Posted on February 4, 2016 in ,

Financial Planners vs. Robo-Advisors

Financial Planners vs. Robo-Advisors: There’s No Comparison

Robo-advisors have become an increasingly popular topic over the last few years. A robo-advisor offers online wealth management service that provides automatic algorithm-based portfolio management. Before investing, you are usually asked a number of questions to evaluate your income, risk tolerance, time horizon, etc. in effort to match you with a suitable asset allocation. Your money is then placed in funds and will be automatically rebalanced throughout the life of the account as time passes, fund values change, or money is added. Generally, there is no human interaction.

For young investors or those just beginning to save, robo-advisors might be attractive for a variety of reasons. Robo-advisors typically have low account minimums, which is an attractive feature to those just starting out. Also, because you get put into a one-size-fits-all model based on your allocation and there is little to no additional personalized service provided, these plans are typically low-cost.

Robo-advisors may be appropriate for investors just beginning their financial journey when the primary focus is saving and the individual’s life situation is usually less complex. However, as investors get older and the family and work dynamic begins to change, seeking guidance from a professional can be critical to establishing a comprehensive and complete financial plan that will help the investor reach his or her goals.

One size does not fit all when it comes to financial advice. The internet is a great source for general stand-alone financial advice. However, everyone has different goals, a different family dynamic, and a different financial situation. A cookie cutter financial plan can’t and shouldn’t be applied to everyone. Every component of your financial plan should be taken into consideration when creating a long-term plan, including investments, risk management (insurance), tax planning, estate planning, and even business planning. Robo-advisors are not able to examine all of the unique characteristics of an individual’s situation that should be taken into consideration when formulating a comprehensive plan.

Financial advisors can also answer questions that can’t be defined by a computer-generated number. Choosing the best education savings vehicle for grandchildren, finding the best way to gift assets and money to family members, determining the best time to take Social Security, and deciding whether or not to pay a mortgage off early are all very important decisions that can have a serious impact on your long-term financial plan.

When comparing robo-advisors and financial planners, it’s apples to oranges. While both robo-advisors and financial planners may offer investment management services, there is significant value that a financial planner can add beyond that of a robo-advisor. Investments are just a small piece of your financial plan. A financial planner’s focus is the big-picture, and on making sure all of the pieces of your financial plan fit together in the way that is most conducive for helping you reach your goals.


Peter C. Golotko, CPA/PFS, MBA is President and CEO of CPS Investment Advisors.  Leighann Davis, Portfolio Analyst at CPS Investment Advisors, is a contributing author of this article.