Financial Coaching

The Showdown With Robo-Advisors

In late July, entrepreneur Kevin O’Leary of TV’s Shark Tank fame unveiled the latest of many mobile apps for automated saving and investing. “100 million Americans have almost no savings for retirement and I want to change that,” O’Leary said in a launch statement. The Beanstox Seriously Simple Investing app, as it’s called, joins the burgeoning field of online trading platforms and 24-hour, at-your-fingertips investing apps widely referred to as robo-advisors, which are disrupting the financial services industry.

But Jeffry Weldon, J.D., CLTC®, and Carolyn Weldon – the founders and husband/wife team at Weldon and Weldon Financial Coaching Inc., in northern New York – are on the side of peace rather than disruption. In a recent interview with Advisors Magazine, both expressed tremendous concern about the proliferation of robo-advisors, while explaining how their firm helps clients gain peace of mind around their finances.

“So you come in from the cocktail party at 1 a.m. after a few drinks and overhearing some hot tip,” Carolyn said. “You go online, and in 30 seconds you might make some devastating investing mistake that will affect your financial future – and there’s nobody at a robo-advisor that can coach you or maybe advise that it isn’t the best move.”

From the Weldons’ viewpoint, robo-advisors are incapable of caring about a person’s financial or personal life, and not interested in an individual’s own goals, hopes and dreams.

Jeff told the story of a client who was active on a robo-advisor platform. The client was being deluged with emails about trading options.

“Do you realize how complicated options are?” Jeff asked. “There are certain options where the amount you can lose is infinity. People don’t understand this.”

As financial coaches, the couple ultimately works to see their clients live their lives, rather than obsess about their assets. Jeff likes to say it’s all about freedom, fulfillment and love – the subtext being that those are things robo-advisors can never provide.

“With robo-investing, people are being told they can drive the Maserati,” Jeff added. “But their financial life is being put on the line by being tempted to race ahead with decisions on things that could totally mess up their financial future.”

A financial coach, on the other hand, helps clients avoid such potential wrecks by getting them to focus on what’s really vital.

“Our true purpose is to empower our clients to create freedom in their lives by transforming their investment experience, so even after we’re gone, these people will still be having great - lives,” Jeff emphasized. “And through our coaching, we don’t only teach them how to focus on their financial behavior, but we teach them to focus on what’s important to them.”

The firm’s mission is to empower families in discovering their true purpose for money by transforming their investing and planning experience. Clients at Weldon and Weldon start with an investigative review of where they stand now and what is meaningful to them now and in the future.

In fact, if that client’s deep-drill review sometimes feels like a legal deposition, it’s probably because Jeff has a law degree and was once on the editorial board of Journal of Contemporary Health Law and Policy, (Columbus School of Law at Catholic University, 1985) Among the 20-odd questions he’ll ask a client:

• Do you have a true purpose for your money? (Meaning something that’s more important than the money itself.)
• Have you defined your investment philosophy?
• Do you have an academic understanding of how markets work?
• Do you have an academic method for measuring your risk tolerance and do you know what the number is?
• Have you measured the total amount of commissions and costs in your portfolio?
• When it comes to building an investment portfolio do you know exactly what you are doing and why?
• Is the person you are working with a coach or a planner?
• Do you have a customized lifelong game plan to guide all your spending decisions?

“One of Jeff’s favorite phrases is ‘whoever God puts in front of me gets all of Jeff,’” Carolyn said. “We’re not going to turn anyone away. We have people who don’t make a whole lot of money and we have people who are very wealthy and we have a lot in between. And it doesn’t matter if you make $50,000 or $500,000 or $5 million a year,” Carolyn, who is also an Investment Advisor, continued. “Interestingly enough, I observe that those who make more money are often the most stressed about money.”

Such stress can lead to fear and behaviors — and subsequent action or inaction — which may prove harmful without the steady guidance of a financial coach.

“People may have a financial plan, but they also have fears,” Jeff explained. “Some have a scarcity mindset around money; something happened in their life, and they constantly revisit that experience keeping alive a fear about money,” he added. ““I have a client with over $5 million of assets and they are so fearful that they are going to run out of money. I don’t see any possibility of it from the facts, but they are very fearful about their future.”

Educating clients is beneficial and Weldon and Weldon do a lot of teaching as well as coaching. But because of each client’s own fears and individual biases, Jeff contends that the important thing to keep in mind is that knowledge does not always dictate action. He maintains that education is tremendously important and that clients must have a basic understanding of how markets work, and then be coached on their behavior around money.

“There is no dumb question,” Carolyn said. “If you are wondering about something, chances are good your spouse or other people on a call have the same question. If you are wondering about it, bring it up and let’s address it.”

Worry, stress and fear were all in play during the height of the pandemic. The Dow Jones Industrial Average index plunged some 8,000 points in the four weeks from February 12 to March 11, 2020. Those stock market losses threw many investors into panic mode, leading them to forget why they invested the way they did, and looking to flee into cash.

