Alas the future evolution of technology has sparked a new option in the financial planning industry known as robo-advising. What is this you may ask? A robo-advisor is an automated investment platform that leverages AI and algorithms to create and manage your investment portfolio. With minimal effort required and lower costs compared to traditional advisors, it can be an appealing choice- especially for those who are comfortable with technology. However, what is the real cost of using this modern financial tool?
The initial questionnaire and hands-off, “set-it-and-forget-it” approach of robo-advisors may work well for those with straightforward financial needs. However, individuals facing more complex financial situations may require deeper, personalized guidance. If you already have a financial advisor, a robo-advising platform would need to develop a much more comprehensive understanding of your personal circumstances before fully replacing that relationship. You might ask a robo-advisor questions like: How much risk should I take with my investments? Can I retire comfortably? What should my overall asset allocation be? Yet, if your definition of risk has evolved over time, these questions demand more than just algorithmic calculations—they require a deep understanding of your personal balance sheet to create a strategy truly tailored to you.
I often associate robo-advising to the early stages of financial growth. When you’re just starting to build wealth, you might handle your own tax return each year. However, as your finances become more complex over time, working with a financial advisor and accountant can help ensure you’re maximizing all available strategies. This includes tactics like tax-loss harvesting and maximizing Roth conversions during lower tax bracket years. Similarly, while a robo-advisor may be a convenient option in the beginning, personalized guidance becomes increasingly valuable as your financial situation evolves.
A traditional financial advisor’s holistic approach offers that added level of service focused on helping you plan for key life events. Whether it’s preparing for retirement or ensuring your estate planning aligns with your legacy wishes, we are here to guide you. If you are interested in learning more, reach out to a human advisor today.
