There are lots of reasons to use a robo-advisor, but they’re not for everyone…

If you don’t have a background in finance, or if numbers just aren’t your thing, here’s some good news. There’s never been an easier time to pass on the task of managing your money to someone (or something) else.

Thirty years ago, you would have paid a king’s ransom for others to manage your money. Knowledge about stocks and investments was sparse and hard to track down. But with the advent of the internet, those walls around financial knowledge have come tumbling down. Today, you have access to a plethora of investing services, and it’s never been easier to open an account with low management fees.

That’s a bad thing for professional money managers who were relying on your ignorance. It’s a great thing for everyone else.

But even today, financial literacy doesn’t get the attention it deserves¬† and people get nervous making their own decisions about investments. It seems too risky. They want someone else to do it for them but don’t want to pay huge fees for that service. Enter robo-advisors — one of the strongest trends the financial services industry has ever seen.

What is a robo-advisor?

A robo-advisor is a website or app set up by a company to help manage your money. The robo-advisor invests your money according to an algorithm that is designed around maximizing your earnings with minimal human intervention. This ease of execution often allows for no account minimums and fees as low as 0.25% of your portfolio per year — that’s almost 90% cheaper than human-driven financial services!

The setup is simple. The algorithm can be tailored to your own life circumstances, taking several factors into consideration:

  • Your age and desired date of retirement
  • Your income level
  • The number of people in your household
  • Financial goals for your money
  • Your tolerance for risk

After getting your answers to questions like these, the robo-advisor is ready to start strategically investing your funds. That’s it — you’re free! Behind the scenes, a robo-advisor will take care of your diversification, asset allocation, and portfolio rebalancing.

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