Since 2011, this website has emphasized the importance of finding investment managers who don’t have conflicts of interest, charge excessive fees, and don’t have a considerable overhead in terms of having national mutual fund wholesaler fund sales forces and excessive executive compensation. This old sales investment management structure was designed for the benefit of substantial global investment firms and their staff and not for the benefit of individual investors.
But today, average investors have more choices than ever in terms of investments and types of managers, and these choices can go right to your bottom line (in some cases, increasing your net return by 2.9%). So, your 401(k) and other investments benefit from lower expenses and fees and access to a wide variety of lower-cost investments, such as ETFs.
The robo advisor revolution is here and it’s time for more investors to note the benefits of this basic change in selling and managing investment products.
This is happening because of the vast technological advances, especially the robo-advisor revolution.
Here is an article that explains the basics of robo-advisors and how they can increase the money in your investment accounts.
This article comes from Nico Bros. They do a good job explaining the basics of robo advisors, what they do, and how they work. All this means that technology provides lower costs passed on to investors.
In future articles here, I’ll list other robo advisors for your consideration, but the days of old-line investment firms with national wholesaler networks and other personnel structures that only add to your expenses and never increase your bottom line should be over.
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How to Find the Best Robo Advisors that Will Help You Make More Money
How to find the best robo advisors may not be easy to answer. Robo advisors are becoming very popular among investors. These are automatic and low-cost investment opportunities. Within moments, robo-advisors help you set up a diverse, customized portfolio. You can access fund management services like a certified financial planner, etc. Such services were earlier reserved for the super-rich. For these reasons, robo-advisors are getting people’s attention. In fact, AT Kearney claims that assets managed by robo-advisors are likely to grow by 68% p.a. They’ll become nearly $2.2 trillion in the coming five years.
There’s an increasing choice of robo-advisors as new companies enter the industry. Veteran robo-advisors are also increasing their offerings. So, how do you choose from the options to get the best robo-advisor? The ideal robo-advisor varies from investor to investor. It depends on their financial needs and situations. But, the high-rated robo-advisors have some common traits. For this list, robo-advisors got the highest points for solid portfolio management, minimum account balance, and low fees.
We hope this article can help you make money, get rich, and become a millionaire!
What Is A Robo Advisor?
Financial advisors could be costly. Though an average yearly fee of 1%- 2% isn’t much, it adds up. For example, the stock market generates a return of 6.5% after inflation. In this case, a 1-2% fee makes up for 15-30% of the overall return. For people who hardly meet their financial advisors and have significant portfolios, the total cost can be appalling. For people who meet their advisors once, the cost can sum up to $10,000-50,000/hour.
Usually, financial planners don’t help the client outguess the market; also, studies have shown that active investing cannot beat passive investing, especially after considering the fees.
Due to high fees and weak performance, many fintech firms created the robo-advisors. It’s a sophisticated algorithm that does most of the things financial planners do. But for a meager price. At its center, robo-advisors help build, manage, adjust, and improve portfolios. For a person who retires after 20 years, the robo-advisor may suggest riskier assets like stocks. But, for a person about to retire in a few years, it may recommend conservative options like bonds.
Why Do We Need Robo Advisors?
- Variety of Services—Robo-advisors help determine the amount to invest, which is in tune with the client’s financial goals and risk tolerance. They also help automate tax-loss harvesting, asset optimization, and portfolio rebalancing. Some even help people develop retirement plans and manage their 401ks. Plus, robo-advisors like Betterment automatically rebalance the portfolio without any commission fee.
- Negligible Minimums—This is one of the most significant merits of Robo advisors. They have lower account minimums than financial planners, who ask for an investment of at least $100,000. Some robo-advisors have $0 account minimums. This makes portfolio balance and retirement planning advice affordable.
- Low Fees—Robo advisors charge 0.25%- 0.5% of the portfolio, while financial advisors charge 1-2%. Though this 1-2% may not seem much at first glance, it adds up in the long run. The users of robo-advisors get a higher share of investment profits, which may also be thousands of dollars for many people. The robo-advisors’ fees don’t always include mutual funds and ETFs.
- Little or No Conflict of Interest—Usually, financial advisors’ interests differ from their clients’ interests. A financial planner may earn more if he drives his customers toward high-fee products, which may not suit the client’s goals. As robo-advisors use algorithms, they look for the least costly solution to fit client needs. Hence, there is a small conflict of interest.
- High Availability—As robo-advisors are software, they’re always available until the client has internet access. However, it’s difficult to access a financial advisor anytime you want. You need to make an appointment to schedule a meeting, and financial advisors are very busy people.
- Tax-Loss Harvesting – Clients also get an advanced tax-loss harvesting feature with robo-advisors. This is the practice of divesting a loss-making security, i.e., harvesting. It helps offset profit somewhere else in a portfolio. You can then replace this divested security with similar security. Thus, you can maintain an optimal asset allocation by portfolio diversification. The losses on divestment can also decrease the investor’s taxable income by almost $3,000.
- Hybrid Robo Advisors—For some, robo-advisors are not enough. They need a more practical human touch. To resolve this issue, many companies provide hybrid robo-advisors. Such robo-advisors have the extra functionality of speaking with human advisors on the phone. These financial advisors can help investors with complex matters that robo-advisors are unable to do currently.
How Do We Find the Best Robo Advisors for You?
We ranked robo-advisors based on several criteria. Our experts reviewed over 30 different firms. They spent nearly 100 hours crunching data and speaking with other experts. Below are the rules we used to find out the best:
- Best All-Round Quality – Some companies surpassed others in every category
- Account Limits – The lower, the merrier
- Fees – We prefer little or no fees
- Assets Under Management – The higher the AUM, the higher the company’s stability, and the more you can trust it.
- Features – The more features it has, like tax loss harvesting, direct indexing, etc., the better
- Customer Service – Support is critical when it concerns investments
Best Robo Advisors Help You Make More Money
Best Robo Advisor 1: Betterment
Betterment LLC is among the robo-advisor giants. With $10 billion in assets under management (AUM), it is by far the principal robo-advisor. In July 2016, it crossed the $5bn AUM mark and became the first robo-advisor to do so. Betterment has a passive investment approach. It trades via the Apex Cleaning Corporation, like its arch-rival Wealthfront.
So why do many investors prefer Betterment? The service is suited to new investors. It has a zero account minimum for its standard or digital plan. The company also provides excellent portfolio management services via its Plus and Platinum Plans. Betterment uses automatic tax-loss harvesting. It promotes that “You can keep an extra 2.9% of your returns every year by using Betterment.” This is because of company’s passive investment approach and rebalancing techniques.
Betterment provides a blend of bond index funds and low-fee stocks. The company will give you a diverse, customized portfolio after knowing your risk tolerance.”
