Over the last couple decades, technology has become an essential part of our lives. Whether it’s getting turn-by-turn directions from the GPS in your car, ordering groceries from your smart fridge, or using your phone to do basically everything, we’ve become increasingly reliant on the technology around us.
A growing number of people are now turning to technology to help with their investments, too, as investing apps make it easy to buy and sell shares of stock with the push of a button. But what about financial advice? Does it make sense to trust your financial future to a robo-advisor?
What Is a Robo-Advisor?
Robo-advisors are digital platforms that offer algorithmic financial planning advice. To put it more plainly, a robo-advisor is an online financial planning service that collects your financial information, asks some questions about your financial goals via a survey, and then uses that data to provide you with planning advice and make investments.
There are a number of great robo-advisors out there, and many large financial institutions have their own versions of robo-advisors. But are they right for your specific situation? Let’s take a look at the pros and cons:
Who May Benefit from a Robo-Advisor?
New Investors
Robo-advisors can be great for people who are just getting started with investing. Generally, these programs can help you project how much you need to save to meet a certain goal, and they can offer guidance on how much you should save each month to meet that goal. As someone new to the world of investing, meeting with an advisor can be intimidating, which makes these online options a great starting point for those just looking to get their feet wet.
Budget Watchers
Hiring a comprehensive financial manager might not be a viable option for some people. If you’re wary of taking on the costs that come with hiring a traditional financial advisor, then a robo-advisor can be an affordable alternative. Without the costs of human labor, these platforms can provide similar services at a fraction of the cost.
Frequent Trackers
Many of the robo-advisors out there have their own apps, meaning you can check in on your account balances, see your rate of return, and adjust your investment options anywhere with internet service. Depending on your goals and lifestyle, the convenience of a robo-advisor may be just what you’re looking for.
Who May Not Benefit from a Robo-Advisor?
Experienced Investors
More seasoned investors, like those who are working toward their retirement goals, may need a wider range of options to properly manage their accounts. Robo-advisors are generally geared toward simple investment planning and portfolio balancing, so if you’re looking for a customized investment strategy or want to have a more granular level of control over your accounts, a robo-advisor may not be the best option for you.
Relationship Builders
One of the biggest things you miss when you work with a robo-advisor is the personal relationship and guidance–especially when it comes to your specific needs. Robo-advisors aren’t always able to handle more complex situations. They may not take things like taxes, estate planning or specialized investment needs into account.
If you need help planning for these types of scenarios, you will likely want a live person to talk to. And if you build that relationship and work with someone for several years, you can trust that the advice and guidance they’re giving you has your best interests in mind and is suited to your specific situation–it’s not simply a generic piece of advice churned out by an algorithm.
A good financial advisor should work proactively to give you the best options out there so you can be confident in your financial future. If this is something you value, it may mean you’d be better off going the traditional route. Reach out to one of the advisors at Wealth Enhancement Group to learn more about how we can help prepare you for the retirement of your dreams.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
