While automated trading systems may seem like the easy path to financial flexibility and freedom, the smart money is still on traditional human investment advisers. The top echelon of investors continues to rely on live financial services providers, avoiding using automated investing programs because of the flaws inherent in those systems.
Robo-trading systems are software applications programmed to buy and sell stocks and other financial products based on parameters established by their users. For example, a robo-trading program may be programmed to invest in an index fund if some stocks tracked by that fund hit a certain price. Automated systems of all types are becoming more commonplace in society, but investment remains one area where the human touch remains essential.
According to a study released by Spectrem and published by Investment News, a very small fraction of wealthy investors have ever used robo-advisers or automated trading. About 6 percent of the investors surveyed said they had used a robo-adviser, and, of those, just 47 percent said they were pleased by the results. With regard to human advisers, about 85 percent of wealthy investors who use live financial services professionals say they were pleased with the service.
The study surveyed more than 3,000 investors in three categories: $100,000 to $999,999; $1,000,000 to $4,999,999; and $5,000,000 to $25,000,000.
The study did find that younger investors were more comfortable with the idea of working with a robo-adviser or automated trading system, but, even among that sub-group, trust for these systems is low.
Automated trading systems can provide useful information and can work well in some situations if provided adequate human supervision, but they have a number of limitations and flaws that makes human investment advisers the superior option.
For starters, automated systems can be disrupted by technology failures. A power outage, server crash, or problems with an internet connection can all work to disrupt the trading plan you’re trying to implement with your automated system. Technology problems can disrupt traditional investing as well, but the risk is higher with automated systems.
Another key drawback of automated systems is the limitations of the software. While there are a broad set of parameters investors can program their systems with, no program can cover all eventualities like a human investment adviser can.
Human investment advisers can see patterns and make connections that an automated trading program can’t. This makes human investment advisers essential to wealth management plans. Wealthy investors realize this and are wisely reticent about turning over their money to programs afflicted with tunnel vision.
Automated trading systems aren’t completely worthless – backtracking and quick execution are key selling points – but they shouldn’t be used without the supervision and intervention of an investment adviser. Today’s smartest investors find advisers who use a combination of automated and personal services.
StockCross financial services provides the latest technology and highly trained and competent human advisers to help investors create and execute successful investment plans to grow their wealth and gain financial flexibility and freedom. To learn more, call 800-225-6196.