4 Reasons to Use an Automated Financial Advisor


I have said this before and I will say it again – we all want to make money. In fact, if we have money, we usually want it to work for us and make more money. The problem is, we want it to work for us, but we usually do not have the time, effort, or knowledge of how to do that.

In the past, I have written of easy-to-use gig opportunities such as, AirBnb, UpWork, Turo, etc. But today, I want to offer a way of investing in the stock market without putting any effort into it. Well, besides setting up the account, which is extremely easy. The solution that I want to present to you today is an automated financial advisor. There are two key players in this market; Wealthfront and Betterment.

So, what do these services actually do? I think we should step back and view what the upper class do when they have extra capital to invest. Normally, they would talk to a financial advisor. These advisors would give advice of what are the best stocks to invest, how to diversify your portfolio, and even retirement plans. They would then take a percentage of the entire dollar amount that they managed for you. For example, if you gave them $5,000,000 dollars to invest, they would take 1%, for example, of that total. You then would be able to relax and enjoy your life as a paid professional makes sure that you are going to be able to retire at a age that you want.

Jumping back to the automated financial advisor, imagine a world where all of that is fully automated by algorithms. You no longer need to schedule time to talk to professionals, no longer need to give a percentage (unless you reach a certain amount of money), and you can instant access to your portfolio, retirement, and all other financial information that you want.

There are two different types of automated financial advisors that are leading the pack – Wealthfront and Betterment. Betterment is catered towards individuals that have more assets that they want to invest (think $100,000 or more). The services that they offer will be more beneficial to that demographic. Additionally, they will charge a percent to manage your finances from the first dollar.

On the other hand, Wealthfront allows you to get the first $10,000 managed free. If you are pushing that amount, just refer a couple friends and as soon as they start an account, you both get an extra $5,000 managed for free.

Now that we have what a financial advisor does and the distinction between the two, here are 4 reasons for you to use them.

1. Instant access to your finances

When considering your investments, it is fair to say that you will want to see what you are invested in, how it is performing, and any other question you might have related to those numbers. By using these apps, you get that at the touch of a finger. Both of these companies have an app for your phone and a website where you can always get a snapshot of your finances.

Compare this to the current setup with financial advisors where you have to call them, set up a meeting, and then drive to the meeting to get access to this. Of course, I’m sure they would be happy to explain over the phone, but it is harder.

2. Curated Advice for your situation

Wealthfront (I am not entirely sure about Betterment, since I do not use it) has analyzed my financial setup and realized that I could take advantage of setting up a retirement plan, 529 plan, and a few other tips to optimize the use of my finances. The best part of this, is that I can opt in to these with a few quick pushes of buttons and that is it. Financial advisors offer this service to, but it is not as convenient.

3. Portfolio based on your risk scores

When I set up my Wealthfront account, I had to take a quick test. This test asked about my risk tolerance, my goals towards investing, and other topics around how I handle and react to my finances losing or gain profits. Based on my answers, the service provided me a “risk score” (mine was 10 out of 10). This score is based on your living situation (e.g. kids, age, income, etc.) and will adjust the way your portfolio is diversified based on your score. You can change the score at any given time, giving you the freedom to dictate how open you are to taking a risk.

4. Ease of use

I cannot explain how easy this service is to you. The company has made the design so intuitive that it is hard to mess up (something that you do not want to risk when dealing with your money). If you are still not sure about it, just go to their website and answer a few questions. These questions will provide you with a theoretical portfolio that they will place you in, even before you sign up. Pretty cool!

Final Thoughts

Now, I will be the first to say that this is not for everyone. If you have millions of dollars that you want to invest, it is comforting to know that you can always stop in at someone’s desk and talk to them. I would venture to say that these services are more for the younger techies that are looking to capitalize on technology. However, I am sure that there are others that have money and just want to see how it stands up against other financial advisors. Either way, having someone (or something) manage your money will allow you to relax and trust that your money is working for you.

Don’t let another day go by with your money sitting in the bank account. It is essentially losing money due to inflation. Put it in the market, let it rise with the market, and relax.

Posted 7 years ago on 05 September 2017

About Parker

Parker Benjamin is the owner of DMAD and has been writing for the web for over 10 years. He is passionate about design, Wordpress, travel, language learning, fine dining, and online marketing. Note: Some links on this site are monetized by affiliate programs - see disclosure for more details.

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