When it comes to managing your finances, there are a lot of options available at your fingertips today. With the rise of technology, you can access financial services and investments easily with just a few clicks. Two such popular options that come to mind are a financial advisor and a robo-advisor. While both options have their positives and negatives, determining which is right for you may depend on your financial goals and preferences.
What Is A Financial Advisor?
A financial advisor is a trained professional who can provide you with advice on investment, tax planning, insurance, retirement planning and other financial-related matters. They have the necessary qualifications, certifications, and experience to provide personalized financial advice based on an individual’s financial goals.
One of the primary advantages of having a financial advisor is that you get customized, one-on-one service designed to meet your unique financial objectives. Your financial advisor will take the time to understand your financial circumstances, goals, and work with you to develop a plan that helps you achieve those goals.
However, the downside to having a financial advisor is the cost. Depending on the services provided, financial advisors can be expensive, especially if they charge an asset-based fee or commission.
What Is A Robo Advisor?
A robo-advisor, on the other hand, is an automated online platform that uses algorithms to automatically create and manage a portfolio of investments tailored to your financial needs, goals, and risk tolerance. With robo-advisors, you can invest in a diversified portfolio of low to moderate-risk investments with minimal to no human interaction.
The primary benefit of using a robo-advisor is the low cost. With no human interaction, robo advisors charge a lower fee compared to traditional financial advisors. They can also be considered more convenient than having to travel to a financial advisor’s office for your appointments. This is especially beneficial for investors that want to be able to manage their investments from anywhere.
However, it’s important to know that robo-advisors are not a one-size-fits-all solution. They don’t provide personalized advice, so they might not be the ideal solution for everyone’s financial needs. Investors that require more handholding and a more customized approach will benefit more from the services of a financial advisor.
How Technology Has Changed Financial Advice
In the past, financial advisors acted as the sole financial experts responsible for managing client portfolios. The rise of technology and automation has changed the financial advice game, and robo-advisors have been a significant disruptor.
Technology has enabled financial planners to provide more comprehensively proactive strategies for their clients. For example, some financial companies are using artificial intelligence and machine learning algorithms to help identify trends that make it easier to generate more profits.
Robo-advisors have also helped to level the playing for individuals that couldn’t afford or access financial advice services, making investment opportunities more widely available to the masses.
Combining Technology and Human Touch
While financial advisors and robo-advisors have their benefits and drawbacks, the good news is that you can leverage the benefits of both by combining technology and human touch. Many financial advisors today use elements of robo-advising technology to help augment the advice and service they provide to their clients.
In other words, some financial advisors are using robo-advisors as a tool to reduce costs and improve investment efficiency while continuing to provide a customized, personal touch with added value.
Choosing between a financial advisor and a robo-advisor will largely depend on your financial goals, investment knowledge, savings, and preferences. If you want more personalized attention and customized advice or have a particularly complex financial situation, you might want to consider a financial advisor. On the other hand, if you are comfortable with a digital-first approach, have a simpler financial situation, and prefer lower fees, then a robo-advisor might be a better solution. Whichever solution you opt for, always do thorough research and create a budget to help you make sound financial investment decisions.