Working with Robo-Advisors vs. Traditional Financial Advisor Services in Scottsdale

How do robo-advisors compare to traditional financial advisor services in Scottsdale? The major difference between the two revolves around what services are provided and how they are delivered.

According to Investopedia, a robo-advisor is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners. They use automation to select investments that meet a set of pre-determined investor criteria.

Robo-advisors may use the same software as traditional financial advisor services, but they typically only provide portfolio management. Unlike a full-service financial advisor, robo-advisors do not manage personal wealth management projects, such as tax, retirement and estate planning.

With traditional financial advisor services in Scottsdale, investors work through a human professional for a wide range of financial help. However, robo-advisors offer only portfolio management services online, typically at a low cost and with low account minimum requirements. Robo-advisors often attract younger investors, such as millennials, who seek out low-cost services and are comfortable managing their portfolios online without personal advice.

Although robo advisors have become the latest trend in financial services, they are not suited for every investor. Here are some pitfalls surrounding the use of robo-advisor services:

  • Lack of Personalization – The best financial guidance is often delivered after a qualified expert gets to know you personally – your near and long-term goals, your family situation, your financial concerns, your tolerance for risk and your preferred communication style.

In many cases, a robo-advisor provides a one-size fits all approach that may not suit all investors. An advisor may not be there to calm you doing market crashes or help you understand how markets work.

For example, if you want an in-person, face-to-face meeting, you may be out of luck. Robo-advisors do not work from offices where you can just walk in and meet with your advisor.

  • Lack of Integration – A traditional financial advisor will work with you to integrate your entire financial life, including managing your finances, portfolio, taxes, retirement and estate. Most robo-advisors will not offer a comprehensive set of services. They focus primarily on investment strategies for your portfolio. And, they may not offer a very wide range of asset classes. Robo-advisor portfolios most commonly consist of exchange-traded funds.
  • Lack of Detailed Advice – A traditional financial advisor in Scottsdale will get to know you as a person, not just an investor. He or she will be able to provide advice geared entirely to your financial situation. A robo-advisor, on the other hand, will not analyze your entire financial life and develop a comprehensive plan to achieve your goals. They do not offer detailed advice on life events, such as changing careers, how to fund your children’s college and when to retire.

The type of financial advisor services you select boils down to some common sense criteria. What services do you want from an advisor? Services will vary widely among robo-advisor firms and traditional financial advisor services in Scottsdale. Also, what level of human interaction do you want? Will you be comfortable with an advisor communicating only through email?

The financial services industry continues to evolve. The latest trend today will be replaced with something new down the road. Regardless of what financial advising services are available, you must compare options carefully to find the best fit for your requirements.

As a SEC registered advisory firm, WealthTrust Arizona’s financial advisors have earned at least one or more advanced degrees or professional designations, including the CFP designation. In addition, WealthTrust Arizona operates in a fiduciary capacity, which means we will manage your financial life without conflicts of interest. We’re concerned only with providing sound advice and a well-rounded service offering that meets your unique financial goals. WealthTrust Arizona is a trusted resource you can count on to manage your entire financial life.

To learn more about financial advisor services in Scottsdale, call for a free consultation at 1-480-483-7300. You can also visit our website for more information.