Robo-Advisors – what’s the hype?
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Article by
Lindsey Taylor, Small Business Specialist Financial Advisor Triangle Financial Services, Inc.

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As a financial advisory firm, we talk a lot about the importance of finding the right match in an advisor.  But some people aren’t to the place where they need the full financial planning experience…yet. In the last few years, we’ve seen an increase in the availability of online advisors called “Robo-Advisors.”

Robo-advisors are online, automated investment management programs available with low fees and low or no minimum investment. Robo-advisors offer very little human interaction, although many provide a call center with human financial advisors for an additional fee.    

Some full-service financial advisory firms, including Triangle Financial Services, have started providing “Advisor-Directed Robo-Advisors.” These combine the simplicity and ease of a robo-advisor with the as-needed personal touch of a local financial advisor.

What are the advantages of a robo-advisor?

    • Low cost. Rates for investing with a human financial advisor are typically 1 to 2 percent of the account value per year, depending on the size of the portfolio. Most robo-advisors average less than 0.9 percent per year.
    • Low or no account minimum. Robo-advisors require very little, if any, account minimum. Many financial advisors have account minimums of $50,000 – $100,000.
    • Automatic re-balancing of the account. Because robo-advisors are automated, and use algorithms to invest your portfolio, you can expect to remain invested just like your targeted risk model.
    • Simple retirement calculators. Basic retirement planning and suggested savings provide simple guidelines for successful retirement.
    • Access to a call center of financial advisors. While not all robo-advisors offer this feature, many have call centers staffed by Certified Financial Planners TM for more advanced financial advice.  

Why choose an advisor-directed robo-advisor?  

  • Dedicated advisor. Advisor-directed robo-advisors allow you to establish a relationship with a local advisor for questions and annual follow up, whereas robo-advisor call centers staff several different advisors, and it’s unlikely you’d talk to the same person every time.
  • Personalized education.  For many, investments and finances are intimidating. The opportunity to sit down with a financial advisor and ask questions helps ease discomfort and fears.
  • Lower fees and account minimums. Typically, advisor-directed robo-advisor programs have a lower barrier to entry than the traditional financial advisor relationship, allowing easier access to an advisor.
  • Easier transition to the traditional model. As wealth grows, financial planning and investing needs will change. With a financial advisor monitoring your portfolio and needs, they are better able to assess when moving to a more traditional model would be beneficial.
  • Support local economy. A prosperous community is beneficial to everyone. Hiring a local financial advisor is just one more way to support the business community.

When evaluating robo-advisors, it is important to include advisor-directed programs in your list. If you aren’t sure which to choose, select a financial advisor that has both traditional and robo options for an objective recommendation of pros/cons of both models. You may not need a full-service financial advisor today but having someone you trust available for when that time comes will set you up for greater success.

Lindsey Taylor, MFM

Securities and Advisory Services offered through Harbour Investments, Inc. Member SIPC