Robo-Advisors have captured much attention and have been the center of VC interest lately. With their ability to provide virtually the same services as traditional financial advisors ranging from investments to retirement planning. Will these automated investment vehicles eventually replace their human counterparts? Here are some of their strengths for you to consider:
- Low cost
Traditional financial advisors usually charge 1% – 2% annual fees to manage your portfolios, while robo-advisors only charge 0.15% – 0.35%, depending on your investment size.
- Low entry point
Most of the traditional financial advisors require a minimum of $500,000 in assets to manage your investments, while the starting-point for robo-advisors can be as low as $500.
- User friendly and easy access
By combining highly sophisticated algorithm and Modern Portfolio Theory, it only takes a few questions to determine your risk profile and get you started. Running on mobile platforms, robo-advisors also allow users to adjust their portfolios anywhere anytime.
As the industry leaders, Wealthfront hit $2 billion AUM in just 3 years since its inception, and New York-based Betterment has recently reached $3 billion mark and received another $100 million in new round of funding. Following their initial success, traditional investment management firms such asCharles Schwab and Vanguard have also followed suit and launched their own automated apps. Let’s take a look at the list of robo-advisors currently on the marketplace:
- Charles Schwab
- Financial Guard
- Personal Capital
- Rebalance IRA
- TradeKing Advisors
- Vanguard Personal Advisor Services
Going automated is becoming more mainstream as more big asset management firms are jumping into the race. As a matter of fact,Northwestern Mutual recently acquired LearnVest and Blackrock acquiredFutureAdvisor.
Traditional asset management firms still maintain their edge over start-up robo-advisors in handling complex investments. Could the joined forces of seasoned investment professionals and the latest technology be the future of wealth management? This is becoming interesting.