How do Robo-Advisors Compare to Financial Planners? By Financial Literacy Counsel Inc.
In the last decade, the presence of robo-advisors has steadily increased and at Financial Literacy Counsel FLC), we’ve been seeing more interest from our clients. About 50% of young doctors we work with are incorporating robo-advisors into their investment strategy. What does this mean for you as a BC optometrist? Should you consider a robo-advisor? What is a Robo-Advisor? Robo-advice is investing on autopilot. These companies utilize software that asks you a few questions about your risk tolerance, financial goals, and investment preferences. The answers are then fed into an algorithm to build your investment portfolio. Robo-advisors are geared towards passive investing and can automate different investment strategies such as Modern Portfolio Theory to construct portfolios 1. Advantages of a Robo-Advisor: 1. Low Cost Constructing your portfolio from an algorithm allows for a lower cost compared to actively managed funds. This means low advisory fees (usually under 1%), as well as low or no minimum 20 | Eye Digest Magazine
investment requirements, making investing more accessible for those with fewer assets. 2. Set It and Forget It! Automated algorithms and easy-to-use apps attract those of us who don’t want to spend time researching and picking stocks. Roboadvisors allow for minimal human interaction and building an investment portfolio is as easy as reaching into your pocket. 3. Range of Options There are a range of robo-advice companies available who are adapting to the demands of the market by offering more services such as on-call human advisors, tax loss harvesting, and socially responsible investing portfolios. How Do Robo-Advisors Compare to Financial Planners? To compare robo-advisors and financial planners would be a false equivalency. Truth-be-told, there are robo-advisor applications made specifically for financial planners. Robo-advice can be a strategy that you use independently, with your financial planner, or not at all.
