[Summer Remix] 101: Robo-advisors: Your New Best Friend or Your Worst Enemy?

The robots have taken over. Just kidding. In reality, robots haven’t taken over — but they have taken over a major chunk of the financial industry in the form of robo-advisors. A lot of people assume that we’re going to bash on robo-advisors (“The robots are taking your jobs!”) or that we will tell them a human advisor is the only way to go. 

But the truth is, we think robo-advisors are actually pretty useful. Of course, there’s a time and a place to use them, which is exactly what we cover in this episode of Wealth by Design.

WHAT YOU’LL LEARN

• Dustin’s concerns about robo-advisors earlier in his career

• Why they’re not a threat to the financial planning industry

• What robo-advisors are 

• Why it’s not a question of which to use, but when to use each

• The questions that may come up around using a robo-advisor

• The major downside to robo-advisors (hint: it’s about customer service)

• The limiting beliefs that come when people consider hiring a financial advisor

• The biggest question clients have about an advisor

• The scary stories in the media that might discourage you from enlisting help

• What you should feel when you find the right robo-advisor

• 11:32 What robo-advisors can’t do (spoiler alert: it requires ears)

• How to have your cake and eat it too

• The risk of letting the noise win

• When to go with a robo-advisor

• The rise of the subscription advisor

• How a hybrid of human + robo-advisor can help you navigate complexity

• When you should go all-in on a human advisor

• The need for customization as you grow your wealth

• How Dustin + Danielle use robo-advisors in their own business

WHAT IS A ROBO-ADVISOR… EXACTLY?

You might not be using the term “robo-advisor,” but you might be using one. Sites like e-Trade, Charles Schwab, Ellevest, Betterment, Acorn, and others all offer an automated, algorithm-based, and accessible way to invest for a low cost. Usually, you can create an account, tell them your goals, the amount you wish to invest, and the types of stocks or funds you’d like to invest in (optional), and you’re off to the races. It’s that easy to start investing with robo-advisors, which we think is pretty neat. 

Robo-advisors are:

• Algorithm-based. They take data to determine the best fit for your investment needs, and they pair you up with the right stocks and funds to make selection super easy and quick. 
• A little cookie-cutter. How could they not be? A robot can’t understand the nuances of every element of your financial life and goals (thank god). So, you’ll want to ask yourself, “Am I OK with a little cookie-cutter advice to get my investments off the ground?”
• Cheap. For those of you out there who are super conscious of price, robo-advisors are great. They’re some of the lowest-priced advisor services out there, but you know what they say — you get what you pay for.
• Pretty DIY. Robo-advisors don’t have a human advisor on the line, waiting to answer your calls. Sure, there’s tech support and a few resources to help with your questions, but they’re going to be fairly general.

IS A ROBO-ADVISOR RIGHT FOR YOU?

In this episode, we cover a lot of ground about what exactly a robo-advisor is, as well as when to choose one. We talk about scenarios that make you prime for a robo-advisor, like:

• When you are just starting out with investing. 
• If you’re a total DIYer with your finances.
• Your situation is pretty simple (no kids, not a ton of money to invest yet, etc.).

We also