What Are Robo Advisors?
Have you ever struggled with your finances, specifically your financial planning and budgeting? You’re not alone with that struggle. This is a crusade that most of us end up fighting and losing at times, but other times, we come out victorious and more prepared than before. Properly managing our finances can lead us to live more fulfilling lives and make better decisions that lead to happiness. For instance, you can prepare for your retirement with a vigorous 401k or Roth IRA to travel around the world after you leave the working world behind alongside your youth.
If you’ve ever struggled with financial planning, maybe a robo-advisor is the right solution for you. If you’ve never heard of robo-advisors before, then you’ve landed on the right article. Let’s take a look at what robo-advisors are, how they can benefit you, and which ones are the top choices in the industry.
What is a robo-advisor?
A robo-advisor is a personal, digital financial planner that makes it easier for you to assess and control your financial situation. Robo-advisors can come in the form of a mobile application or a website or software that enables you to enter basic information about your finances and your goals and transform that information into reachable goals. These digital platforms are driven by algorithms and require very little human supervision, making them the ideal self-service option for budgeting enthusiasts.
The top robo advisors in the industry will even help you make investment decisions based on the input financial information and your desired financial goals—whether that’s growing your wealth in the short or long term or day-trading. They also offer intuitive account setup, portfolio management, high-security measures, low fees, and educational material so you can learn about your finances and how to manage them at your own pace. Like everything in life, robo-advisors have pros and cons that should be considered when choosing the right one for you. Let’s start with the pros.
What are the benefits of using robo-advisors?
Robo-advisors are driven by algorithms that leave little space for human error—excluding the user interactions—which can highly influence their low fees. They also usually require low balances on your bank accounts, unlike human advisors who may require an exaggerated balance to hire their services. Also, they are ideal for beginners who are looking to easily invest in their favorite companies and track their gains.
What are the shortcomings of robo-advisors?
Some of the most common shortcomings of robo-advisors include their limited ability to serve people looking to make more complex financial services like tax management, estate planning, trust fund administration, and retirement planning. Additionally, many of these automated services may not be fully equipped to work with unexpected crises or situations.
According to studies, many people prefer a certain level of human interaction when situations escalate rather than winging it with a digital platform on their own. Moreover, it’s essential to mention that robo-advisors are designed to work with individuals who already have a basic understanding of their financial needs and goals and will not always take into account the real-life implications as a human advisor would.
Which are the top robo-advisors in the market today?
Lastly, it’s important to point out that, although not one single robo-advisor will be the holy grail for your financial planning needs, there are many services out there that are taking the robo-advisor market by storm. Some of these include Betterment, Wealthfront, Schwab Intelligent Portfolios, and SoFi Wealth. Others include Ellevest, Acorns Invest, and Personal Capital. They each have their own set of benefits and shortcomings, fluctuating fees, portfolio rebalancing options, and online interface or mobile apps.
Using a robo-advisor may be just what you need to take your finances to a whole new level.