“All that stuff goes out the window when fear takes over,” Carolyn noted. “And that’s why regular contact and coaching are so important. Because, when those fear instincts come along, coaching can bring them back to what they were doing and why they were doing it—and talk them through those moments.”

That’s exactly what the firm did during the pandemic and is continuing to practice currently: Outreach. Listening. Feedback. Before the pandemic, Jeff and Carolyn were traveling at least once a month, sometimes more, seeing out of state clients and continuing their own training.

“But when the Pandemic occurred, we made a commitment to call every single one of our clients,” Carolyn said. “That took some time. Some of those conversations were on the tough side. People were suffering and they just needed someone to listen to what they were dealing with.”

She’s quick to acknowledge that there is no magic bullet or perfect solution, no cookie-cutter approach that applies to all.

“So we made sure to be in contact with our clients to let them know that we are here, we are available. We can talk on the phone, we can set up a Zoom meeting,” Carolyn said.

They both still prefer in-person meetings, but they’ve also learned a lot can be accomplished via Zoom or with an earnest phone call. 

“We’ve even had groups of clients together on Zoom and those meetings have been very powerful,” Carolyn added. “People who might not necessarily know each other are connected through us and share their experiences and we have developed some great community in Zoom meetings with multiple clients – that’s not something I had barely considered prior to March.”

Jeff pointed out that life insurance companies quickly responded to the needs of people during the pandemic. Emailed or faxed death certificates, with some companies, are now acceptable whereas a raised-seal certificate was previously required. Some underwriting guidelines have changed also.

“One of the underwriting questions was always: ‘When have you last seen the client?’ Now the question is phrased: ‘When have you last seen the client, or been on a Zoom with a client?’” Jeff said.

Most clients are now very comfortable with Zoom. The Weldon’s find millennials, especially, love it. Clients in their 50s and 60s have adapted and are frequent users, and even most of Weldon and Weldon’s older, retired clients could now be considered boomer Zoomers.

“The pandemic experience reminded us of the importance of regular communication with our clients” Jeff said. “We even added additional staff to help us with that because we discovered how vital communication is and how we wanted to continue that outreach even when the pandemic ends.”

The Weldons called to listen to what was happening in the lives of their clients. Paying attention was prioritized over offering advice. In the process, Carolyn and Jeff say they learned so much that had absolutely nothing to do with the pandemic, in addition to information directly linked to COVID-19.

“See, no robo-advisor is going to call you and discover you’re now working from home, or your daughter’s wedding had to be canceled, or you lost a loved one,” Carolyn said.

In fact, Weldon and Weldon plans on countering the rise of the robo-advisors with even more meetings, increased communications and – get this – more human beings.

“We learned so many things from listening to clients that need to be addressed,” Jeff emphasized. “And through this pandemic, we have added staff and believe we’ll have to add even more.”

Encouraged by the outlook at their own firm, the Weldons are not without their frustrations with the industry in general.

“In investing, there needs to be a change in how investing is offered to clients because clients are basically put in a situation where an opportunity is presented that is really no different from Vegas,” Jeff said, not mincing words. “It’s ding-ding-ding and the bells are ringing and it’s like hey put your money in here, you can win big.”

In his view, the big problem is rampant gambling and speculation. People profit once from a stock tip and think they can time the market and make a bundle.

“They’re picking stocks and it’s been proven over and over again that you can’t pick stocks,” Jeff insisted. “It can’t be done. That’s been academically proven over and over again. Market timing doesn’t work.”

What may likely have a better outcome is being a better saver and working with a financial coach around your investing behaviors. In fact, the personal saving rate in the United States, as calculated by the federal Bureau of Economic Analysis, jumped during the pandemic to 32.2% in April, surging from the March rate of 12.6%, only to slide to 23.2% in May. And Jeff relishes the chance to have a coachable moment with a client around the practice of saving money. Strong savings will trump a riskier return every time, he contends.

“If you’re someone who saves 5 percent of your income for 30 years, and you made 12 percent in returns, and your neighbor had the same income, but he saved 20 percent of his income and made 6 percent, guess who had more money?” Jeff asked. “You have to have the world-class saver conversation. We have people in law firms, and accounting firms and it’s like a new world to them. No one has ever talked to them about it before.”

Other sources of frustration for both is the industry’s jargon, extensive legalese language contained in prospectuses and disclosures, and the blurring of lines between fiduciaries and brokers/dealers.

“Such documents need to be provided in plain and simple terms that people can easily understand,” Carolyn said. “It needs to be in summary form so that it’s not in 50-page packets. And it’s difficult for the average Joe, because of state and federal regulations, to understand the differences between a fiduciary and a broker/dealer.”

In the end, the Weldon and Weldon takeaway messages are indeed plain and simple: People need to find a coach who can really help them see their behaviors are the problem in their whole financial picture; clients must be empowered to discover their true purpose so they can focus on what’s important to them, and the ultimate objective is having peace of mind around their money.

And one more thing: it’s best to avoid the financial sharks and robots.