PERSONAL FINANCE

New York Life | May 2 , 2022

When it comes to financial guidance, it's tempting to think in terms of man versus machine. Robo-solutions offer a cost-effective approach to building a financial strategy, while data from the New York Life Wealth Watch survey shows that human guidance leads to increased levels of financial confidence. So, how do you know when to turn to a robo-solution compared to live, human guidance from a trained and qualified expert? Dylan Huang, SVP and Head of Retirement and Wealth Management Solutions at New York Life shared his perspective with The Street.

These days, we do just about everything online or through apps. From ordering groceries and household goods, to booking travel and transportation, to investing and even buying life insurance, our entire lives are increasingly in the palms of our hands. 

As the world continues to go mobile, consumer preferences have shifted in favor of seamless, on-demand transactions at the tap of a screen — a trend that has permeated the financial services industry and will continue to shift the industry for the foreseeable future. In fact, many of us have already seen this in the form of robo advisers: online investment services and apps that offer financial advice driven by algorithms. Robo advisers have been attractive to consumers largely thanks to the simple, rich user experience that eases people in step-by-step. According to CNBC, since launching more than a decade ago, robo advisers have grown into an industry that managed $460 billion in 2020, and some analysts predict robo advising will become a $1.2 trillion industry by 2024. 

The rise of digital robo advisers was initially driven by younger generations or first-time savers who have grown up with the rapid technological shift and are accustomed to using their phones for nearly all aspects of life. As the oldest millennials turn 40 and round the corner toward their prime earning and retirement saving years, the trend of leveraging robo advisers is not likely to fade away. Older generations have started to adopt digital solutions at a greater pace, and together with younger generations who are even more adjusted to turning to digital solutions than their millennial counterparts, these cohorts will continue to drive this shift. Digitally-based solutions are great for first-time savers and investors looking for a simple, cost-effective way to begin building on their financial strategy. 

While the draw of robo advisers can be alluring, there are some things that an app simply can’t do. So, how do you know when to turn to a robo-solution compared to live, human guidance from a trained and qualified expert? This is a great opportunity to balance the best of both worlds. 

Generally speaking, there are clear benefits for both digital and human solutions. Robo advisers have broadened access to investment advice through a digitally rich and simple experience, and low-cost solution. They offer a one-size-fits-all approach and help people address simple accumulation needs.  

But for more complex needs, like understanding how protection-oriented solutions play a role in your overall strategy, navigating both short and longer-term financial goals, evaluating tax implications, or developing a spending strategy ahead of retirement, nothing matches the value of having a trusted financial professional by your side. And, over time, the ability to leverage the technology in tandem with routine human guidance can help you move towards your financial goals efficiently and effectively without losing sight of the greater picture — your overarching vision for your life and the holistic financial strategy you’ll need along the way to achieve that vision. Robo advisers offer “cruise control,” but aren’t able to offer emotional support or tailor specifically to you and your goals over time. Together, you’ll be able to map out your near- and longer-term journeys in a hybrid approach.

Firms that offered a digital-only robo have been incorporating human guidance as “hybrid” approaches as a more desired option. In fact, a 2022 Cerulli study found that just 12% of “emergent affluent investors” — those under 45 who earn $125,000 or more annually but have less than $250,000 in investable assets — intend to operate a digital solution without additional human support, service or investment-wise, showing an enhanced focus on striking the balance between digital and human guidance.

By having that trusted financial partner to ask questions, talk through scenarios, and give expert guidance, you can feel confident and empowered by your financial roadmap. Thinking about what works for you in both the near and longer term may also help you strike the right balance between knowing when to seek personalized attention from an advisor and when to turn to digital solutions for tasks like handling quick transactions.

While younger generations — especially millennials — have been driving the trend of using robo advisers, according to research conducted by The Harris Poll in 2020, Americans tend to have higher confidence when it comes to their personal financials when working with a human financial adviser. And, according to New York Life’s 2022 Wealth Watch survey, a majority of millennials (60%) said that having human guidance to help develop a financial strategy and learning from a financial professional what should be incorporated into a retirement or investment portfolio would help boost confidence. It’s expected that this trend will continue to grow as more people seek to adjust their financial portfolios in the current environment. No two individuals or families are alike, and being able to navigate digital tools with expert, customized advice can be key to greater confidence and outcomes over time. 

While digital solutions can be efficient as supplemental tools to enhance your financial strategy, it is a mistake to swap in robo advisers as a replacement for professional financial guides, who can work with you to thoughtfully develop a financial strategy at any stage of life. The good news is that with the help of a financial professional, you can put a strategy in place that has been customized to your unique circumstances, and supplement that strategy by leveraging a robo-advisor as you work toward achieving your goals. The first step is getting started; who said you can’t have your cake and eat it too?

About the author: Dylan Huang

Dylan Huang is Senior Vice President and Head of Retirement and Wealth Management Solutions at New York Life. In this role, he is focused on the development and distribution of New York Life’s retirement income and investment solutions as well as enhancing New York Life agents’ ability to deliver financial outcomes rooted in protection for clients, including Retail Annuities and Long-Term Care Solutions. He is responsible for the company's digital capabilities, including strategy and tools designed to enhance the digital experience for consumers and financial professionals. Dylan began his career at New York Life as an actuary in 2001 and advanced to leadership roles of increasing scope in the company's Life Insurance, Annuity, and Corporate Finance divisions. He is recognized as a thought leader in the retirement industry for his product development, patents, award-winning research, and service as a board member for the Insured Retirement Institute and the New York Life Center for Retirement Income at The American College. He is frequently sought by members of the media for insights on retirement topics. Dylan holds a Master’s degree from the University of Connecticut and a Bachelor’s degree from the University of British Columbia.

About New York Life Wealth Watch 

Wealth Watch is a recurring survey from New York Life that will track Americans’ financial goals, progress toward those goals and feelings about their ability to secure their financial futures, identifying key themes and trends that are emerging about topics like retirement planning, the role of protection-oriented solutions and the importance of financial guidance.

Survey Methodology 

This poll was conducted between December 8 and December 11, 2021, among a national sample of 2,200 adults. The interviews were conducted online, and the data were weighted to approximate a target sample of adults based on gender, educational attainment, age, race, and region. Results from the full survey have a margin of error of plus or minus 2 percentage points.

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