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Robo Advisors: What Are They And What Do They Do?

Michael Ralby explains what robo-advisors do and how they fit into the finance industry today, as well as the benefits to using these services.

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Robo Advisors: What Are They And What Do They Do?

  1. 1. R O B O - A D V I S O R S : W H O A R E T H E Y A N D W H A T D O T H E Y D O ? MICHAEL RALBY
  2. 2. T H E F I N A N C E W O R L D CONTINUES TO EVOLVE, AND ONE OF THE MOST SIGNIFICANT WAYS IN WHICH THE INDUSTRY HAS CHANGED IS WITH THE INTRODUCTION OF “ROBO ADVISORS,” A NEW SOFTWARE TO HELP MANAGE INVESTMENTS.
  3. 3. W H A T I S A R O B O A D V I S O R ? As implied by the name, robo advisors are similar to financial advisors, but rather than utilizing the services of another person, the software takes its place. These have been rising in popularity in the past several years, and have become especially popular with investors who may be new to the practice. 
  4. 4. W H A T I S A R O B O A D V I S O R ? Robo-advisors are also helpful for people who do not want to hire a financial investor for whatever reason. The expense of hiring one may not be feasible at the time, or perhaps does not have the time to continue with their hands-on approach and would prefer not to manage their stocks themselves.
  5. 5. H O W P R I C E Y I S A R O B O A D V I S O R ? Regarding expenses, a robo-advisor involves a service fee, as well as the cost of the investments used. This can be customized to the user, whether they prefer to incur a fixed monthly fee, or have the fee taken as a percentage of the investments. Many software programs offer a free trial before being charged, to give the user a period of time to adjust to the functionality.
  6. 6. First, robo-advisors are software programs; they do not have emotions and are therefore incapable of making decisions based on emotions. This allows for fewer, if any, costly investing mistakes. 1 Additionally, the robo advisor process is all automated, and therefore less stressful. The user truly does not need to be involved to have a successful portfolio, and there is no need to worry that an investment will be made by emotion alone. 2 W H A T A R E T H E B E N E F I T S ?
  7. 7. A R E T H E R E A N Y D O W N F A L L S ? There are certainly disadvantages to using a robo advisor as opposed to an actual person. It depends on what the user needs in terms of finance. Robo advisors do not work as financial planners, and there is the loss of personable interaction that comes with meeting someone face-to-face. Some programs allow for growth projections, but the software does not advise the user on allocating investments or anything similar, like retirement planning, come the time for withdrawal. The degree of assistance varies from program to program, as well, although none of them are as hands-on or available to talk through questions that may come up.
  8. 8. L I K E W I T H A N Y T H I N G it makes sense to research the best options ahead of time, and there are plenty out there to explore. For some, robo advisors are the right choice, and for others, they may not be. Find what works best and get started.
  9. 9. T H A N K S F O R V I E W I N G ! Visit Michael at his website: MichaelRalby.com

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