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I was born in Dayton, Ohio — the birthplace of aviation. Wilbur and Orville Wright designed and constructed their aircraft in their bicycle shop on Dayton’s West Side. They made their first recorded flight on December 17, 1903, on a then-remote stretch of the North Carolina coast. In more than a century of innovation, the Wright brothers’ small, one-person aircraft evolved into the huge Airbus and Boeing jets that transport hundreds of passengers at a time.
Think about what you’re doing when you get on an airplane. You trust that the struts and wings and rudders and all the other essential parts are all in good working order. The fuel tanks are adequately full. The engines are tuned, and the door will stay closed for the entire flight. Airlines follow a continuous inspection program approved by the Federal Aviation Administration. That plane and its mechanics have to be in tip-top shape to make sure the passengers get from Point A to Point B safely. Safety is so much more important than convenience.
But with all these checks and rechecks and tune-ups and maintenance, that airplane will stay on the ground without a pilot. Technology is considered worthless without a pilot in the cockpit. And yes, technology has come a long way, and aviation is much more streamlined, but can you imagine boarding a plane without a pilot to navigate around turbulence or the ability to make a safe emergency landing?
This is how I think about so-called robo-advisors — automated online investment services. Today you can find as much market data as you need and then some. The robo-advisor was born from this abundance of information. This type of advisor provides portfolio management with minimal human interaction. If you want to know how to invest your cash or reallocate your current portfolio, a robo-advisor will run some algorithms like modern portfolio theory, Monte Carlo simulation or a combination of metrics. Mathematics determine how to position your account. Isn’t that just like the airplane? A convenient way to invest.
But what about safety? What about retirement planning, estate planning, insurance needs, complex tax planning? A computer can’t do that. So we need financial advisors to help us navigate through the turbulence of life. Human advisors are like pilots of complex aircraft: They help you take off, navigate through complex and dynamic markets and make sure you land safely.
Image via iStock.
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