Your assets are going to be invested in the global securities markets. The question is how do the assets get from where they are now to the markets and who helps you make the right decisions along the way. 100 million Americans rely on financial advisors to help them make these decisions.
Your first decision is to select the right type of advisor who can help you navigate the complex financial markets. You can choose a Robo Advisor or a traditional financial advisor. Which one is best for you?
On the one hand there is no difference. Your assets are going to end up in the same place – the global securities markets. On the other hand, there are critical differences that should impact the type of advisor you select to help you. Review our Infographic to learn more.
Robo advisors will ask you a few questions. Your responses will determine which model portfolio you will be invested in. Robos use multiple models that are based on investor age, risk tolerance, and performance expectations. Most Robos invest in Exchange Traded Funds to minimize your investment expenses.
Traditional advisors will obtain detailed information from you and use it to develop a personalized investment strategy. The best independent advisors in this category can provide relatively unlimited investment choices that include Exchange Traded Funds, separate accounts, and active portfolio management.
Pure Robos want to limit human contact to minimize expenses. Or, they limit contact to telephone, email, and Skype to leverage their resources and minimize expenses.
Traditional advisors are available to meet with you face-to-face. Service meetings can be at your location or their locations. Meetings are an important part of traditional advisor delivery systems for information that focuses on the achievement of your financial goals. This type of communication may be particularly important during prolonged down markets when your investment concerns are highest.
Most investors want a financial plan that describes their performance expectations, risk tolerance, and investment horizon. However, most Robos provide investment services, but do not provide planning services. Planning is a difficult service to automate because there are so many variables.
90% of traditional advisors provide integrated planning and investment services. Investment decisions must be consistent with the provisions of the plan. Financial plans become obsolete over time so they are updated annually to reflect changes in your personal situation. For example, a financial plan becomes more conservative as you approach your retirement years.