Financial markets are in trouble with a war going on between the newcomers of the market and the already established marketers. The vast investment industry has a newcomer in the form of technology that may or may not threaten the jobs of many. Our latest finance blog is a story of robo advisors versus financial advisors; another addition to the robots versus humans battle!
Robo advisors have become a force to be reckoned, they came, they saw and they conquered. While innovation is good, financial innovation may not be such a great idea keeping in mind the global financial crisis that happened some years ago. In spite of this robo advisors have become quite popular in the past few years and have been stealing customers from human financial advisors almost every day. However there is no denying that robo advisors are not all bad and have some benefits that are distinguishing them from the human finance advisors.
The Benefits of Financial Robo Advisors
- Robo advisors or websites offering artificial intelligence services are able to engage their users better.
- A lot of financial information that is required for making investments is easily available at a click of a button.
- Many companies offering robo investing have enhanced the user experience by making use of graphics and charts for demonstrating all the possible scenarios.
- The process of rebalancing your portfolio is done more smoothly and automatically by the best robo advisors.
- Customers availing these services can expect a 24/7 assistance in case of any problems.
- The price of hiring a human financial advisor is definitely more as compared to availing automated services.
SEE ALSO: ‘20 Questions’ Game Helps Robots Understand Humans
The Downside of Robo Advisors
- One of the biggest disadvantages of what might sound like the holy grail of investments is that it relies on a very small amount of information that is provided by the client.
- Due to various factors such as (job, children, retirement, major purchases etc.) your risk profile may be different due to which you may not be able to afford the investing risks taken by a financial robo advisor.
- Robo advisors mostly take into account the previous performance records of the market without considering the future changes in the financial market, making them a not very reliable choice.
- There are some robo advisors that rebalance a user’s portfolio daily, monthly, quarterly or at other such frequencies. Excessive rebalancing leads to additional transactions and fees which might hurt you financially.
- If you are an investor that is seeking for a more diversified portfolio then robo advisor might not be the best option for you since you can’t choose your own investments.
While robo advisors are still considered young and new to the market as compared to human financial advisors, it may be too early to predict whether or not they are a wrong choice. However, before choosing a human or robo financial advisor it is important to consider both sides of the coin. It is also important to choose organizations such as Wealthfront, Betterment, Ellevest and Vanguard amongst many others to ensure that your finances are being handled by the trusted and right companies.
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