by Rich Wesselt, founder and principal, Wesselt Capital Group
Modern digital technology has spawned many buzz words, but none seem more popular in finance than “automation.” Automated investment advice — so-called robo-advisors — are gaining traction with individuals looking for opportunities for financial growth. As you can see in this article from popular personal finance site Nerdwallet, robo-advisors are becoming more mainstream and popular. What does that mean for you? Let’s explore the issues.
How do robo-advisors work?
If you have signed up for any web-based subscription service, you will find the format of online investing platforms to be familiar. You sign up for an account with basic details and provide some information about your financial status, goals, and risk tolerance. With this information, the service’s algorithm creates an investment portfolio for you.
What works about automated investments?
As Nerdwallet and Investopedia point out, robo-advisors bill themselves as affordable. Because the services are fully automated, they tend to have low fees and low minimum investments.
This technology also isn’t as new as you might think. Financial advisors and wealth managers have engaged in some kind of automation for portfolio management for nearly 20 years. What is different is that robo-advisors remove the human element.
But is automated investment advice worth it?
In my estimation, this is where robo-advisors run into trouble: removing a human financial advisor from the investment process. For many financial product consumers, investing is utilized as part of a three-part strategy, which rests on disciplined savings and smart protection (insurance) strategies. This systematizes the financial planning process and will make prudent use of fintech for automation when possible.
If you are looking to build wealth and stability for your family and future generations, you will want to work with a financial planning professional to create a comprehensive strategy. Yes, that may include some automation, but we’ll be there to provide advice and lend a human touch to your portfolio when needed.
Making the decision to invest should not be taken lightly. Before you turn to automated investment advice, call a financial advisor to discuss your options.
About Richard Wesselt, Principal and Founder of Wesselt Capital Group
With over 23 years of dedication to the financial services industry, Richard Wesselt brings a wealth of knowledge and experience in helping clients plan for a secure future with financial and investment planning. As principal of the Wesselt Capital Group, Rich uses a relationship driven, individual-based approach to macro economic planning. Rich has a bachelor’s degree in Economics from the Wharton School and is a member of Top of the Table. He holds his FINRA Series 6 Registration. Follow him on Twitter @RichWesselt.