Robo financial advising

When it comes to investing, studies show, for many, it’s puzzling. If you’re not a Wall Street whiz, we found you may have another choice than navigating the markets alone, or paying a personal financial planner. We’re talking about the advent of the robo-advisor. There’s now digital advisement firms and insiders say it’s a booming online industry.

Busy professional, Meghan Womack, spends most of her day connected to a smartphone or a computer. So when she heard about robo-investing, she opened an account.

“I have very limited time and end up working long hours and managing investments was certainly something that was cumbersome with my time,” Womack said.

A robo-advisor is a computer based system that invests and keeps tabs on your money based on your goals. Financial start ups and well-known firms are getting in, or testing out, the digital portfolio game.

“What they do is they provide you with an efficient and typically low cost ways of investing your assets,” said Ed Gjertsen with the Financial Planning Association.

Many say digital advisors are the next big thing in investing.

“This is an area just that’s exploding in growth right now,” said Betterment Founder, Jon Stein.

A study found eleven leading digital advisors now manage 21 billion dollars. Experts tell us these newer firms usually specialize in investing your “after tax money,” part of your paycheck, in stocks and bonds.

“Our customers come to us and they tell us about their goals. Then based on those goals, which could be a down payment on a house or I’m saving for retirement, we create portfolios for them and manage their money in the most intelligent way over time to minimize taxes, minimize expense and optimize for the best returns,” Stein said.

Betterment says its customers’ ages range from 18 to 92. But Gjesten says robo-advisors are usually attractive to younger and computer savvy investors.

“Those who are very comfortable with using the Internet in regards to doing their online banking and things like that,” Gjesten said.

While digital advisors are usually much cheaper than meeting with a traditional financial planner, some say you could be missing out on that “personal touch,” especially if the markets get rocky or you have complex finances.

“Typically people’s lives are much more than just their bag of money that they’re invested in, there’s a lot more going to it, where it has to do with legacy planning, estate planning, retirement advice, if you have risk needs analysis and things like that, the robo-advisor typically won’t be able to answer these questions for you,” Gjesten said.

Meghan Womack says she likes the fact she’s making smart investments and all she has to do is log-on online.

“Certainly there are probably some people that would prefer to sit with a human and talk to a financial planner, but for me and for my time constraints this was definitely the way to go,” she said.

Digital advisors are regulated by the Securities and Exchange Commission, so before you log-on and give money to an online firm check out it’s record and make sure it’s legitimate. Some also offer “human help” and guidance.

Ed Gjertsen from the Financial Planning Association recommends you ask these questions when choosing a personal or digital advisor:
What type of investment advice do I need?
What fees are involved? (management fees, transaction costs, custodial fees for retirement accounts, account closure fees)
Am I limited to buying certain investments?
What am I getting for the fees? (investment advice or financial advice: investment advice focuses only on the portfolio where financial advice tends to be more comprehensive)
What safeguards are in place? (data security, privacy of personal information)
Where will my money be held? (who has custody of your funds?)
What is the minimum dollar amount needed to open account?
What is the minimum dollar amount that can be added?
Can I get advice from a human? If so, what are their credentials? Is there a cost to connect with a human?