Invest Wisely

Robo Advisor – The Right One Will Help You Invest

by Ryan Kinnar5 min read
So what is a Robo Advisor?

Today there is a new kind of online software that can help you with managing your investments – robo advisor. These softwares are automated, algorithm-driven financial planning services platforms that have little or no human supervision.


The Advent of the Robo Advisor

The first robo advisor was Betterment, launched in 2008, bang in the middle of The Great Recession. The initial purpose of this company was to help investors manage passive, buy-and-hold types of investments via a really simple online interface. This technology wasn’t new, even in 2008. Wealth managers had been using such portfolio allocation automated software from the early 2000s. At that time, however, only professional could afford this software. Therefore, if you wanted to use that software, you needed to first hire a wealth manager.


Betterment changed all that by taking the automated financial planning platform directly to the end user, thus starting an entirely new industry – robo advisors. Now, experts say that the robo advisor market is slated to achieve a market capitalization of about $7 trillion by 2025.


How to pick a robo advisor
Choosing the right robo advisor is important.


Choosing the Best Robo Advisor for You

With the robo advisor market expanding and new players entering the market, offering customers a wide range of service offerings, it is becoming more and more difficult to decide which would be the best platform to choose. Here are a few tips to help you along:


  • Access to Human Financial Advisors

Look for a robo advisor that also offers access to human financial advisors. For example, Vanguard Personal Advisor Services provides its customers access to a financial advisor during the onboarding as well as portfolio construction process. Additionally, all investors have access to human advice over the phone, by email and video chat.


There are other platforms, such as Wealthfront, who don’t have any human interface. According to the company, that is the way their customers prefer it. They build their own plans based on their goals. Choosing one depends on your comfort level. Having a human advisor can be a huge plus as talking to a human also serves as a circuit breaker for your emotions when you are stressed.


  • Investment Conflicts

When using a robo advisor, check the kind of fees you are paying as well as whether there are any conflicts of interest with the platform’s proprietary funds. Betterment CEO, John Stein states that one of the reasons why his company stays away from offering their own funds is to keep free of a conflict of interests. He feels that this is a part of being a fiduciary and keeping the customers’ best interests in mind. You should also check what types of futures your robo advisor offers you and whether they align with your personal investment goals.


Robo advisors are a great solution for those who don’t want to hire financial advisors or don’t have enough assets that would require the services of a financial advisor. Beginners, investors who have simple portfolios or those who just want their investments on auto mode are the best people to use robo advisors.