Author: Adam T. Hughes
February 7, 2017

Have you ever came across an investment firm that relies on software planning tools rather than advice from a personal advisor? If so, you may have experienced, without even knowing it, what it’s like to work with a robo-advisor.

A robo-advisor “is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners” (source: ivestopedia.com). In other words, these are computers that try to emulate the advice one would receive from a face-to-face financial advisor. Over the last few years, there has been a proliferation of web-based advising companies entering the industry, and whether you like them or not, there is no denying that they are changing the game in the world of financial planning.

Why would you want a robo-advisor over a real life financial planner? Well, the biggest advantage by far is the cost savings. As you can imagine, taking the human aspect out of the equation can reduce advising prices substantially. While you will lose that human instinct that is inherently useful in financial planning, some would argue that any marginal losses are made up for in the reduced account fees. That, combined with the abundance of online tools, is generally why robo-advisors are particularly attractive to the younger generations of investors who wish to have more control over their portfolio. The increase of technology also leads to more transparency in fees/costs associated with your investments, something younger investors are placing more emphasis on over previous generations.

On the other hand, just because we are seeing an influx of robo-advisors, certainly doesn’t mean human advisors have lost their appeal. Not by a long shot. If you aren’t particularly familiar with computers or sometimes need things explained in different ways, human advisors are worth their weight in gold. Of all the limitations that robo-advisors pose, the biggest has to be life guidance outside of investment performances, which is virtually nonexistent. No matter how hard they try, a robot will never be able to assist with decisions related to your family, health, and personal goals. That, along with the general consensus that human advisors will save you the most time over the long run, is why human advisors will continue to be the staple among financial advising firms.

The Winning Strategy

Whether or not you decide on choosing a robo-advisor over a human advisor, there will be a number of pro & cons you should consider. Most importantly it will come down to how much control you wish to have over your portfolio. If you are one that likes a more hands-on approach, considers performance transparency a high priority, or you consider yourself “tech savvy”, then robo-advisors might be for you. On the other hand, if you easily find yourself overwhelmed by online investing tools, value face-to-face customer service, and seek additional guidance beyond bottom line profit margins, then continuing to seek advice from a real life financial advisor is undoubtedly your best option.


About Adam

adam

Adam has worked in the tax & accounting field for about 8 years having a background in corporate tax, commercial audit, QuickBooks consultation, and IT support with hardware/software installation and maintenance.


 
Before making any decisions, please consult your tax advisor. Investment Advisory Services offered through Symphonic Financial Advisors, LLC. Insurance offered through Symphonic Insurance, LLC. Securities offered through Symphonic Securities, LLC., member FINRA/SIPC, 400 Park Avenue, New York, NY 10022. Investment products are not bank deposits or guaranteed by or obligations of City National Bank or any subsidiary or affiliate, and are not insured by FDIC. They involve risk, including the possible loss of principal.
 
 

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