I am becoming increasingly torn between hiring a human financial advisor or using a robo-advisor to manage my finances. These are options that I have been considering since I am an inexperienced investor. I am still learning about the financial market system. Also, I have been thinking it might be good to have some direct help beyond advice from investor friends. After all, absolutely no one is going to work harder for your money than you, right?
And working with an advisor, human or A.I., is a more progressive way to handle my finances than relying on the charitable advice of my investor friend.
Human Vs Robo-Advisor
Human financial advisors work on their own time. You can’t discuss your money with them after working hours or on holidays. Human advisors can charge hundreds of dollars per hour for their services. Most charge a commission percentage against your entire financial portfolio. A human financial advisor might charge anywhere from 1% to 2% annually against your total financial value. For example, if you are worth $1 million, then a financial advisor might charge you $10,000 for retainer services.
Also, some advisors may give you financial advice based on commissions for financial products for businesses sponsoring them. In other words, they may give you investment advice that benefit them, not you. Robo-advisors are online financial management platforms, powered by artificial intelligence, that can manage your financial portfolio without human intervention. You fill out an application, list your investments, stocks, retirement funds, real estate holdings, and so on, and the robo-advisor takes over.
It manages your finances autonomously based on your application, preferences, and as-needed directives. A.I. enabled robo-advisors, like WealthFront, Betterment, Blooom, Ellevest, and others, offer more affordable management fees. They charge management fees ranging between zero, a quarter of a percent, 0.50%, and up to $10-a-month. Robo-advisors are designed to save you money on human advisors and take the worry out of financial management maintenance.
However, is it prudent to take yourself out of the equation when it comes to your finances? Robo-advisors will make decisions for you autonomously. You can change or reverse decisions they make. Although, changing a robo-advisor’s decision after the fact won’t erase financial consequences. For the inexperienced investor who wants the best of both worlds, M1 Finance might be the answer.
M1 Finance is a relatively new online-investment platform that combines the efficiency of robo-advisor management while keeping you in control of your investments and financial portfolio. The company was launched in 2015 by CEO Brian Barnes.M1 Finance claims to have over 25,000 accounts and about $100 million After registering on M1 Finance, you will fill out a questionnaire outlaying your financial goals, investing guidelines, and overall risk tolerances.
After assessing your information, a diversified investment portfolio recommendation will be presented to you. When you want to begin investing, you have to add a minimum of $100 to you M1 Finance account. As you begin investing, M1 Finance will suggest a diversified distribution of investment options that are preselected according to your questionnaire information. It’s called, “pie investing,” and it allows you to control how your assets and investment are distributed and allocated in your financial portfolio. You can control these activities yourself or allow M1 Finance’s automated functions to work you.
Stay In Control
While M1 Finance is a fine financial investing platform, it is important that you stay personally engaged in the management of your financial portfolio. Instead of letting a financial advisor or robo-advisor make all of the decisions, M1 Finance allows you to stay in control.
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