Which Is Better: A Human Financial Advisor Or A Robo-Advisor?

Robo-advisors are everywhere you turn. Or, so it seems. These automated online investment platforms appeal to new and younger investors, but they can be a good fit for seasoned pros as well. The key to deciding whether to go robo-advisor or human financial advisor is to understand what’s right for you and your financial situation.

Are you tired of paying high fees and commissions with a traditional financial advisor?

Does the investment advisor at your local bank seem to pitch you only their own products?

Do you need someone to walk you through your investment choices?

Your to these questions will help determine whether to go robo-advisor or financial advisor. There are differences between a robo-advisor and a traditional financial advisor. Each one has their strengths and weaknesses. The best investment solution depends on what kind of investor you are, your comfort level with DIY, investing style, risk tolerance, and goals. Robo-advisors can work well for a variety people or for a robo with human touch, you might look into a robo-advisor with access to a human financial advisor.

Here’s what you need to know about the differences between robo-advisors that manage your investment portfolio automatically thanks to algorithms and proprietary software and traditional financial advisors.

Investing with a Robo-Advisor

Robo-advisors are different than traditional financial advisors. From the cost, client interaction, investment selection, and more, robo-advisors can be a great choice for the right investor. Following are reasons why robo might be best for you.

You Want Lower Fees

One of the biggest benefits to robo-advisors is the cost. In comparison with traditional financial advisors, most robo’s fees are quite low. And, your investments’ costs have a direct impact on your investments’ performance, especially over a long time horizon.

Traditional financial advisors typically charge 1% or more of the value of your investment portfolio just to manage your investments. You may also pay transaction and other fees on top of the 1% management charge.

So, if you had $1 million invested with a traditional financial advisor, you might pay $10,000 annually in management fees. That can quickly add up over the long term. Most robo-advisors on the other hand charge less than 1%. In fact, many robo-advisors have investment fees lower than 0.5% per year. Betterment charges a 0.25% fee for accounts up to $2,000,000 with no minimum investment amount when you open a Betterment Digital. That’s a $7,500 per year savings in our previous example.