I recently got back from a weekend trip to Santa Monica with my girlfriend. Let’s first get one thing straight, I prefer San Francisco to LA. But I have to admit, Southern California has grown on me. And as a food lover, I was curious to test a theory that countless individuals consider fact: LA sushi is the best on the west coast. Of course this wasn’t the primary reason for the trip, but it seemed like a good side project.
We booked a reservation at Kiriko, located on Sawtelle and Olympic, and sat the bar. We ordered the omakase menu (chef’s choice), which in my opinion is the only way to go. Let me tell you, it didn’t disappoint. But more on that later. What I’d like to focus on is our transportation from the hotel to the restaurant.
As we almost always do, we used Uber to order a car. But as we stood outside the hotel, I noticed there was a bit of traffic backing up at the onramp to the 10. I thought about saying something when our car arrived, but assumed the driver would know the best route. His in-car GPS told him to take the 10, so that’s the way we went. This is despite the fact that Google maps showed the 10 as fully congested for over a mile.
We sat in bumper to bumper traffic for 15 minutes before the driver decided to get off the freeway and take Olympic (which was the direct route to the restaurant). But after another mile, his GPS told him to take a left, so he did. Then it said take a right, so he did. And then another right. Finally, take the next left. We were right back on Olympic, the same road as before!
At this point my blood was starting to boil. He apologized and did actually get us to the restaurant, but it took almost 30 minutes to travel 3 ½ miles. I’m somewhat of a rookie to LA, but even I know you can get places faster by taking surface roads as opposed to freeways. But this driver blindly trusted his GPS, and ended up making multiple errors.
Don’t get me wrong, I’m a full believer in using technology to its maximum potential. And I love Uber! I want nothing more than to see them grow and change the transportation industry for the better. I’m sick of trying to flag down impossible-to-find taxis. But I also believe an element of human expertise is invaluable. Had the driver simply known the surrounding area, he would have taken us on the appropriate route from the get go.
Granted, better technology could have improved our experience. There could be a time when GPS apps account for all variables and perfectly calculate the fastest route between point A and point B. I’ll admit, they’re getting better. The end goal, of course, would be to fully automate transportation with driverless cars, although we’re not quite there yet.
Fully Automated Financial Services?
As I sat in the back of this disastrous Uber ride, I couldn’t help but draw comparisons to the financial services industry. More specifically, the so called “robo-advisors” who want to fully automate investing and remove humans from the equation. Personally, I don’t think we’ll ever fully be there.
Unlike a simple traffic route, money is deeply emotional. Most investors want, and need, a human being to interact with when planning their life goals. This is the primary reason Personal Capital has a team of advisors serving our clients’ needs. Unlike fully automated firms, our advisors provide expertise and guidance on issues like saving for college, when to take Social Security, or custom stock options strategies. These are important life questions, and ones not easily answered by an algorithm.
Additionally, one of the biggest hurdles investors face is themselves. Most understand the concept of buying low and selling high, but in reality this is very difficult to do. As we pointed out in our recent info graphic What are average investment returns, investors let emotional biases influence their behavior—they end up chasing heat (buy high) and ditching losers out of fear (sell low). Over time this leads to dismal investment returns. According to Dalbar’s recent Quantitative Study of Investor Behavior, equity mutual fund investors lost more than 4% annually relative to buying and holding the S&P 500 over a 20 year period.
Fully automated investment firms partially correct this issue—they take control of day to day buy and sell decisions. But without a human advisor, they still allow investors to inflict serious damage to their portfolios. This most often comes during market downturns, when fear is greatest.
I’ve witnessed two major bear markets in my professional career, and both times investors tried to jump out of stocks at almost the exact market bottom. Sounds unbelievable, right? It’s true. They wait and wait, hoping things will turnaround, but the market keeps falling. Finally they panic and sell, hoping to salvage whatever portfolio value they have left. Then the worst part comes. They sit in cash while the market does what it always does: it goes back up. This can be absolutely devastating to a portfolio. In extreme cases it can even cause someone to postpone retirement indefinitely.
This is where the true value of an advisor is realized. They act as an emotional coach, talking you off the ledge in your most vulnerable and high risk moments. Having a rational human voice on the other end the phone can do wonders to calm fear. This element is missing from a fully automated model. So while we agree the financial services industry is in desperate need of a technology overhaul, we don’t believe eliminating people altogether is the answer. We’re simply too emotionally tied to our finances.
But……and there’s always a “but”. Choosing an advisor can be a tricky process. A large number of “advisors” and “financial planners” out there are really just brokers in disguise. They sell products to make commissions. This presents a tremendous conflict of interest, and it can put your financial goals at risk. So make sure to do your diligence when searching for an advisor. See our recent post How Do You Know If You Can Trust Your Financial Advisor for a list of some important questions to ask.
P.S. So is LA sushi better than SF? I’m not qualified to make a blanket statement, but I will say this, I’ve been to most of the highly regarded SF spots, and my experience at Kiriko was definitely better (strictly speaking about food quality, not ambiance). That said, I’ve also heard the Seattle sushi scene is second to none. I grew up in the Seattle area, but it’s been quite some time since my last Pacific Northwest sushi outing. Think I’ll need to continue my research……