Robo Vs. Human

Learn the pros and cons before investing through robo-advisors.

PERHAPS YOU HEARD OF A ROBO-ADVISOR, or use one for your investments. Robo-advisors are technology platforms that provide automated investment services, ranging from trade execution only to those that employ algorithms to determine a client’s asset allocation and risk tolerance. The typical roboadvisor uses a generic questionnaire to collect information from its clients. It then applies that information to determine the client’s risk tolerance and an appropriate mix of investments, generally low-cost exchange-traded funds (ETFs) or other passive investments. This model completely eliminates human labor from the financial planning and investment process — hence the term “robo.” Several robo firms expanded this model to offer access to human financial professionals for an additional fee. Such access, however, is usually limited to electronic communication.