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How to Tell if a Robo Advisor Makes Sense For You

December 28, 2017 by Eric C. Jansen, ChFC®

Whether you use Siri, rely on Alexa, or just have a Roomba, there’s no escaping the fact that bots are more part of our lives than ever before. And that’s not necessarily a bad thing. After all, why not automate life’s mundane, tedious tasks? Depending on how you feel about your finances, you could even get some robots to help you with that too.

Robo advisors have joined the mainstream, whether they look like Silicon Valley tech startups or they’re owned by old-school, traditional financial firms. It seems like there’s a robo advisor for every need and preference, which can provide an appealing investment solution, especially if you’re new to investing and don’t know where to start.

Before jumping on the investment automation bandwagon, you have to think about the pros and cons of going robo – and whether a robo advisor makes sense for your unique situation and goals.

How a Robo Advisor Can Work for You

Robo advisors automate the investing process. Their investment strategies and the portfolios they offer to users are based on Modern Portfolio Theory and the Efficient Market Hypothesis.

Robos use a process to determine exactly how to invest on your behalf:

  1. You sign up and take a short survey to provide your answers to a few investment-related questions.
  2. The robo advisor plugs your answers into an algorithm that determines the specific kind of portfolio and asset allocation appropriate for your age, risk tolerance, and time horizon.
  3. You make your first contribution to your investment account, and the robo advisor invests the money on your behalf.

You can get started, but you don’t have to worry about making complicated investment decisions or worrying about whether you’re doing everything exactly right, which is perfect if your eyes glaze over at the first mention of ETFs or mutual funds. That said, you need to understand that robo advisors provide services, not financial planning – which is a critical component of financial success.

Service, Not Guidance

Investment management and financial planning are both important, but they’re not the same thing. Financial planning provides you with an actual human advisor who can educate and guide you to where you want to be with your money. That’s an ongoing process that includes personalized attention and, importantly, accountability. It’s a long road to financial success, and having someone to keep you on track can make all the difference to whether you achieve your goals or not.

Services like investment management from a robo advisor provides you with options and solutions, but without context. Even though the process is mostly automated, it’s still up to you to avoid doing things like:

  • Forgetting to contribute to your investments
  • Not increasing your contributions over time
  • Selling low or buying high
  • Panicking and making irrational investment decisions (like drawing out all your money at the bottom of the market, which can destroy your wealth)

Think of it like this: a student can sign up for any class offered by the local college. That’s a service the college provides. But to make the most of their educational experience, the student seeks the advice of an academic advisor. The student uses the guidance, advice, and accountability of the advisor to choose the appropriate courses for them that will get them to their goal of graduation on time, and they rely on the advisor through hard times to make tough decisions. That is planning, and financial planning can provide you with similar benefits as you invest and build wealth.

Are There Upsides to Robo Advisors?

This doesn’t mean a robo advisor is a bad idea. They provide benefits to specific kinds of investors with a certain set of needs. Here are some of the upsides of using a robo to get started on your wealth-building journey:

It’s low(er) cost

Working with a robo advisor provides a low-cost solution to investors who are just getting started. Lower costs mean more money to invest.

The fees from robos can be less than human advisors, although this difference can be less than you think. Robo advisors also can’t take your long-term lifestyle goals into account, and a successful investment strategy always aligns with those goals.

Fees are also low because robos typically invest in index funds and ETFs. But you can also easily do this on your own if you choose; most robos use solutions like Vanguard funds and ETFs which are available to the public without having to pay the robo advisor fee that is added on top to the underlying mutual fund or ETF fees. When weighing that value, you should take into consideration the automated re-balancing and tax-loss harvesting most robos provide.

It’s accessible

Even Vanguard requires you to have a few thousand dollars to invest with them. Robos can require as little as $0 to open an account with them. This enables younger investors to build wealth earlier, which is critical when time and compounding interest are your greatest advantages to increasing your nest egg.

It’s fast and simple

Create a username and password, answer a few questions, and you have an investment account! Robos offer one of the simplest, fastest ways to go from saver to investor. From there, you can automate deposits and create a variety of investment accounts.

Robos not only invest automatically for you, but they do important tasks like rebalance and handle tax loss harvesting, too.

