits at $25,000 or more. The minimum investment for robo advisors is $1, democratising access to professional investment advisory. Additionally, robo-advisor fees typically run 25-75 basis points vs. 1-1.5 per cent for human advisors, giving the financial institution the opportunity to provide advisory services to all at a better price without compromising on customer service.

“Financial Institutions that employ in-branch advisors often benefit from revenue sharing in the AUM fees. By adding robo-advisory, they can drive additional non-interest income by generating fees to all of their members, not just the high net worth individuals. In a time where financial institutions are actively seeking ways to drive new revenue streams, Robo-advisory seems like an obvious complement to their existing services.”

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