Is a robo-advisor perfect for you?

Robo-Advisors can be a great solution for many investors. They provide investment management at reasonable costs and instead can focus on more of what you love. Robo-Advisor sets up and manages your investment plan. All you need to do is add money to your account.

Because robo-advisors are automated, new investors, or even veteran financial advisors, may provide services that are inaccessible without spending a considerable amount of time and energy.

“Most people focus on fees or minimum accounts, which is important to know, but one thing people overlook is the value-added services offered by robo-advisors.”

However, some investors (especially do-it-yourself) may find that paying the management fee simply isn’t worth it. They also enjoy spending their own money on their work, as they may find their investment options limited in robo-advisors.

So, before you decide if using a robo-advisor is right for you, dig deeper and see how it may benefit your individual situation.

5 Questions to Know if a Robo Advisor is right for you

1. What are your needs and goals?

A good place to start is to determine your financial needs.

“Identifying your financial goals, time horizon, risk tolerance and liquidity needs is the first thing financial experts will be working on you. “Being able to define these yourself is a great place to get started. These are the foundations of your developed investment strategy.”

Ask yourself some of the following questions:

• How much would you like to invest? a bit? a lot?
• Do you need a comprehensive financial plan? Or just support your investment portfolio?
• For example, if you’re saving on down payments at home, do you need a goal-based financial plan?
• Do you want to consolidate all your accounts with one provider?
• How much do you want to be involved in your investment plan?

Robo-Advisors is suitable for those who need at least some support in their investment portfolio. Those who need a lot of expertise will find a robo-advisor worth it. Both groups may find a choice of robo-advisors with a variety of services that can meet the needs of financial planning, investment management, goal-based planning, and many other services.

Perhaps the only group that robo-advisors are not suitable for are individuals with a high level of expertise and who want to do it all on their own.

You need to self-assess before you start, but the actual process of opening a robo-advisor account is surprisingly quick and relatively simple.

2. Can I afford the robo-advisor fee?

Another important question is what a robo-advisor will charge for the service. Usually, you pay an administrative fee to your advisor and also pay for the funds you invested. For many robo-advisors, that’s the range of fees you pay on an ongoing basis.

How much can it run you?

• A robo-advisor usually charges a percentage of assets that you manage on your behalf. The industry standard is approximately 0.25% per year, but it varies. So you’ll pay $25 a year for every $10,000 you invest.
• For exchange trade funds in a portfolio, you pay a fee ranging from 0.08-0.15% of the amount invested, or a fee ranging from $8-15 per year for each investment of $10,000. This fee is seamlessly deducted from your account and sent to the fund company rather than the robo-advisor. Therefore, the robo-advisor you choose will pay regardless of which robo-advisor you want.

“Don’t think so just because you don’t have to pay out of your pocket like your other monthly bills that the service is free,” says McBride. “Not so. Don’t ignore these costs just because they’re deducted from your account, not from your pocket.”

The fee is only one side of the equation, so you need to balance it with what you are receiving.

A key feature of every robo-advisor is to build an investment portfolio for your customers based on risk tolerance and time horizons. It’s valuable, but robo-advisors can actually do more. They may provide a time-based feature that is too expensive for human advisors to match.

“The basic concept of building a portfolio is relatively simple,” Wauck says. “The location where robo-advisors add value is in an automatic rebalance state, saving you a lot of time and stress.”

Auto-rebalance is the ability to maintain actual investments near target allocations set by the robo-advisor, helping to ensure that returns and risks are consistent.

Another valuable feature? Automatic daily reduction harvest. This feature may allow Robo-Advisor to sell money-losed investments to enjoy tax benefits that can offset future profits.

“RoboAdvisors can look at their portfolios every day to maximize tax savings,” Wack says.

Wauck adds that tax Loss harvest can maintain great value for its customers. She points to a wealthfront study that states that nearly 96% of clients in tax accounts have earned an advisory fee that is fully covered by tax LOSS harvest profits.

Automobile rebalance and tax LOSS harvest are two of the biggest features, but check out other features such as:

• Sofi Robo Investing offers online community and networking events among many extras.

• Schwab Intelligent Portfolios does not charge advisory fees.

• WealthFront offers special investment funds for clients with higher account balances and a higher range of available investment funds than many of their rivals.

It’s important to look around and find features that provide added value.

4. Do you need financial planning services?

Beyond these automation capabilities, you may need a robo-advisor that provides a more comprehensive financial plan. These robo-advisors can get your financial home neatly by looking at your spending, savings and other aspects of your financial life.

For example, you might be able to link your financial account with a robo-advisor and get a full “real-time” view of your finances, a full “real-time” view of where your money is on the way, and where you can go instead.

Financial planning using either automated software or human advisors can help you set specific savings goals, such as university education or the House of Representatives. A more comprehensive financial plan will also help with things like spending so that you can invest more money and eventually roll up a larger nest egg.

For example, both Sofi and Vanguard provide access to financial planners as part of their management fees. Betterment and Schwab Intelligent Portfolios provide unlimited access to a team of certified financial planners as part of a higher service, while WealthFront offers software-based financial planning.

5. Do you want to discuss your investment with people or do it all online?

“Do I need to talk to someone or is it okay to go all online?” Ask Wauck and set one of the key differences between Robo-Advisors.

Some robo-advisors can plan your investments. And you don’t need to tell anyone. You will be able to access and adjust your plans at any time. This can be useful for users who know what they want and what they’re doing. However, this does not mean that customer service is not readily available if necessary.

Others need at least some, if not often, at least some, especially for more complicated questions. Depending on what it offers, the robo-advisor may have access to a limited or unlimited certified financial planner. Or maybe you’ll connect you with a team of planners or one individual planner focusing on your needs.

But don’t forget the value of a human advisor when the market is interrupted. They can help you get your investment plan back on track during periods that are easy to get back on track.

“RoboAdvisors have come from the desire to do it all online, but there’s a lack of calm voices on the other side of the phone when the market is covered,” says McBride.

When choosing a robo-advisor, we measure what the service needs and the help of the human needs.

RoboAdvisor FAQ

Conclusion

When determining whether a robo-advisor is valuable, you need to first know what you need and whether the robo-advisor may meet those needs. The best robo-advisors offer a variety of automated features and prices with different levels of human assistance, so there are many options that are difficult to sift.

However, if you’re not sure what you need, it may be smarter to use a fully functional robo, as you can scale or down and adjust it to your needs.