When you hear the words “Robo-Advisor,” what do you think of…? The Matrix?
And does “Financial Advisor” conjure up a swaggering DiCaprio in The Wolf of Wall Street? Or maybe someone in a Brooks Brothers suit, describing products you barely understand?
If you said yes to either, you’re not alone.
One common fear about the new wave of robo-advisory firms is that, once you take the “red pill” and dive in, you’re no longer in control. You’ve turned your money over to a mysterious series of algorithms with no human in sight to help you guide it.
Many investors – particularly younger ones – are also put off by the idea of bespoke-suited advisors from traditional firms who are trying to up-sell them investments and insurance products with hefty fees and commissions. And even if they were to opt for the more conservative “blue pill,” traditional advisories are often not interested in speaking with them because they can’t make the hefty minimum investment.
While there is some truth to both stereotypes, there are also big shifts going on in the financial industry that make this a great time to take advantage of both a new breed of independent financial advisor and the efficiencies that targeted robo-platforms can provide.
Here are the differences – as well as drawbacks and benefits – in a nutshell: