We saw the rise of robo-advisors after the last Great Recession in the late 2000’s with platforms like Betterment and Wealthfront leading the way.


Robo advisor platforms leverage technology to do algorithmic trading, have digital mobile apps, and use digital signatures—meaning the old ways of working with a financial advisor are quickly changing.

Typically, a financial advisor requires new clients to fill out a paper application in order to open up and start investing. In contrast, a robo-advisor can get new users started quickly from their mobile device or browser. This low barrier to entry combined with low-cost ETFs and low management fees of the funds within the robo-advisor model portfolios enables people to start investing with little money at a fraction of the cost. 

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What are the benefits of using a robo-advisor?

There are many benefits to using a robo-advisor. Here are the key advantages:

    • Relying on technology to execute trades 
    • Rebalancing your portfolio on a daily basis
    • Tax lost harvesting 

These benefits, plus the fact that these platforms are fairly affordable for the everyday investor, leave many people wondering whether they should completely switch to a robo-advisor or if they should continue to work with their human financial planner.

Why is partnering with a human financial planner a good idea?

For starters, robo-advisors will never provide the human element that financial planners still offer, such as listening to your personal financial goals and concerns or helping you initially set up your accounts—even if they are robo-accounts. They also will take your goals and long-term strategies into consideration when helping you select the appropriate risk tolerance for those investment accounts. Additionally, a financial planner you trust can help you manage your emotions and behavior when it comes to investing, instead of making irrational or spontaneous decisions.

An added benefit of working with an actual financial advisor is their ability to help you customize specific strategies such as: 

    • Build a comprehensive financial plan towards your future financial goals
    • Review your cash flow and budget
    • Set up the right savings and investment accounts
    • Help you understand the right insurance and estate planning documents you may need
    • Plan for events like purchasing a first home or saving for college

Even with the additional fees that a financial planner may charge, it is wise to leverage their services and expertise for these additional human elements that a robo-advisor could never deliver. 

And if you find a financial planner that works on a fee basis or flat-fee model, their fees will be transparent to you. Having someone you can call directly on a regular basis can actually save you a lot of money in the long run.

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So what’s better, working with a robo-advisor or a human financial planner?

While your specific situation may vary and one option might be best suited for you, the ideal answer is to work with a combination of both technology and human expertise.

Robo-advisors can automate and streamline much of the investing process—but a human, even with their human errors, can listen, care, and even bring new ideas to the table that you might not even be considering.

At Altruist, you get the best of both worlds: beautiful, modern technology with everything handled digitally online and the benefit of a human relationship with a professional financial advisor.

 

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Financial advice for real people, by real people. You shouldn't need a degree to understand your money. Join Head of Education, Brittney Castro and Altruist mentors as they break down financial tips and strategies in a real way to help you finally understand how to achieve your financial goals faster.