Over the last few months a lot of articles about the future of financial planning. The rise of so called Robo-Advisers seems to be in the Sunday press more and more. A Robo-Adviser is an automated system that has asks clients questions about risk in addition to information about their pensions and investments. The software or system then comes up with an informed recommendation to help the client.
Robo-Advisers aim to offer a low cost solution to Financial Advice. Whilst this is great, I do have concerns that this solution may seem too simplistic and could lead to clients making the wrong financial decisions.
The advice will only be as good as the software and programming behind it. I don't believe its possible to build a Robo-Adviser service that will be able to take into account every aspect of a clients own personal circumstances.
If a client is looking purely for simple advice on their finances then Robo-Advice might be appropriate. However what about more complex aspects of true " Financial Planning", such as cash flow modelling, tax planning or generating retirement income? The combination of an adviser that is using the latest technology to help project forward the clients financial plan would in my opinions be a better option.
Many people over the age of 45 generally prefer to deal with someone they know and trust. A good financial planner will be able to help a client identify and prioritise aspects of their finances that are most important to them. This ability is developed over a long period of time and can be quite nuanced. Asking the right questions at the right time is one of the most important skills an advisor should possess. You simply can't get the same result from a software driven application. A recent article by Fina Metrica covered the concerns about Robo-Advisers.
The best option
I'm a great fan of technology. I believe the outlook for clients and Financial Planning in the UK is promising. Independent Financial Advisors need to use technology to their clients advantage. This can make a huge difference to the clients personal circumstances and their life.
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There are primarily two types of screening, positive and negative.
The process of Negative Screening excludes investments that you might consider undesirable. For example you might want to exclude some of the following:
Positive screening helps to identify the businesses that demonstrate the potential to offer good quality, long-term ethical investment opportunities. The positive screening process will help you to avoid businesses that could encounter problems as their day to day operations might not be sustainable in the long term. Positive Screening might include companies involved with
By employing active shareholder engagement it is possible for shareholders and fund managers to encourage a more corporate and social business approach.
It makes sense to consider investing into companies that have the foresight and willingness to adapt.
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