Off late Robo advising has been making all the right noises regarding financial advice. There seems to be a lot of potential and in future, the number of Robo advising companies are only expected to grow.
Going back a few years, customers had a couple of options when it came to financial investing. They had to do all the investment themselves or hire a financial advisor. Hiring a financial advisor had limitations, the biggest being having a minimum asset requirement which was around $0.5 million. These advisors charged around 2% of your investment which meant around $10,000 annually. Comparing this to Robo-advisors which typically have a min investment between $25,000 to $50,000 and charge around 0.5% management fees. At the surface level, Robo advising seems a much better option but can it replace human financial advisors?
Robo advising has the prospects of replacing financial advisors but in the end, I believe it comes down to individual preference. For many people wealth is personal and a lot of emotions are attached to it. They want to make future life decisions based on wealth and these people would not a want a robot advising them. At the same time, many people don’t have the time, grasp of finances and desire to consider all investment options and would prefer a robot to give financial advice. Another point to ponder upon is, after 2008 financial crisis the markets have been on the rise. A financial crisis is imminent in the future and when this happens would you want a robo advising you or would you prefer a human who you talk to and share your concerns?
References:
https://investorjunkie.com/35919/robo-advisors/
https://www.nerdwallet.com/blog/investing/best-robo-advisors/