We’re only human: Let’s bust a few myths about robo-advisors

July 16, 2018 James Virgo

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My colleagues and I like to keep a close eye on robots, droids, and information technologies, especially when they may signal investment opportunities for MD funds, pools and portfolios.

Within our own operations, MD also stays on top of innovative technologies that can make the investing process easier for you and better suit your needs. Whether you like to rely on the discretionary know-how of our professional MD Private Investment Council Portfolio Manager or prefer to pick stocks and trade online yourself (and everything in between), the range of services in the MD Financial Suite let you invest towards your goals, your way.

So, cue the robots.

When MD recently introduced  MD ExO® Direct, a digital investing service that’s popularly known as a robo-advisor, some people wondered who or what, exactly, was at the other end of the keyboard.

Here are the five biggest myths we often hear about MD ExO Direct, and the truth about them:

Myth: I’m getting advice from a robot

I’ve watched enough sci-fi movies to be unnerved at the idea of a roomful of robots managing my money. In fact, if you were to walk through the door at MD ExO Direct, you’d find a team of busy humans, as in any other financial industry workplace.

The “robo” part of this advisory service is the use of technology to simplify the investment process. For example, the automated, step-by-step, online investment questionnaire and technology is used to recommend a portfolio based on your investment goals, timeline and risk tolerance. From there, a very human advisory team is available to support you, answer questions and go over your portfolio allocation, before or after your investment. You can talk by phone or have an online chat.

Myth: I have to choose between robo and a real-life person

Financial services is now a hybrid world that pairs smart people with powerful technology. It means you can choose from personalized services based on your needs, your financial goals and how involved you want to be in the decision-making process.  

Feel free to have both. While a core of investors may opt to keep their primary account with a traditional advisor, others may direct some savings to a robo-advisor to kick the tires, so to speak.

Myth: It’s only for newbies with small accounts

It’s no surprise new investors or millennials who grew up connecting with people online find it natural to work with a robo-advisor. But this type of service serves people of all ages looking for a comfortable middle ground between do-it-yourself investing and a full-service approach.

The Globe and Mail recently published a survey of Canadian robo-advisors and found the average age of their clients was 44, with more substantial assets.

Integrating technology keeps costs down to lower fees, which can lead to savings compounded over time.

Myth: There is less security

Not true. Digital investing is subject to the same strict regulations and oversight as every other part of the Canadian financial services industry. Portfolio managers have a legal responsibility to put your best interests first.

Maintaining your confidentiality and protecting your personal information are fundamental to the way MD does business with you, and it is no different with MD ExO Direct.

Myth: This is a passing fad

Much like online shopping and car sharing, robo-advisors are here to stay.

It’s expected that assets supported by robo-advisory services will grow to over US$2 trillion by 2020.

Digital wealth management uses software to help build and manage customized portfolios, teamed up with trained professionals who can provide advice when a human touch is needed.

Embrace a robo… if it’s right for you

At MD, we know that everyone’s circumstances are different. The MD Financial Suite is designed to provide a range of investment services, while maintaining the standard of excellence you’ve come to expect.

Ultimately, the service you go with should be dictated by your level of interest, how involved you want to be in the investment process, and your personal situation.

MD ExO Direct offers simplified investing that is entirely automated and online, while still providing access to a MD ExO Direct advisory team when you need it.

If you prefer to work face-to-face with an MD Advisor or to trade online, on your own—we’ve got you covered too.

 

About the Author

James Virgo, CFA, CFP, MBA, is Vice President and National Lead with MD Private Investment Counsel at MD Financial Management. He oversees the practice of investment counselling and delivery of investment advice across MD PIC.

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