The Robo Said What?

Nico Robo

By Nico Anduze

Over the past decade, the popularity of Robo-Advisor companies (known as Robos) has skyrocketed. Armed with algorithms and index tracking technology, Robos were born during the Great Recession. They offer software-driven investing for a fee rather than having a personal relationship with an Advisor. This appealed to some as evidenced by the rise of Robos like Betterment, the standard by which other Robos are commonly measured. While the global economy was recovering from the Great Recession, the US Stock Market experienced the longest Bull Market that the Stock Market has ever had. Many investors, including those with Robo accounts, were experiencing a remarkable run. Then, something else happened.

The novel Coronavirus (Covid-19) pandemic changed life for us all. That longest ever Bull Market? Done. The S&P 500 index dropped 34% in just over a month and stock market volatility was sky-high. Hopefully, you were in communication with your Financial Advisor to review your portfolio and make timely adjustments. But, what about the investors who called their Robos?

In an open letter dated February 5, 2020, the CEO of Betterment wrote that he strived to have incoming phone calls answered in less than 3.5 minutes. While data has not been released on the average length of hold time for people calling their Robos during the pandemic, there is an abundance of user feedback online detailing extremely long hold times to speak with anyone. It is concerning to think of all the people seeking information and advice calling into their Robo. Then, there is the question that is raised in the title of this article, what did the Robo say?

These are some of the stark differences between working with a Robo and a comprehensive Financial and Investment Advisor. According to Backend Benchmarking, a New Jersey-based firm that follows the Robo industry, Betterment's overall returns over the first six months of this year were -5.4%. But, more importantly, returns do not tell the stories of investors seeking time-sensitive advice or tax-efficient investment planning. How are they going to adapt to the volatility and uncertainly ahead?

We live, grow, work, and invest in a complex environment during complicated times. With the U.S. Presidential election less than 90 days away and the Covid-19 global pandemic not yet defeated, having a truly customized financial plan has never been more important. There is no algorithm for understanding the unique circumstances and life events that we face. Each of us has our own goals and pathways to achieve them. Successfully navigating those pathways requires planning, commitment, adaptation, and working with a Trusted Advisor. If you are working with a Financial Advisor at Gerber Kawasaki, you know that we are here for you and preparing for what may be around the corner. If you are not working with a trusted Advisor, please reach out to me or one of my colleagues to schedule a complimentary consultation.

Nico Anduze is a Financial Advisor of Santa Monica, Calif-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately $1billion in assets under management as of 02/10/20. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss. Readers shouldn't buy any investment without doing their research to determine if the investments are suitable for their situation. "All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results."