Evaluating Robo Advisor Platforms

A decade ago, robo-advisors were just entering the financial scene. Now, it seems as if a new offering comes out daily. Robo investing can be a great opportunity for many people, but with so many options, it can also be overwhelming to decide which is the right for you. When evaluating any investment opportunity, it’s easy to turn to performance and returns for guidance. Let’s take a look at some factors that can help you evaluate robo advisor platforms on the market.

Historical Performance

It’s important to keep in mind that past performance never guarantees future results. While past performance can be taken into consideration, it should not be viewed as a guarantee of future performance.

As an industry, robo investing has only been around for a decade. Additionally, specific platforms may have been around for even shorter periods of time. That means that there’s minimal performance history to evaluate. A lack of history with this service makes any historical performance review difficult. Any advisor, robo or otherwise, may have great returns but a subpar quarter. On the other hand, an advisor may typically underperform the market but have one good quarter.

Factors To Evaluate Robo Advisors

Two key factors to consider when evaluating robo-advisors are fees and rebalancing. Beyond this, other factors to keep in mind are account minimums and the availability of a human advisor. Let’s take a closer look at each of these below:

Fees

One of the benefits of robo-advisors is the lower fees compared to many typical advisors. Lower fees benefit investors on multiple levels. First, paying for anything means spending money. With investing there’s also the double whammy of spending money now and losing out on future profit. That’s because money you spend is not being invested and, therefore, the interest that could be gained on it is also lost. This is not to say that the platform with the lowest fee is always the best investment, but it is an important factor to consider.

Rebalancing

Another useful tool for evaluating a robo-advisor is rebalancing. Rebalancing is the process of keeping your portfolio mix accurate over time. A more accurate portfolio mix is ideal, since it means you’re still in line with your long-term goals and risk preferences.

One of the benefits of robo-advising is that it has the ability to rebalance automatically. Most, but not all, platforms offer automatic rebalancing. So, whether or not a platform offers automatic rebalancing can be a good question to help you find the right solution for your needs. Even if a platform does offer rebalancing, however, it will be important to consider how and when they do so.

Account Minimums

Account minimums for robo-advisors differ greatly. Some have a $0 account minimum, while others are in the tens of thousands of dollars. In general, however, robo-advisors tend to have much lower account minimums than traditional advisors.

A higher or lower account minimum does not mean that one platform is better than another. Again, account minimums are just another tool an investor can use in order to evaluate which platform is the best fit for their specific needs.

Human Advisor Availability

The original concept of a robo-advisor meant investing without a human financial advisor. This is beginning to change. More and more human advisors are offering robo-advising services, and more robo-advisors are offering access to a human financial advisor as part of their overall package.

This melding of services may fit the needs of many investors who are looking for lower account minimums and some of the automation of robo-advising but still want to have the option of working with a human advisor when they need advice.

Invest With Good Life Financial

Good Life Financial is pleased to work with Guided Wealth Portfolios (GWP) to offer robo investing services to our clients. When using the GWP platform with Good Life Financial Advisors, you get a technology-driven investment platform and the opportunity to build a relationship with a real human advisor.

Our Fees. There is a .35% platform fee and a 1% fee for advisor access, for a total 1.35% fee.
Rebalancing. The GWP platform automatically and periodically adjusts your portfolio mix based on your goals and risk preferences.
Minimum Investment. There is a $5,000 minimum investment, making this a great option for investors with smaller budgets.
Advisor Access. Enjoy the benefits of automated portfolio management through GWP plus individualized support from one of our real human advisors.