Planning Briefs
Do Robo Advisors Have Glitches?
Published Tuesday, May 24, 2016 at: 7:00 AM EDT
Robots already do serious work in manufacturing, construction, and an increasing number of other fields. And now, "robo advisors" are invading financial services. Within the next decade, these automated portfolio managers are expected to be handling trillions of dollars in assets.
But are robo advisors an upgrade over their human counterparts? The jury is still out on that question, so let's take a closer look.
How do robo advisors work? It's not like R2-D2 sets up a face-to-face meeting at his office and devises a financial plan for your future. Instead, you input critical data—including your age, risk tolerance, assets, and goals—into a software package, which then spits out an investment "asset allocation" based on an algorithm. So, the technology does all of the grunt work.
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