What to Think About Before Considering a Robo

Remember, you can always pick up the phone and talk to your financial advisor. The value of a two-sided conversation is worth its weight in gold. While some robos offer “customer service,” your call goes to a call center. An advisor might be at the other end, but they won’t be your advisor you have a relationship with.

Along those same lines, an advisor can provide insight that a robo can’t. Emotions can cloud the judgement of even the most battle-tested investor. The urge to sell during a downturn or chase after underperforming stocks is human nature and can be hard to fight on your own.

An human advisor can help clients balance emotions with practical advice and judgement. A robo? Well, you’re automated – but you’re also on your own.

And while robo advisors offer simplicity, simple isn’t always the best approach. Lifetime goals and plans can’t always be determined by a few questions and answers.

While robo advising takes away the need for expertise, it also takes away important context and subtle nuances. A robo’s reasons for choosing a portfolio can be completely different than an investor’s.

The Bottom Line: Here’s When You May Want a Robo

Robo advisors are a great option for entry-level investors because of their low fees, low cost threshold, and ease of use. If you have $25,000 or less, robo advisors may be a great option for you to help you get started.

Investing for the long term and growing your wealth beyond this level, however, requires the experience and guidance of a qualified financial and investment advisor. These advisors provide customized, holistic solutions – and they can also offer investment options not available on robo-platforms.

A strategic approach that goes beyond index funds is important if you want to build your wealth beyond the low six figures. And human advisors can adapt to life’s curveballs in a way that even the best AI can’t manage just yet.

Robo advisors provide an excellent starting point to building wealth. Financial advisors provide the options, accountability, experience, and nuance to reach your goals.


Eric C. Jansen, ChFC is the founder, president and chief investment officer of Westborough Massachusetts–based Finivi, which provides fee-based retirement income planning and investment management services for successful individuals and families nationwide. Do you need help planning for retirement? You can click here to request a complimentary consultation with a financial planner.

PLEASE NOTE: The information being provided is strictly as a courtesy. When you link to any of these web-sites provided here, you are leaving this site. Our company makes no representation as to the completeness or accuracy of information provided at these sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, sites, information and programs made available through this site.

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Eric C. Jansen, ChFC

Fun Facts About Me

When he is not researching the next great stock to add to client portfolios, you can find him travelling frequently with his family to Jackson Hole Wyoming.

  • Hometown: Chicago, IL
  • Birth Month & Year: November, 1964
  • Favorite Hobby: Goldmining in Nome, AK
  • Favorite Food: Steak at Charley’s Steakhouse in Orlando FL
  • Can't be interrupted when: Watching the Discovery Channel
  • Hidden Talent: Finish Carpenter
  • Something on bucket list: Obtain Helicopter Pilot License
  • Family Pet: Goldfish

Steven C. Johnson, ChFC

Fun Facts About Me

Steve would tell you that one of the best parts of the day is spent talking to clients and relationships that result from it. When away from the office, he loves to travel the back roads of New England enjoying all the great sites that can be found off the beaten path.

  • Hometown: Townsend, MA
  • Birth Month & Year: December, 1967
  • Favorite Hobby: Playing Hockey
  • Favorite Food: Chicken Caesar Salad
  • Can't be interrupted when: Watching the Bruins
  • Hidden Talent: Cooking – Makes a great Thanksgiving turkey
  • Something on bucket list: Travel to Italy and Greece
  • Family Pet: Max – our Pomeranian

Frederick M. Lane, ChFC, CASL

Fun Facts About Me

When not managing client portfolios, Fred can be found relaxing with family and friends.

  • Hometown: Nutley, NJ
  • Birth Month & Year: July, 1954
  • Favorite Hobby: Dog Walking
  • Favorite Food: Italian
  • Can't be interrupted when: Listening to Pink Floyd
  • Hidden Talent: Landscaping
  • Something on bucket list: Space Flight - Tourism
  • Family Pet: None

Catherine Utley

Fun Facts About Me

  • Hometown: Huntington Beach, CA
  • Birth Month & Year: February 1977
  • Favorite Hobby: Anything that gets me outdoors exploring nature
  • Favorite Food: Anything Mexican
  • Can't be interrupted when: Drinking first cup of coffee for the day
  • Hidden Talent: Putting together complicated puzzles
  • Something on bucket list: Over the water bungalow in Fiji
  • Family Pet: Currently between pets. Previous owner of 2 adorable pugs

Catherine M. Gareri

Fun Facts About Me

When not caring for her clients Cathy enjoys relaxing in her yard at home.

