Robo-Advisor Or Traditional Advisor: The Best Choices When It Comes To Managing Expenses
Financial literacy is something that many people acquire once they’ve made a few financial mistakes or once they step into the practical part of their lives. Before that, they are generally making money over the weekdays and spending it all on the weekends. However, in recent years, people are becoming increasingly aware of the importance of managing finances, especially after the COVID-19 pandemic when many lost their jobs and had to cut down expenses significantly to stay afloat. Because of this, it has opened doors for the younger generation to explore their options and understand that managing finances is an important trait to have.
When it comes to it, you can go about it by doing it yourself, hiring a professional, or getting a Robo-Advisor to do the job for you. However, if you are someone who needs the extra help, then you are most likely stuck between choosing one or the other. If this is something that’s on your mind, then you are at the right place because this article will fill you in on all the details you need to know before choosing a Robo-Advisor or a traditional advisor.
Robo-Advisor Or Traditional Advisors?
This concept might be new to many people, but Robo-Advisors are software platforms that invest for you: they create an investment portfolio and manage it as well. To use it, you must answer a few questions concerning your age, risk tolerance, and financial goals so it can customize and follow an investment plan for you.
While on the other hand, a financial advisor will be assisting you with immediate financial matters. You can either get a consultation with them a few times or hire them for a long-term period where they get an up-close look at your finances, goals, targets, and strategy and guide you through the way. Unlike a Robo-Advisor, they can give you genuine advice about how to go on about your financial matters and what would work best for you.
Both traditional advisors and Robo-Advisors will charge you a percentage of your total assets, which are being managed, but the percentage varies. Generally, a Robo-Advisor will charge you around 0.25% to 0.5%. On the other hand, financial advisors will charge you 1% of your assets that are managed over the year.
This might convince many people to opt for the Robo-Advisor, while others would still prefer a traditional financial advisor, despite the higher charging fee.
The Final Verdict
Robo-Advisors are quite beneficial for people who don’t have lots of time on their hands since they are designed to automatically rebalance your portfolio if there are any changes in the market conditions rather than sitting down and discussing with your financial advisor about the right course of action.
But then again, Robo-Advisors are just software platforms, which means that they have a quite limited view of your financial picture and don’t have an idea about your assets, your debts, and moral values like a financial advisor would.
This is the best guide to choosing between Robo-Advisors or Traditional advisors.
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