Will the financial planners of the future be machines? Will a machine be able to dispense good investment advice?
The answer for the moment seemingly is a yes for plenty of people.
“Robo-advisers” are using technology to create investment advice and manage your portfolio. You answer a few questions that touch on your tolerance for risk and time horizons. In seconds, a software program analyzes your answers, applies investing theories about diversification, and gauges possible risk-reward outcomes.
Then, presto, out comes a portfolio specifically designed for you (or one of many preprogrammed portfolios where the firm makes the most money). The theory is that keeping costs low is key, robos use mostly low-fee exchange-traded funds to build the investment portfolios. Unlike the “human” financial advisers who use the same software and then work with you to decide a portfolio.
Among firms giving robo guidance: Financial services giants Charles Schwab
and Vanguard Group. Upstart sites such as Betterment, SigFig and Wealthfront are also getting on board. No thing helps a relationship like taking the “humans” out of the equation. Don’t you just love cost cutting measures.