In fact, financial advisors can be helpful to you, and traditional advisors and robo-advisors are both options to consider. But what exactly is a robo-advisor? And how do you decide if it’s right for you?

Read on for the differences between robo-advisors versus traditional advisors and how reviews can help you decide whether robo-investing or speaking to a traditional advisor is the best option for you.

A robo-advisor is an online application that provides automated financial planning and investing services. To get started with a robo-advisor, you answer online questionnaires regarding your finances, risk tolerance and goals. Most robo-advisors use computer algorithms based on Modern Portfolio Theory to recommend a portfolio of investments to you.??

A robo-advisor offers financial advice with little or no human interaction. Because of this, they can charge lower fees than traditional advisors, typically .25% for the money you have with them each year. Some companies, such as So-Fi, do not charge any fees for basic services. Many robo-advisors also have low minimum account balances required to get started. For instance, Acorns rounds up all of your purchases to the next dollar.

You would turn to a traditional financial advisor for more tailored financial advice with a human touch. These advisors use the same or similar algorithms as robo-advisors but guide you by answering questions, taking requests, and tailoring a plan to your needs and wants. If you want to own Tesla stock or look into life insurance, they will purchase that for you. A financial advisor is not confined to using a set bundle of investments that robo-advisors use. Typically, a financial advisor charges 1% of assets per year, and some also have minimum balance requirements — up to $250,000 — to use their services. Interested in looking into financial advisors??Reviews can be extremely helpful in choosing which type of advisor is right for you.

Review of Acorns

Here are a few things to consider when making your decision.

… or bonds or other investment types you need for a diversified portfolio. If you do not have the time or interest to invest actively, the robo-advisor will research, track your positions and buy and sell investments for you. And many robo-advisors, such as Wealthfront and Personal Capital, link your other money accounts and advise you based on your whole picture.?

Robo-advisors aim for a diversified portfolio by investing in low-cost exchange-traded funds (ETFs), and they generally do not invest in single stocks. If you are interested in directly owning stocks, a stock broker like Interactive Brokers may be more of interest to you, or you can find reviews of stock brokers here. And remember, many robo-advisors will link all your money accounts to their site. Some people opt to have both — a stock broker account to scratch the itch of owning stocks — and a robo-advisor for financial planning.??

Knowing your appropriate level of risk is key to understanding which investments are suitable for you. And it goes beyond whether you are a “risk taker” or not. It also involves your and your family’s situation and timing. For example, if you are in your early career, you may feel you can hold riskier investments, like stocks.?

Robo-advisors construct a risk-appropriate mix of investments (stocks, bonds, etc.) for you.? Each dollar you invest is spread across a variety of investments. It’s more difficult to achieve diversification when you are investing on your own.

As your situation, financial goals and time horizon change, a robo-advisor will also adjust your optimal investment mix. Additionally, as the prices of your stocks and bonds change, this could change your mix of investments away from your targeted 80% stocks/20% bonds. For example, prices may cause your portfolio to drift to 83% stocks/17% bonds.?

A good robo-advisor will rebalance your portfolio by buying and selling investments to return you to your optimal mix.????

It takes discipline and effort to decide again and again to invest your money instead of spending it. Making your investments automatic removes that decision from your plate. How? Connecting your bank or neobank directly to a robo-advisor and setting up a set amount to be invested only requires that initial decision at setup. It’s happening and requires no further effort from you! Neobanks, bill pay with banks and 401(k) contributions all provide the benefit of automation.

Additionally, with a few strokes of the keyboard, a robo-advisor can get you started on your financial plan immediately. You can check for customer reviews to get an idea of a robo-advisor’s onboarding process.??

If you prefer a more thorough and stepped process to constructing your plan, then you might have more comfort with a traditional advisor. The choice is yours.?

1. Your robo-advisor should be trusted by consumers. Good feedback is top of the list for a service provider, particularly one you entrust with your money. Learning from the experiences of other consumers can help ensure that a robo-advisor is delivering on their promises.

2. They should offer automatic portfolio rebalancing to ensure that your portfolio stays aligned with your investment goals and risk tolerance.

3. They should show you the performance of your investments over time.

4. Do have a customer service team? Some services can come at an additional cost, so read about the fees and know when you may need to pay more.

5. Your robo-advisor might offer a tax-loss harvesting service. Tax-loss harvesting is simply selling investments that have lost value to get capital losses to offset capital gains realized on your investments, and this is done to lower your tax bill.

6. They should also offer financial advisory services for a fee should you want some tailored advice.

7. They might be able to offer services or products specific to your interests.? For example, Ellevest focuses on women investors, and Betterment offers socially responsible investing and crypto strategies.??

Robo-advisors offer a hands-off financial advisor at a lower cost. When thinking about robo-advisors versus financial advisors, consider whether you require standard services or specialized complex services. If the latter, then you might consider a traditional financial advisor. Otherwise, robo-investing may be a good idea for you. And be sure to do your research to find the best robo-advisor for you!??

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