Copy of New 'robo-advisors' help manage your money online
Posted October 3, 2016 10:38 a.m. EDT
Raleigh, N.C. — Computers assemble cars, perform surgeries and even venture into space - but would you let one manage your money?
These new online financial advisors, called "robo-advisors," use computer algorithms along with customers' risk tolerance and timeline to recommend investments to users for a fraction of the price a human advisor charges.
Allison Cohen is one of many users who are pleased with the robo-advisors.
"It didn't feel old or stodgy or conservative," she said. "It felt really on the cutting-edge of the future of investing."
Officials say the robo-advisors have become big business.
"Robo-advisors manage an estimated $53 billion dollars," said Margot Gilman, Consumer Reports' Chief Money Editor. "And that number is expected to grow to between five and seven trillion dollars in the next 10 years."
Investment firms like Wealthfront and Betterment are starting to use the robo-advisors, and even asset-management giant Schwab is getting into the game.
Officials at Consumer Reports say the new tool requires users to have a fair amount of faith in the technology - especially in a rocky market.
"There's no real track record," said Gilman. "Robo services haven't been around that long, and they haven't been tested in a true bear market."
Additionally, the robots can't do everything human advisors do, like helping customers prioritize their financial goals. They also can't help users navigate tricky financial situations like divorce, saving money for college or handling the finances of an aging parent.
However, Consumer Reports says a robo-advisor could be a smart option for many investors, especially for those who are looking for a way to jump into the market. Officials recommend that people making the decision to switch to a robo-advisor consider their financial circumstances, their reaction to risk and their comfort level with recently-developed technology.
Still stumped? Consumer Reports created an online quiz to help you determine which is right for you - a human advisor or a robo-advisor.