The online tools robo advisors offer aren’t new. Traditional financial advisors had the same tools available to them for years and could roll up a personalized asset allocation plan. Robo advisors push the technology down to the masses. You have direct access to manage your account and it removes the non-value-added middlemen.
Some financial advisors can add tremendous value, however. They can offer guidance to the asset allocation best for you based upon unquantifiable factors, which computer programs can never do. But this is often more the exception than the rule.
Financial advisors can give recommendations about long-term life decisions (e.g., helping save for a child’s education through a recommended action plan). Some robo advisors are just tech-assisted firms and not 100% automated. If you want it, the human element is not entirely removed from the loop at some firms, though you may have to pay extra for that perk.
Robo advisors, like other investment brokerages and advisors, are regulated by the SEC and FINRA. In most cases, your portfolio is protected by government-backed insurance as well.
There’s something to be said for any 100% algorithm-driven investment approach. While it might help with a high percentage of individuals, there are always cases in which automated guidance isn’t appropriate.