Ever since the inception of commerce and investment, there has always been a need for financial advisors. It is a fact that while there are many with the means to make major investments and engage in various commercial activities, not everyone is well conversant with the nitty-gritty of finance and investment options. Thus, it is necessary to have the right financial advisor to take care of investing decisions. Financial advisors have been highly regarded for quite a long. However, in recent times technological advancements have created some interesting developments in this segment. Welcome financial advisor bots!
It might sound really interesting to many while there will be another segment of the population who are apprehensive of this technological advancement. Bots replacing human intelligence has always been questioned for ages. When it comes to critical areas such as financial analysis, quite understandingly investors will think twice before trusting a bot blindly. So, how trustworthy are these financial advisor bots and is it really wise to trust them with something as important as investing and commercial decision making? Let’s find out.
The three most talked about automated financial advisory services are Betterment, Wealthfront, and Vanguard. There has been much discussion about which is the best one among the three. Let us take a closer look at the three.
Betterment focuses on a simple and easy signup process. It asks some basic questions about the user and the current status that will allow it to best decide the future plan. Once done, the automated advisor is all set to get further. The user is asked about the future target and has to decide what he/she is looking forward to. If the person selects retirement then Betterment calculates the age of the person and the days remaining before retiring. Finally, after analyzing the current financial and investment situation the Robo advisor provides a plan that will allow the user to reach the goal at the time of retirement and enjoy a peaceful and enjoyable life thereafter with regular returns from the investment. The details of the stocks and bonds owned have to be entered as well for getting a perfect analysis. Betterment suggests the best options and it is up to the user to select the one that is most attractive. There are estimates of the returns against all the options presented.
The user will be asked to enter the preferred account type that will be used for reaching the set goal at the time of retirement. The options available include the normal taxable account, Traditional IRA, SEP IRA, and Roth IRA. The final retirement amount and the target amount vary based on a number of factors like the choice of the account and the distribution between bonds and stocks.
Finally, Betterment provides a detailed report of the entire strategy. This includes a concrete idea about the various investments suggested such as Tesco shares or any other shares that are secure to investment and the allocation is parsed clearly between US Large Cap Value, US Total Stock Market, Municipal Bonds, Developed Markets, and many more.
A relatively new investor might feel more at ease after checking the landing page of Wealthfront. They provide two options to the visitor – whether to go ahead and plan investment right away or to check a video about their service. The video is a pleasing one and gives enough information to build the required amount of trust with their first time client. It also helps first-time investors to take the right decision. Once the user moves into the planning screen the user has to input personal information and then select a goal. The options available include tax savings, creating a diversified portfolio, competing with the market performance, or simply having a Robo advisor. Once the option is selected, there is a host of options that come up that will help Wealthfront to understand the goals of the visitor.
Wealthfront even makes a risk analysis by considering the current income status before tax deduction, the number of dependents in the family, the current, and the modes of income at present. There are other questions that find the current financial status of the person and paint a picture of the financial goals – maximizing investment or minimizing loss.
Once all the information is entered Wealthfront creates a detailed plan for the person and gives the various options that can be considered while investing. A variety of mix is suggested to reach the desired goal.
Vanguard is quite clearly the least intuitive of all three and there is a clear lack of proper streamlining of the information. The user begins by entering a host of personal information and then confirming it all through the uploading of a digital signature. The sign-up process for new users takes approximately 15 minutes as per the Vanguard estimate. Thereafter the user is redirected to one of the sister sites depending upon the user’s interest, such as retirement plan, personal investor, financial advisor, institutional advisor, non-US investors.
There is much information provided on the Vanguard site and even though there is a lesser number of input areas a lot of scrolling has to be done. Vanguard offers the suggestion at a much later stage. User, after completion of all the process, can go directly and start investing after entering some fund in his/her Vanguard account.
The approach of each one of the above tools is quite different making it difficult for comparison. In the end, it is best to select the one that satisfies the need of the user the most