The pros and cons of robo-advisers

We live in an era where online financial software, automated trading and robo-advisers are changing the way investors manage their portfolio.

Robo-adviser services are an attractive option for those who don’t want to hire a financial adviser or prefer not to spend a great deal of time selecting their investments, executing trades or rebalancing their portfolios.


That said, automated investment services aren’t for everyone.

Here’s a quick overview of the pros and cons.

The Upside

Small asset base: If you’re just starting out in your career and just beginning to accumulate savings, robo advisers may be worth a look. The fees are low and with regular contributions, you can establish good investing habits such as disciplined savings and market monitoring.

Emotional Distance: With most automated investing services, the software makes the big decisions for you based on your goals and risk tolerance. Individual investors often make costly mistakes when markets become turbulent and emotions override rational decision-making.

Reduced Stress: You don’t need to spend a lot of time researching stocks or refining strategies. Most robo advisors use mutual funds, or exchange-traded funds to build the portfolio – not individual stocks. So no need to execute trades or wonder if your broker’s advice is sound or commission-driven.

The Downside

Customized Strategy: An experienced, human financial adviser can calibrate your investing strategy to your changing needs and your account growth. Some investors like the human touch and tax and regulatory expertise that a seasoned financial planner can bring to the table.

Tax Planning: If you’re a big account investor with a complex portfolio, automated websites may not be able to factor in the assumptions of your financial situation with great accuracy. Tax attorneys and financial advisers are more expensive, but they can offer valuable advice many robo-adviser services can’t.

Active Investing: Robo-adviser investing programs tend to focus on passive investing strategies such as mutual funds, as well as equity and fixed-income ETFs. Financial advisers can help you choose individual stocks, bonds , closed-end funds and insurance products tailored to your individual needs.

Third Way

At Interactive Brokers Asset Management, we think there is another alternative that may offer you the best of both worlds.

We can deliver both the low costs and convenience of online investing, as well as human help when you need it.

On top of that, we offer a broad selection of actively and passively managed portfolios.

Deeper Offering

We have three types of passively managed portfolios that are personally overseen by our Chief Investment Officer Sanjoy Ghosh and automatically rebalanced on a quarterly basis.

Moreover, we also offer dozens of actively managed portfolios run by experienced money managers.

Our Commitment

Want to learn more? Go here to check out our full portfolio lineup, fees and our commitment to transparency and customer service.

IBKR Asset Management gives you unprecedented access to all the talent, insight and experience of our marketplace of investors.

Your portfolio is matched to the portfolio of a money manager — trade for trade, maneuver for maneuver.

Welcome to the future of investing.

Photo Credit: Saxon Woelber via Flickr Creative Commons