Would you invest with a robo-advisor? In recent years, the robo-advisor market has grown considerably. Many investors are turning to these automated advisors to help them manage their investments and grow their retirement savings.
Nevertheless, not everyone feels comfortable using a robo-advisor. A significant segment of the market is looking for a different approach. ScoutVisor's free revolutionary tool solves just that very problem.
Robert West, 37, is just now starting to save for retirement. While he considered using robo-advisors, he balked at some of the regulatory problems he heard that some of them have faced.
“I wasn’t sure robo-advisors were everything they were hyped up to be,” says West. “Plus, my investment goals are a little more complex, and so is my situation. I’m getting a late start to saving for retirement, and I was pretty sure a robo-advisor wasn’t going to be able to help me handle the obstacles ahead.”
Robo-Advisors Haven’t Taken Hold With All Investors
West isn’t alone in his distrust of robo-advisors. American Banker writes, “Still, even as banks have increasingly rolled out these automated platforms over the last few years, demand among customers has been muted.”
Like West, many consumers question whether robo-advisors can really meet their needs. Are they sufficient to replace human advisors?
The answer is highly dependent on the requirements and goals of the investor, but there are certainly many situations where a robo-advisor might not be ideal for an investor’s needs.
Robo-Advisors Have Their Limitations
Although robo-advisors have their benefits, some of those advantages are paired with corresponding drawbacks. For example, consider automatic rebalancing and its potential downsides.
US News & World Report explains, “Asset allocation isn’t designed to be fixed; it’s intended to shift and evolve along with an investor’s risk tolerance and time horizon. Robo advisors attempt to make managing asset allocation easier through automatic rebalancing, but there are problems with that strategy. The first is the potential for returns to underwhelm.”
The article quotes Gregory Lawrence, certified financial planner and founder of Lawrence Legacy Group as saying, “Robo investing makes your portfolio performance average, rarely giving you superlative returns relative to the market.”
Indeed, this is one of the reasons why West was not impressed by robo-advisors when he did his research. “Getting a late start to saving for retirement, I needed something that was going to help me generate bigger gains. A robo-advisor just was not going to cut it.”
US News & World Report also points out that robo-advisors can lead to tax inefficiency, explaining, “In a taxable investment account, tax-loss harvesting can work to an investor’s advantage. The problem with allowing a robo advisor to harvest losses automatically is that it could result in tax inefficiency if the wash-sale rule is triggered.”
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ABC News points out additional issues with robo-advisors, including limited choices with respect to investment vehicles, a lack of financial planning advice, and even potential ethical issues depending on the consumer’s goals.
ABC writes, “For investors of all ages, situations and goals, the cookie-cutter nature of robo-advice may not conform to your preferences. Your robo-advisor’s software may put you in a fund that clashes with your goals for socially responsible investing. For example, you may not want to invest in oil companies, preferring instead to invest in clean energy.”
To West, the ethical ramifications of investment decisions are not a secondary concern. He explains, “I have lived my whole life to high standards when it comes to making eco-friendly choices. I couldn’t find a robo-advisor that was going to make it easy for me to stick to my principles.”
Robo-Advisors May Suffer Other Problems As Well
Econsultancy reports, “An early robo-advisor startup, Hedgeable, last year shuttered its original service and changed direction. And robo-advisors, including Betterment and Wealthfront, have run into problems with regulators in the US for various rule violations.”
The report continues, “What’s more, some observers suggest that robo-advisors, especially the upstarts, are of questionable viability. According to Simon Bussy, a principal consultant at UK financial services consultancy Altus, robo-advisor services are spending £200 to £300 to acquire a new customer even though the average
customer only delivers £70 a year in fees.”
In short, the business model itself is creating issues for some companies that offer robo-advisors.
ScoutVisor is Connecting Hardworking Americans With Real Human Financial Advisors
Today, West has a financial advisor, but it isn’t a robot. It is a human advisor that he found by using a convenient tool online offered by ScoutVisor.
“I wanted to find an advisor in my area,” says West, “but I was having a hard time calling around on my own. Then I found ScoutVisor. I filled out their survey, which I think took less than two minutes. At the end, they matched me with an advisor who has experience with situations like mine.”
West’s advisor has helped others who started saving late for retirement to make strides toward their goals, and is now helping him to do the same.
“There is no replacement for being able to look a human being in the face and talk to them,” says West. “My advisor understands my situation and really cares about her clients. She understands why I want a green portfolio, and has helped me make it happen. I am bringing in larger returns than I expected, and am starting to feel more confident about my future.”
Will robo-advisors eventually resolve some of their issues with respect to low returns and tax inefficiency? Perhaps. But one thing they will never be able to do is offer the experience, empathy, and perspective of a human advisor.
Scoutvisor’s tool is making a major difference in the lives of investors like West, as are the human financial advisors in the company’s network.
“I wish I had discovered Scoutvisor sooner,” says West. “It was so fast and easy, and it could have saved me a lot of time from the start.”
If you are ready to save time and connect with a human financial advisor that is right for you, click here to take the free two-minute Scoutvisor survey and find your match.