The nature of the global stock market is such that even the most calculated, advanced, algorithmic predictors and programs cannot accurately navigate through the volatility. Take China's recent market plunge, for example. After a year of steadily increasing investment in Chinese stocks - even in the face of economic stagnancy - the market bubble popped on June 12 and the Shanghai index dropped by a third, according to CNN. There were warning signs, but none prevented the downfall. Instead, investors held onto their assumptions right up until "Black Monday" (as the crash is now dubbed) when many panicked and sold immediately.
This behavior highlights a common practice among modern investors: relying on robots to guide trading decisions. A variety of mathematically-sound automatic investment "strategists" help investors select profitable assets and minimize risk, according to Wired. But when the market behaves erratically and losses mount, these investors, especially the inexperienced ones, need human guidance. That's why, despite the prevalence of bots and their relative benefits, the market for advisors and other finance professionals is still alive and well.
The problem with automatic investment
One might presume that bots are not as effective as they say - that the metrics they use to devise the best investment strategies is somehow flawed or incomplete. While they are far from perfect - nothing exists, so far, that can consistently and accurately predict market changes - they still do a pretty good job of making the right choices for investors.
The problem, according to Wired, lies with the investors themselves.
"[With robo-advising services], there's a danger for investors to panic and do something that may not be in their best interest," Aite Group senior analyst Sophie Schmitt told Wired, "which is selling right away."
"Inexperienced investors can make rash decisions, panic and sell their assets."
In other words, without the stability and trust a good financial advisor provides, inexperienced investors make rash decisions, panic and sell their assets. The robot services act in the interest of long-term investment, in which ups and downs are part of the natural progression. Riding the course is the best bet, but investors are emotional.
"If reading lines of text could allay the effects of human emotion, everyone would be a pretty great investor." Morningstar equity analyst Michael Wong explained to Wired. "Trust mainly comes when you build on a personal level not from a website."
There's also the issue of people who aren't in the stock market for long-term gains - though it's not the wisest investment move, some people would rather try high-risk, high-reward investments. Financial advisors can work with these individuals to mitigate risk while still seeking out assets that satisfy their criteria.
Job market for finance professionals expected to grow
As crises like the recent one in China and the global recession from 2008 remain fresh in investors' minds, it stands to reason professionals with the ability to alleviate those concerns will have no trouble finding work.
"In fact, the need for financial professionals across the spectrum tends to increase in times of economic uncertainty," explained Beacon Hill Financial Division Director Michael Pickens. "In 2002 and then again after 2008, increased regulation opened up the market for, among others, CPAs, auditors, and advisors. We continue to see the need for financial talent across the nation."
According to Quartz, the end of China's financial woes may still be a ways off. The Chinese government has made every effort to control its currency, the yuan, even as domestic liquidity becomes restricted. The source explained, "the government's grand plans to reduce its debt woes while preventing capital from flowing out may have the perverse effect of causing more of both."
The global market is only expanding and so is the market for financial industry experts.
Think Advisor ranked Financial Analyst as the second-fastest growing finance job from 2010 to 2020 with 23 percent employment increase in that time span. Personal financial advisor ranked No. 1 on that list, with plus-32 percent change.
"Driving that job growth are aging baby boomers seeking advice as they navigate retirement," the source stated. "Also, the decline in pension funds will compel younger workers to contact personal advisors."
It's important to note that, while financial advisors are likely to increase, so too are those automatic investment bots. The industries will likely need to find a middle ground - a way for each to complement the other and provide better overall services for investors. Ultimately, the role of advisors and similar professionals hinges upon the public's faith in the market as a whole. More investment is a good thing for the financial industry and they can help their own cause by providing top-notch service for their clients.
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