Financial advice use to come in the form of human only. Then the robo advisors showed up. Robo advisors are automated. Freedom Debt Relief mentions that robo advisors ask a few questions then suggest about the type of portfolio strategy you should invest in.
Now robo advisor + human services are gaining traction in the financial services world.
The Goal OfRobo Advisors
Robo Advisors are popular at companies such as Betterment, Personal Capital and Wealthfront. There are also at larger, more established financial services companies such as Charles Schwab, TD Ameritrade, Vanguard and E*Trade.
Robo advisor fees are charged against assets under management (AUM). They are often .25% - .30%. Although, Personal Capital charges .89% of assets up to $1 million of assets. This fee covers the cost of maintaining the portfolio at the financial service company as well.
Robo advisors are great for handling specific task but not financial planning, which is more comprehensive and complex. Usually, robo advisors at the above-mentioned companies will not offer advice on tax planning, retirement, estate planning, or college planning. Those are areas you’ll want to work with a financial advisor on.
Interaction with robo advisors is usually in the form of a set number of questions. Freedom Debt Relief says the goal of a robo advisor is to pick a portfolio strategy based on your time horizon, risk and goals. It’s a simple enough task and one that is easily automated to software.
However, people often have more complex financial questions, which robo advisors aren’t so good at. This is where robo advisors begin providing another path to human advisors, forming a hybrid model.
The Human Touch
Financial planning is more in-depth than just asking a few questions. It isn’t uncommon to have two or three phone calls with a human financial advisor before any plan is delivered. More comprehensive plans often require ongoing engagements.
For people who start with a robo advisor from a specific company, using human advisors at the same company is a great way to step into financial planning. The financial planner can work with the same portfolio setup by the robo advisor.
Freedom Debt Relief points out that financial advisors can ask more in-depth questions and dig deeper into the customer’s financial life. This type of conversation can often yield financial benefits for the customer.
Hybrid models also charge an AUM fee. Betterment charges .40% for unlimited access to a CFP.
The Hybrid model costs much less than working with a stand-alone financial planner. One negative is that each time you call in to speak with a financial advisor, you’ll get a different person. If you want to work with the same financial planner and build a relationship with them, a stand-alone advisor might be best. Although of the hybrids, Personal Capital does assign you a dedicated financial advisor.
At Freedom Debt Relief, we aren’t robo advisors and you’ll speak with a real person every time. If you need help getting out of debt, please get in touch with us at freedomdebtrelief.com