Want a new way to make smart, affordable and savvy investments? You may want to consider a
These efficient tools provide automated,
What started as a basic and affordable suite of tools to build and rebalance portfolios has become a sophisticated online offering that, in many cases, targets high net worth individuals seeking options such as tax-loss harvesting and socially responsible investing.
Robo-advisors have experienced exponential growth since their launch in 2008 during the Great Recession. In 2017, total assets managed by robo-advisors hit $222 billion—more than double the previous year. Growth is projected to reach $2 trillion by 2020 and $7 trillion by 2025. In short, robo-advisors are big business.
Five benefits of robo-advisors
- They’re affordable. Cost is a big part of their appeal. It’s possible to get started for as little as one dollar. Management fees are also less.
Robo-advisorstypically charge an annual flat fee of 0.2% to 0.5% of your total account balance compared to 1% to 2% for a human financial advisor.
- They suit all types of investors. Whether you’re just starting to invest or have an established portfolio, robo-advisers can be particularly helpful for the cost savings and efficiencies they create. According to Investopedia, half of investors aged 53 to 64 and
one-thirdof retirees now use digital resources to manage their finances.
- They take advantage of the latest and greatest products. Rather than blanket investing,
robo-advisorsare tapping into every corner of the market−from. hedge-fundsto interval funds. Some companies, chiefly robo-advisorstartups, are adding innovative tools that adjust allocations. For example, Ellevest, a women-focusedinvestment platform, introduced a private wealth management service last year for clients investing more than $1 million. Similarly, Wealthfront Inc. offers a tool to minimize risk for customers investing $100,000 or more.
- They require little involvement. Managing multiple investments can be
time-consuming,especially when life takes on new dimensions−childrenenter the equation, you start a business, acquire properties or approach retirement. Robo-advisorsdo the managing for you. They even offer mobile apps to access your account, check your balance and returns, and make deposits and withdrawals with the click of a button.
- They work in tandem with their human counterparts. Financial advisors tout investment strategies that combine the certainty of algorithms along with active management to cover all bases and maximize investment performance. Banks are adding a human component to their former
robo-advisor-onlyformula at lightning speed as consumers seek more guidance, especially during the onboarding and portfolio construction process.
Consider discussing robo-advisors with your financial expert. If you already use one, make sure that it’s registered with the U.S. Securities and Exchange Commission and is licensed and compliant. Incorporating a
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