The State Of Robo-Advisors in 2020

Let’s start with a question.

10:47 29 March 2020

What’s easier: going on your weekly grocery run to pick up things from the supermarket or setting up a personalized portfolio of stocks, bonds, and ETFs that are in line with your investment goals and risk tolerance? It turns out setting up a well-tailored portfolio is actually going to be easier than buying groceries. Well, it’s actually quite ridiculous to think that you can build a well-diversified portfolio of stocks and bonds easily and for cheap without taking advice from a financial expert. Apparently, it’s not ludicrous anymore. The emergence of savvy Robo advisors has shaken the financial service industry to its foundation, completely disrupting the way things worked especially how people sought advice and took guidance for investing.

For those wondering what Robo advisors are, they are digital automated investment services that give investors a well-tailored customized portfolio suiting their investment goals, appetite for risk, etc. Previously, you needed to pay a lot of money for getting guidance from a seasoned financial advisor. But now, a low-cost Robo advisor - armed with the power of artificial intelligence and driven by advanced algorithms-- divvy up the right portfolio in line with your investing goals and rebalance it periodically according to your risk/reward profile. 

Sounds too good to be true, doesn’t it? 

Believe it or not, many Robo advisers in 2020 are able to provide expert investment and financial planning advice and more at fairly cheaper rates than their human counterparts. This is particularly useful for young investors who are just starting out with a long investment journey ahead of them and for those who cannot afford to pay the high fees required to consult with expert financial planners and investment advisors and to get them to manage their portfolios. 

The robo adviser industry is still fairly nascent but several financial management giants are starting to show interest to get on board and roll out new digital Robo advisors that can automate investing end to end and manage portfolios passively. In keeping with this, several new Robo advisors have started coming up with a few of them really standouts in their own right and proving to be much more effective and resourceful than the rest. Most worthy of mention is the Betterment Robo advisor using which you can assemble a good portfolio and manage it on an ongoing basis with everything happening on auto-pilot mode. According to InvestmentZen's recent Betterment review, its Robo-advisor provides multiple product offerings, smart automatic rebalancing capabilities, minimum no deposit rules- all at attractive rates, making it a reasonably good option for newbie investors who want to invest passively and be hands-off. That means you get a well-diversified portfolio for a price that’s tough to beat. That’s not all. There’s more. With a service like Betterment, you can also roll-over your existing IRA or 301K. So if you’re a young investor looking to invest a little and see it grow, the all-encompassing solution provided by Betterment has got you covered. It is well-designed to help you put together a good portfolio that can produce a market-beating performance in the long term. 

To sum up, Robo advisors were a novel unproven idea just a few years ago, but not anymore. These automated investment advisors are here to stay. And the growth rate at which this industry is ticking along is a nice indication of where things are headed. It also goes to show that the idea of hiring a financial advisor at a fraction of the cost has gained traction and is becoming more and more popular. Companies are trying to differentiate their offerings and make them more appealing to prospective investors, say by making a team of financial experts to give advice and support for free when necessary. That said, it remains to be seen whether they are capable of producing market-beating performance year after year after year. But, they have the AI smarts and the right backing by established companies to help them get there. 

But, one thing is for sure. With the right Robo adviser, the idea of passive investing is not a costly affair anymore. Be sure to do your own due diligence and find one Robo adviser that you can count on.