{"id":3033,"date":"2015-12-15T15:51:52","date_gmt":"2015-12-15T20:51:52","guid":{"rendered":"http:\/\/162.223.13.186\/~zacksim\/4-things-to-know-about-robo-advisors\/"},"modified":"2022-02-26T13:23:02","modified_gmt":"2022-02-26T13:23:02","slug":"4-things-to-know-about-robo-advisors","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/4-things-to-know-about-robo-advisors\/","title":{"rendered":"4 Things To Know About Robo-Advisors"},"content":{"rendered":"<\/p>\n

We live in an age where algorithms and \u2018apps\u2019 increasingly determine how we receive services. They are particularly useful for the discretionary services we often use for getting from point A to point B (Uber), finding an economical and unique place to stay (Air BnB) or getting the best price for an airline ticket (Expedia, Priceline, etc\u2026).<\/p>\n

But, could these programs also apply to receiving financial advice?<\/p>\n

There\u2019s a growing industry that says it might and that investors of the future will be using \u201crobots\u201d as their portfolio managers. If you\u2019re skeptical about a computer program managing your nest egg, it\u2019s probably for good reason. While there are some benefits to the robo-advisor model, there are also a few things you might consider before handing over your assets to a \u201cWatson.\u201d Here are four:<\/p>\n

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  1. Robo-Advisors Have a Singular Function<\/strong> \u2013 that is to build a diversified, passive asset allocation, and to rebalance it so that it remains that way. If you want actual advice beyond an asset allocation, you are generally outside the capabilities of a robo-advisor.<\/li>\n<\/ol>\n
      \n
    1. They Cannot Adapt to Evolving Needs <\/strong>\u2013 as you transition through your retirement, your financial needs are likely to change as your interests and goals change. Whether it\u2019s because you have a new need for additional cash flows, have a health issue to address or your family needs capital for a particular need, those are all adjustments that could influence your overall approach and asset allocation. A robot can\u2019t respond to such changes.<\/li>\n<\/ol>\n
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      1. They Cannot Provide Retirement Income Advice <\/strong>\u2013 most retirees have planning needs beyond just asset management. They need help determining what levels of income their portfolios should produce, where they should take cash flows from and more. A robo-advisor lacks these abilities.<\/li>\n<\/ol>\n
          \n
        1. They Cannot Provide Personalized Service <\/strong>\u2013 because, well, they are not people! In some cases a financial advisor may be attached to a robo-advisor, but we\u2019re wary of this model. In our view, that financial advisor has no incentive to understand the capital markets or become vested in your long-term financial situation or success. Given the passive nature of the investment, the advisor will probably spend more time trying to sign up new clients than manage existing ones.<\/li>\n<\/ol>\n

          The Bottom Line for Investors<\/strong><\/p>\n

          To be fair, robo-advisors can provide some utility. They are a great solution for younger, working savers who do not have enough assets to necessitate working with an investment manager. In those cases, having an automated system that can help you avoid making emotionally-driven changes to your portfolio is positive, and resourceful. Those types of investors don\u2019t need too much advice or planning, they just need an investment discipline and long-term growth.<\/p>\n

          However, for investors at or near retirement, there is a much higher likelihood that you will need an engaged advisor who can provide advice and service that evolves with your financial needs. Robo-advisors aren\u2019t quite there yet.<\/p>\n","protected":false},"excerpt":{"rendered":"

          We live in an age where algorithms and \u2018apps\u2019 increasingly determine how we receive services. They are particularly useful for […]<\/p>\n","protected":false},"author":1,"featured_media":3034,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,75],"tags":[],"class_list":["post-3033","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-client-group","category-the-savvy-retiree"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3033","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=3033"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3033\/revisions"}],"predecessor-version":[{"id":11478,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3033\/revisions\/11478"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=3033"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=3033"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=3033"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}