When my sons were young, our family went on a number of long road trips. Back then, my wife and I were big fans of the road atlas. Now that we’re empty nesters, we fly more often than drive.
After years of frustration with the airlines, however, we decided to
drive on our most recent trip. With our trusty GPS, we just had to key
the address into the touchscreen and follow the instructions.
The friendly voice would always tell us what to do. If we had an
upcoming turn, a pleasant woman’s voice would instruct us to turn left
in one-half mile. Even with the instructions I would occasionally make a
mistake; but when I did, there was no criticism. The nice woman’s voice
would say, “recalculate” and get us back on track without a trace of
I’m definitely impressed with the technology of the GPS. But on the
return home, if I had followed its instructions, we would have gone
through downtown Chicago at the peak of rush hour. Following the
instructions would have been a mistake.
While the GPS could calculate the quickest route, it didn’t take into
calculation the time of day I would pass through the Windy City. Nor
did it know anything about me. For example, the GPS didn’t know if I had
vision issues at night.
At that point it occurred to me that, as wonderful as the GPS
technology may be, we should never ignore the human element and depend
totally on technology.
I bring this up in a financial column because I fear that far too
many investors are doing themselves a disservice by being overly
dependent on technology when they plan the course of their investments.
They’re overlooking the human element.
For example, there are a number of software programs that, if you
input your birthdate and risk tolerance, answer a few questions and
provide a financial goal, the program will lay out an entire financial
In other words, financial planning and investing is becoming eerily
similar to my car’s GPS. Plug in what you want and technology will
instruct you how to get to your destination.
Yes, much of the technology is extremely helpful, but as with a car’s
GPS, computers lack the very important human element that advisers can
bring to the table. By that, I mean the professional relationship
between you and your financial adviser.
A good adviser will be aware of the human side of the planning
process. For example, is there a child or grandchild with special needs?
Are you worried about one of your children blowing through their
inheritance? Are you or your spouse facing a large medical bill or is
senior housing on the horizon?
Whenever the situation dictates, I believe a human can relate to your
loved ones much better than a computer program. And from a purely
investment standpoint, study after study shows that investors who work
with an adviser tend to have better investment performance. Probably
because advisers help investors keep their emotions out of their
investments and keep them calm in difficult times.
Technology is great, but it shouldn’t replace the human element.
Otherwise you might find your investments stuck in the Chicago rush hour
traffic with your GPS muttering an apology.