You’ve probably heard some of the buzz around Robo Advisors. Companies like Betterment, LearnVest, and Personal Capital are gaining popularity as services that use complex algorithms to provide “optimized” financial planning or investing strategies.
But are they better than paying to work with a financial advisor IRL?
Robo advisors are great if you’re just starting out.
Robo advisors remove the human element (for the most part) from the financial relationship, which allows the company to charge less for its services. This can be great for younger people just starting out. You can get basic financial planning and/or investment advice without the steep fees your parents might be paying.
Also, when you’re young and single, your financial situation is probably on the simpler side. Robo advisors can provide general guidance that will likely apply to you. They’ll assess your age and your appetite for risk, then recommend a tax-efficient, diversified portfolio that fits your profile.
But, what happens your financial life gets more complex?
Your robo advisor doesn’t care about your feelings.
Many of us may have similar financial goals, like buying a home, getting married, or starting a family. However, every situation is unique! And robo advisors aren’t really equipped to deal with that. As you get older, your financial life will inevitably grow and get more complex. The one-size-fits-all approach of robo advisors might not work for you at this point.
Let’s say you get an inheritance or start caring for elderly parents. You won’t be able to call up the robo advisor and get personalized advice on how to deal with those situations. And those are times when you will definitely want professional guidance!
Sure, working with a real human costs more than a robo advisor, but you get what you pay for.
Define your goals before you decide what type financial advisor is right for you.
Before paying anyone for anything, determine your financial goals. Where are you in your financial life right now? Are you a recent college grad, just starting to save? A recently married couple looking to merge finances and plan for a family? An older couple thinking about retirement? Where you are in your life right now plays a big factor in who you should be working with.
Then, analyze what you can afford. Robo advisors will likely be your least expensive option, but it’ll also be the most hands-off approach. On the other hand, working with a human financial advisor at a big firm can be costly.
Stash Wealth offers a compromise: we’re human advisors, able to listen to your personal situation and provide customized solutions. However, we keep costs down by providing our services over the phone or computer, not in person. We also offer multiple types of plans, allowing you to take a do-it-yourself approach or get more help from your advisor. Get more details here.