  • Hometown: Bellingham, MA
  • Birth Month & Year: July, 1957
  • Favorite Hobby: Cooking and Entertaining
  • Favorite Food: Steak at the Capital Grille
  • Can't be interrupted when: It's family time
  • Hidden Talent: Dog Whisperer
  • Something on bucket list: Spending a couple months on the Almalfi Coast
  • Family Pet: In Between Mastiffs now so a little blue fish “Willy”

Katie E. Moore, CLTC

Fun Facts About Me

When Katie is not busy taking care of her clients, she spends her time being a mom to her two little ones, Owen and Isla.

  • Hometown: Modesto, CA
  • Birth Month & Year: September, 1982
  • Favorite Hobby: Swimming
  • Favorite Food: Mexican Food
  • Can't be interrupted when: I'm cooking
  • Hidden Talent: Climbed Yosemite's Half Dome, twice - no fear :)
  • Something on bucket list: See the Northern Lights and Potty Train my 2 year old
  • Family Pet: Caddy and Sierra – our two cats

Herbert Kyles

Fun Facts About Me

When Herbert isn't reviewing your portfolio or assisting you with your financial well-being you can probably find him relaxing with friends.

  • Hometown: Overland Park, KS
  • Birth Month & Year: November, 1989
  • Favorite Hobby: Hockey, Golf & Cooking
  • Favorite Food: Chipotle
  • Can't be interrupted when: Studying
  • Hidden Talent: Fluent in French
  • Something on bucket list: Demolition Derby
  • Family Pet: None

Hesper Duval

Fun Facts About Me

Loves spending time with 2 daughters and enjoys participating in 5k obstacle races throughout the year.

  • Hometown: Charlton, MA
  • Birth Month & Year: October, 1981
  • Favorite Hobby: Running
  • Favorite Food: Cheesecake
  • Can't be interrupted when: Reading a good book
  • Hidden Talent: Interior Design and furniture restoration
  • Something on bucket list: To travel cross-country in an RV
  • Family Pet: Charlie and Nora, both black labs from the same litter

Donna Fournier

Fun Facts About Me

When not cheering for the Patriots, Donna spends her free time travelling throughout the United States looking for new haunted places to explore. She loves to wear her cowboy hat and boots when travelling out west.

  • Hometown: Swansea, MA
  • Birth Month & Year: February, 1961
  • Favorite Hobby: Exploring haunted locations
  • Favorite Food: Pizza
  • Can't be interrupted when: Eating my pizza
  • Hidden Talent: Rollerblading
  • Something on bucket list: Travel to Australia
  • Family Pet:  Had a pet skunk

Anne Whitney

Fun Facts About Me

  • Hometown: Jaffrey, NH
  • Birth Month & Year: September 1988
  • Favorite Hobby: Drawing and painting
  • Favorite Food: Anything spicy!
  • Can't be interrupted when: Reading a good book
  • Hidden Talent: Expert calligrapher
  • Something on bucket list: Go to San Diego Comic Con
  • Family Pet: Most recently, a rescued beagle named Max

Steve Taylor

Fun Facts About Me

  • Hometown: Franklin, MA
  • Birth Month & Year: May 1975
  • Favorite Hobby: Golf
  • Favorite Food: Pizza
  • Can’t be interrupted when: Spending time with my family
  • Hidden Talent: Juggling
  • Something on bucket list: Play golf at Pebble Beach
  • Family Pet: none

Sarah Kupec

 

  • Hometown: Wyckoff, NJ
  • Birth Month & Year: November, 1992
  • Favorite Hobby: Hiking
  • Favorite Food: Chipotle
  • Can't be interrupted when: Watching LSU football. Geaux Tigers!
  • Hidden Talent: Chalkboard art
  • Something on bucket list: Travel to Germany
  • Family Pet: Max, a 14-year-old Westie

Cathy Hession

Fun Facts About Me

When away from the office, Cathy enjoys working out and participating in the 26.2 mile Jimmy Fund Marathon Walk each September.

