On May 8, 2015 the U.S. Securities and Exchange Commission’s Office of Investor Education and Advocacy (OIEA) issued an investor alert for automated investment tools (such as robo-advisors and financial calculators). These tools can provide recommendations on how to allocate your portfolio and the OIEA wants the investor to know it is important to understand the risks and limitations.
These automated tools may not see your entire financial picture. It may not take in to account your specific circumstances such as your investment experience, risk tolerance, combined investment holdings for you and your spouse/partner, tax situation, future cash needs, or investment goals.
These automatic investment analysis tools have their limitations. According to the OIEA alert, “Be aware that an automated tool may rely on assumptions that could be incorrect or do not apply to your individual situation.” The output depends on the information you provide and if you’re unclear on any of the questions being asked, you may not get the results that are right for you. Some automated investment tools may only offer a limited choice of investments for you to choose from. An investor may not understand the fees or compensation associated with the recommending, purchasing or selling of an investment.
When it comes to something as important as your finances, getting a face-to-face meeting with an advisor adds value to a plan that can consider different scenarios and paths for your financial future to help you navigate life’s obstacles. It allows you to ask questions until you fully understand your financial plan.
Content prepared by Rana Kory, Worley Erhart-Graves Financial Advisors