Robo-Advisors Are Rising, and Retirees Should Be Worried
I've spent more than four decades watching markets shift, products evolve, and investor behavior follow one predictable cycle after another. I started reading stock tables in The Wall Street Journal as a kid, bought my first stock at 11, and went on to spend over 20 years at major Wall Street firms before leaving to focus entirely on the people I believe need the most protection: everyday investors approaching or already living in retirement. That long view matters right now, because the change I'm watching unfold today concerns me more than almost anything else I've seen in my career.
The change is this: robo-advisors and algorithm-driven platforms are rapidly becoming the default tool for millions of retail investors. I'm not dismissing technology. I use research tools every day. But there is a significant difference between using technology to support experienced judgment and replacing experienced judgment with technology entirely. The platforms being marketed to the public today are designed to gather assets and automate decisions. They are not designed to sit across from a 63-year-old, understand his family health history, his debts, his grandchildren, and his fear of outliving his money, and then build something that actually fits.
What worries me most is the timing. We are in an era where headlines move markets in minutes, social media drives herd behavior, and retail investors are more emotionally reactive than at any point in my career. Robo-advisors feed on that environment. They offer the illusion of control through a clean interface, but they have no ability to slow a client down when panic sets in. At Osiris Capital and through my work with DeBono Financial Insurance Services, I've watched clients come in after doing it themselves online for years. The pattern is almost always the same: they bought late, sold late, absorbed serious losses, and ran out of time to recover.
That last part is the one that keeps me up at night. Time. When someone is in their 30s, a bad year in the market is painful but survivable. When someone is 64 and has three years until retirement, a 30 percent drawdown is not a temporary setback. It can permanently alter the retirement they planned for. That's the reality robo-advisors are not built to address, because they don't ask the right questions. They ask how much risk you're comfortable with on a scale of one to five. That's not financial planning. That's a questionnaire.
What I call "circling the wagons" is the opposite of that approach. It means we stop, take stock of where the client actually is right now, protect what's been built first, and then build a structured plan for income and growth without speculating with principal. I strongly encourage anyone who is 59 and a half or older and still sitting entirely inside a 401(k) exposed to full market risk to be proactive and reach out. The window to make adjustments without desperation is open now. It won't always be. If you want to understand more about how I think about this, the about page lays out my philosophy in plain terms.
The automation trend isn't slowing down. If anything, it's accelerating. And the financial services industry has real financial incentive to push it. Algorithms are cheap to run. Human advisors cost money. So the marketing will get louder, the interfaces will get slicker, and more people will assume that because a platform looks sophisticated, it must be acting in their best interest. That assumption can be costly. One of the events I host, the "Psychology of Retirement" documentary, is built specifically around that gap: the space between what people assume their retirement will look like and what it actually requires to get there. The response from attendees tells me most people haven't had an honest conversation about it yet.
I don't think algorithms are the enemy. But I do think they're the wrong primary tool for someone whose retirement savings represent 35 or 40 years of hard work and who doesn't have another 35 years to recover from a mistake. The clients I serve at Osiris Capital aren't looking for a trend. They're looking for a plan they can trust with someone who will actually pick up the phone. That human element isn't a nice extra. For someone in or near retirement, it might be the most important financial decision they make. That's the direction I see this field heading, and my goal is to make sure the people who need real guidance know the difference before it's too late.