The future of robo-advisors and human advisors

Read Time: 4 Min
Artificial intelligence now allows investors to employ robo-advisors for simple and regular portfolio management. Time will tell how well a tool based on algorithms can perform steps that require discretion and experience.
By Vivian Hairston, MBA
Director of Portfolio Management

What is a robo-advisor and how do they work?

Digital and online investing options are currently hot topics in the financial industry. There’s special interest in artificial intelligence-driven, robo-advisors that offer financial advice and manage investments with limited human intervention.

Typically, a robo-advisor ‘asks’ questions through an online survey about your preferences, risks, and goals, and uses algorithms based on that information to provide guidance and automatically invest for you.

Pros and cons of robo-advisory

There are some benefits to robo-advisors, such as easy account setup, account services, and in some cases, low fees. Robo-advisors make investment decisions using software designed to automatically adjust a portfolio to best align with a client’s outlined goals.

Robo-advisors also come with risk, including technological glitches, and misinterpreting what a client wants or needs. Perhaps most importantly, robo-advisors haven’t yet replaced a human portfolio manager’s discretion, especially when a client faces life-changing moments, illiquid assets, and business or family governance issues.

The convenience of managing your investments with little human intervention and at a reduced fee may be appealing; however, there are fundamental questions to consider.

Will digital advice stand the test of changing market cycles? Can robo-advisors predict events and help clients pivot during life-changing moments? Can it replace the role of other professionals like portfolio managers or trustees?

"A robo-advisor is an interesting concept, and as technology advances, we might see strong evidence of value. It might be a good idea that until then, investors work hand-in-hand with their portfolio manager as they delve into this new financial tool."

Vivian Hairston
Director of Portfolio Management, Huntington Private Bank ®

Who should–or should not–use a robo-advisor?

Because some robo-advisors can be used at no cost and low starting balances, they could be attractive to new investors who are just getting started. Those who’ve grown up with the internet and are typically digitally savvy may find robo-advisors easy to use, perhaps even entertaining, with very intuitive user interfaces.

Those holding expansive, complex portfolios may decide to avoid a robo-advisor, which have limited flexibility and don’t create or monitor comprehensive plans. Robo-advisors may be based on modern portfolio theory, assuming that all stocks are correctly priced at all times. That works well in theory, but not always so well in the real investing world.

Not so fast

Humans can likely better exercise discretion and account for circumstances like we’re facing today, and that’s why trustees and portfolio managers can be valuable. It’s hard to imagine a future with a robo-advisor making decisions involving tumultuous events, such as COVID, international warfare and global inflation.

Can we expect future technology to supplement trustees’ discretionary decision-making processes? Absolutely. In the end, technology will likely help trustees better perform their responsibilities. It just doesn’t seem that technology will replace humans exercising discretion—at least not for now.

Digital and online financial tools can streamline simple tasks and research, but robo-advisors can’t yet replace the experience and discretion of a real live human. To learn more about discretionary investment management solutions, please contact your Huntington Private Bank team to see how we can help, or find a Huntington Private Bank® Office near you.

Related Content

Succession Planning
Read Time: 3 Min
Key factors for business succession planning
A good business succession plan is essential to achieving your goals down the road. Whether you want to keep the business in the family or sell to outside buyers, the journey can be long and rewarding.
January 10, 2025
Estate Planning
Read Time: 3 Min
The lasting benefits of a dynasty trust
Preserving wealth for future generations could be achieved when incorporating a properly structured dynasty trust. If left unprotected, federal estate taxes can significantly reduce a trust’s principal at each generation.
September 12, 2024

The information provided is intended solely for general informational purposes and is provided with the understanding that neither Huntington, its affiliates nor any other party is engaging in rendering tax, financial, legal, technical or other professional advice or services, or endorsing any third-party product or service. Any use of this information should be done only in consultation with a qualified and licensed professional who can take into account all relevant factors and desired outcomes in the context of the facts surrounding your particular circumstances. The information in this document was developed with reasonable care and attention. However, it is possible that some of the information is incomplete, incorrect, or inapplicable to particular circumstances or conditions. NEITHER HUNTINGTON NOR ITS AFFILIATES SHALL HAVE LIABILITY FOR ANY DAMAGES, LOSSES, COSTS OR EXPENSES (DIRECT, CONSEQUENTIAL, SPECIAL, INDIRECT OR OTHERWISE) RESULTING FROM USING, RELYING ON OR ACTING UPON INFORMATION IN THIS DOCUMENT EVEN IF HUNTINGTON AND/OR ITS AFFILIATES HAVE BEEN ADVISED OF OR FORESEEN THE POSSIBILITY OF SUCH DAMAGES, LOSSES, COSTS OR EXPENSES.

Investment, Insurance and Non-deposit Trust products are: NOT A DEPOSIT • NOT FDIC INSURED • NOT GUARANTEED BY THE BANK • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • MAY LOSE VALUE

Huntington offers a full range of wealth management and financial services through dedicated teams of professionals in the Huntington Private Bank® and Huntington Financial Advisors®, as follows:

  • Banking solutions, including loans and deposit accounts, are provided by The Huntington National Bank, Equal Housing Lender and Member FDIC.
  • Trust and investment management services are provided by The Huntington National Bank, a national bank with fiduciary powers.
  • Certain investment advisory solutions, securities, and insurance products are provided by Huntington Financial Advisors®.
  • Certain insurance products are offered by Huntington Insurance, Inc. and underwritten by third-party insurance carriers not affiliated with Huntington Insurance, Inc.

Huntington Private Bank® is a federally registered service mark of Huntington Bancshares Incorporated.

Huntington Financial Advisors® is a federally registered service mark and a trade name under which The Huntington Investment Company does business as a registered broker-dealer, member FINRA and SIPC, a registered investment advisor with the U.S. Securities and Exchange Commission (SEC), and a licensed insurance agency.

The Huntington National Bank, The Huntington Investment Company, and Huntington Insurance, Inc., are wholly-owned subsidiaries of Huntington Bancshares Incorporated.

Minimum investment or deposit balance criteria apply with respect to the Huntington Private Bank. Please contact a Huntington Private Bank colleague for more information on eligibility requirements.

Third-party product, service and business names are trademarks/service marks of their respective owners.