Robo-advisers are a class of financial advisers that provide portfolio management online with minimal human intervention. Robo systems, which emerged only a few years ago, provide automated, algorithm-based portfolio management, particularly accessible to those without huge investment balances.
There has been a rise of the robo-advisers, with many rolling out offerings like tax loss harvesting that appeal to more sophisticated investors. Some are also targeting offerings to those preparing for and in retirement, according to Market Watch.
In an article published on the New York Post, Gregory Bresiner says that robo advisers offer cheaper route to retirement. The fees charged by robo advisers is significantly less - the traditional adviser charges 1.25 percent or more on an account, while robos usually charge about 0.25 percent.
Betterment, one of the largest robo-advisers in the industry, announced in September that it will begin offering 401(k) plans to employers. New York Post reported that Betterment charges a 0.25 percent fee on assets, which falls to 0.15 percent in case a client accumulates $100,000 or more.
Jon Stein, founder of Betterment, said that this lower fees can over the long term result in a retirement fund that is one-third bigger than the person’s who has paid 1.25 percent over several years.
“We are trying to help those people who need retirement help and can’t afford a traditional adviser,” says Stein.
However, traditional advisers such as Ric Edelman, question the value of robo services. He says that none of the robos have demonstrated a sustainable business model based on their current fee schedule.
“If you give robo advisers money, they will invest it for you — that’s it”, Edelman says.