  • Hometown: Hanover, MA
  • Birth Month & Year: May, 1964
  • Favorite Hobby: Travel & hiking
  • Favorite Food: Danny's Homemade Sauce
  • Can't be interrupted when: Watching Katie ride
  • Hidden Talent: Equestrian photographer
  • Something on bucket list: Spend a month in Monterosso Al Mare w my family
  • Family Pet: Sassy, our Australian terrier

Kieran Lavery

  • Hometown: Bedford, NH
  • Birth Month & Year: November, 1989
  • Favorite Hobby: Playing tennis and softball
  • Favorite Food: Tex-Mex
  • Can't be interrupted when: Watching college basketball
  • Hidden Talent: Can solve a Rubik's cube in under 2 minutes
  • Something on bucket list: Attend Oktoberfest

Matthew Cleary

In his free time, Matt likes to hike, camp and travel with his wife Gina.

  • Hometown: Farmington, Maine
  • Birth Month & Year: March 1986
  • Favorite Hobby: Hiking
  • Favorite Food: Lasagna
  • Can't be interrupted when: Watching the Celtics
  • Hidden Talent: Water skiing
  • Something on bucket list: Traveling to Greece
  • Family Pet: Aspiring British Bulldog owner

Justin Giuliano

When not helping clients, Justin enjoys spending time with his wife and family while settling into his new home.

  • Hometown: Wethersfield, CT
  • Birth Month & Year: July 1988
  • Favorite Hobby: Exploring new destinations with my wife
  • Favorite Food: Frutti di Mare
  • Can’t be interrupted when: Grilling
  • Hidden Talent: A unique inability to sit still
  • Something on bucket list: Traveling to Europe

Rana Choubah

When Rana is not helping clients with their financial needs, she spends her time with her family traveling, hiking and running.

  • Hometown: Beirut, Lebanon
  • Birth Month & Year: October 1967
  • Favorite Hobby: Running
  • Favorite Food: Pizza
  • Can't be interrupted when: Reading a good book
  • Hidden Talent: Construction and home repair
  • Something on bucket list: Complete a triathlon
  • Family Pet: Two sweet cats, Macy and Maya

Krista Isabelle

In her free time, Krista can be found crafting or playing outdoors with her husband and son, curled up reading next to her beloved cat, "Berg", or cooking her favorite go-to meals.

  • Hometown: Acton, MA
  • Birth Month & Year: August 1994
  • Favorite Hobby: Graphic Design
  • Favorite Food: Anything with peanut sauce
  • Can’t be interrupted when: Reading
  • Hidden Talent: Cartoon Drawing
  • Something on her Bucket List: Fostering animals

Danielle Drew

When Danielle does not have her head in a book studying to expanding her financial planning knowledge, she enjoys anything active and outdoors, including visits to the beach and hiking.  

  • Hometown: Dennis, MA
  • Birth Month & Year: November, 1985
  • Favorite Hobby: Working out, concerts, and exploring wineries
  • Favorite Food: Lobster pot pie, cheeseburgers, BBQ, the list goes on...
  • Can't be interrupted when: Working out 
  • Hidden Talent: Country line dancing
  • Something on bucket list: To hike the 48, 4000 footers of New Hampshire
  • Family Pet: none, hopefully a big dog someday

John "JP" Bisceglia

JP loves spending time with his niece and enjoys weekend trips to the cape during the summer.

  • Hometown: Shrewsbury, MA
  • Birth Month & Year: October 13th 1993
  • Favorite Hobby: Fishing with friends and family
  • Favorite Food: Pasta Alleluia
  • Can't be interrupted when: Hiking Wachusett Mountain with the pup
  • Hidden Talent: Navigating and driving boats
  • Something on bucket list: Helicopter snowboarding in Japan.
  • Family Pet: Alaskan companion noble dog

Jay Willwerth, ChFC

Fun Facts About Me

Jay’s days are spent helping clients achieve their financial goals, followed by nights and weekends typically watching his daughters play competitive volleyball.

  • Hometown: Melrose, MA
  • Birth Month & Year: September, 1959
  • Favorite Hobby: Golf
  • Favorite Food: Anything at a Patriot’s Tailgate
  • Can't be interrupted when: Watching the Patriot’s Game
  • Hidden Talent: Competitive Volleyball Watcher (Mostly his 2 daughters)
  • Something on bucket list: Play a round of Golf at Pebble Beach
  • Family Pet: Bella, our Shih-poo