Banks Vs. Robo-Advisors: Differences That Change Your Financial Future

Deciding on your financial advisor can be what determines your entire way of banking. This article is meant to evaluate whether a robo-advisor or traditional investment advisor is the better choice for you.

Should you invest with an automated financial advisor that builds a portfolio of low-cost index funds, like Wealthfront, or go with a DIY investor such as Ally Invest ALLY?

The Robo-Advisor

The robo-advisor can be a great way for banking if you’re someone who doesn’t need much direct human contact. If you’re someone who’s comfortable with turning over all the investment choices to someone else, someone who you will have zero contact with, then this would be a wise choice. It's a decision of comfort in that sense. If you’re someone who’s familiar with your finances and doesn’t need someone to show you how they analyze your investments, then this would be a wise choice.

You should also try out a robo-advisor if investment fees matter to you. While traditional investment advisors from brick-and-mortar banks will charge anywhere from 1 percent to 3 percent of your portfolio, robo-advisors are essentially free. You can get fees as low as 0.15 percent, which is significantly lower.

Another thing to take into consideration is how tech savvy you are as a person. Do you find it easy to use online tools and support? If you’re in the younger generation, you most likely are perfectly comfortable using the internet to conduct your finances.

The Financial Advisor

Letting someone else do all of your investing is a personal choice, so if you’re not comfortable with that idea, then an in-person financial advisor might be your best bet. With a financial advisor, most of your decisions are made by the advisor, but you have some measure of control over your investments. Additionally, you will have plenty of human contact in comparison to the alternative option.

If you don’t find spending around 1 percent to 3 percent of the value of your portfolio, then the financial advisor could be a valid option. However, the charge of these investment fees can have a very real impact on your investment performance as months or years go by. Realize the significance of these charges and if you have the means to afford them.

If you’re not comfortable transacting with business online, and you struggle daily with the functions of your computer, then stick with the financial advisor. Not only will it save you the hassle of having to learn online tools and computer skills, but you will feel safe conducting business with someone who knows how to.

Make The Best Advisor Decision For Yourself

The robo-advisor began to take off as an industry after the Great Recession, and since then has grown exponentially. While it's growing immensely with the younger generations, that doesn’t necessarily mean this is the best option for you. Investigate the various options of digital and app-based investing versus traditional central banking.

Keep in mind that several digital banks will offer you a series of other perks, such as MoneyLion. MoneyLion avoids monthly fees such as service fees, maintenance fees and ATM fees.