Robo-Advisor vs. Financial Advisor: Which is Better?


Artificial intelligence (AI) is a growing arena within the investment management industry. Robo Advisory firms are built online to provide investment guidance and portfolio management by utilizing algorithms for decision making. Although investment portfolios using computer algorithms is more accepted among a younger audience, 60% of Millennials and Gen-Xers still prefer to have a personal financial planner to manage their investment accounts, as shown in the graph below (

Charles Schwab’s Man and Machines report, May 2015

Someone who uses a robo-advisor is looking for low management fees and is typically at the beginning of the wealth accumulation phase ( Artificial intelligence is still prone to computer failures and incorrect conclusions that can generate a loss in your accounts.  It is not a fool-proof way to invest. Robo-advisors also lack in the area of providing complex solutions around tax efficiency or any significant shifts in the market.

On the other hand, personal financial advisors cost more in fees (roughly 1%-2% more than robo-advisors, according to Seedly), but they provide in-depth specialized services that would be difficult for an algorithm based portfolio to manage.

robo-advisor vs. human-advisor.jpg

Here are some specialized services that financial advisors may provide to clients:

  • Tax efficiency

  • Risk management

  • Active management throughout the business cycle

  • Ongoing financial support through life changes

  • Cashflow analysis

  • Tax loss harvesting

  • Retirement funding strategies

  • Estate and legacy planning

  • Distribution strategies

Do you trust a machine or human beings to be decision makers for your future wealth and lifestyle options?  Does your investment portfolio require active management and a variety of financial advisory needs, or do you feel comfortable with the simplicity that AI offers?  When you can answer these questions, then you will know if AI is right for you.  We explain more about robo-advisors in our Build Your Wealth podcast episode “Not All Advisors are the Same.” Our Build Your Wealth podcast is an education program where we provide educational insights about financial planning and investment management.  Listen Here!  


Interested in how Lighthouse Financial can help you?  Contact us today to schedule a complimentary consultation.

*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.