The rising popularity of robo-advisors has some in the industry wondering whether this is the beginning of the end for financial advisors.

In reality, robo-advisors have been able to do something that traditional financial advisors have not; get those with limited resources to begin creating a portfolio of investments.

Experienced financial planners typically don’t accept clients with less than $200,000 or (much) more in their portfolio. On the other hand, some robo-advisors are accessible with as little as $1,000, with others not having a minimum balance requirement at all.

Using a robo-advisor is easy, with investors simply filling out a detailed questionnaire indicating their investment goals and objectives. The entire process is automated, with the robo-advisor using a sophisticated algorithm to determine the best investments for your situation based on your preferences indicated on the questionnaire.

The process is quick and easy, with no face-to-face meetings, no discussions, and no disagreements. And that’s exactly why investors continue to seek out the advice of a financial planner. This can be particularly important for those that still need to work out their goals and prefer the personal touch that a financial planner can offer. While everyone continues to tout the benefits of robo-advisors, there will always be several advantages to using a financial advisor to manage your investment portfolio.

A Personal Relationship – While there are those who will always prefer to do business online without any human interaction, there is no way to adequately replace the a human touch with a computer. And while it’s easy to have a computer choose stocks based on a questionnaire, that computer knows absolutely nothing about you; your likes, dislikes, career path, relationship, whether you plan to buy a house, adopt a kid, or start a business. Your financial planner knows all of those things, and can make recommendations based on all of those things. Plus, with market volatility, isn’t it nice to be able to pick up the phone and talk to someone who can explain market fluctuations, or just offer some reassurance after a particularly volatile trading day?

Privacy matters – You keep your personal information private, and are not comfortable sharing that information. While some investors - particularly millennials tend to do everything online, there are many others who have serious qualms about sharing personal data, including financial data, online. And frankly, it’s hard to imagine someone with a million dollar portfolio comfortable managing it online.

You want to be more hands-on. Robo-advisors tend to be a one-size-fits-all solution, which is perfect for some investors. However, if you have some very definite ideas on where you want your money to go, you’ll be much better off using a financial advisor, particularly since investors have no say in where robo-advisors place their funds.

While a great resource for those entering the market for the first time, robo-advisors cannot provide the personal advice nor years of experience that a financial planner can provide.

Robo-advisors are not going away, but neither are financial advisors. Both will continue to provide services to two very different groups of investors, leaving it up to you to decide which option you’re more comfortable using.

Resources

1. https://smartasset.com/investing/pros-and-cons-of-using-a-robo-advisor-to-build-wealth

2. https://investorjunkie.com/41363/robo-advisors-vs-financial-advisors/

3. https://www.cnbc.com/2018/04/25/the-4-advantages-of-human-vs-robo-advisors.html

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