The lowdown on robo-advisors

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There used to be just two options for investing: Hire a financial investment advisor, or do all the research and work yourself.

Today, technology has created a whole spectrum of choices. Online investing and advisory services, also known as robo-advisors, are making investing easier and more accessible for DIY investors. Robo-advisors harness the power of technology to generate investment advice and help you manage your portfolio. They can take the pain and uncertainty out of investing by constructing a portfolio, investing in ETFs, rebalancing, reinvesting dividends, and even harvesting tax losses.

The trend toward robo-investing is gaining momentum. By 2020, robo-advisors are expected to manage around 10% of the world’s assets under management, which equates to about $8 trillion.1 But with Web-based financial services still in their infancy, many investors continue to have mixed feelings about the robo-investing movement.

Attitudes toward robo-investing

Can machines give good investment advice? Many investors believe they can. One study conducted by State Street Center for Applied Research found that 65% of retail investors believe that technology will do a better job at meeting their needs than human advisors.2

Other research conducted by Allianz Life®, which focused on generational approaches to investing and managing finances, revealed more complex attitudes. Case in point: When baby boomers and Generation Xers were asked about using robo-advisors, a significant majority (69%) from both demographic groups said they "don't really trust online advice." Further, 76% opined that "there is so much selling online that it's hard to trust the financial advice."3

The same study revealed that while more than a third of respondents expressed some interest in working with a robo-advisor, just one in 10 would be comfortable having a relationship with an advisor that existed solely online.2

Yet as technology evolves and financial information proliferates online, investors are spending more time on financial websites, with 40% saying they visit such sites regularly, 13% going to financial sites daily, and 22% doing some trading online. Among this group there appears to be a growing comfort level with the robo-experience, as 42% stated that "there's nothing a financial advisor can tell me that I can't find out online."3

Study after study on the emerging impact of digital advice is finding widespread ambivalence on the part of investors. On one hand, they are increasingly comfortable with getting their financial information and conducting more business through digital channels, while on the other, they still gravitate toward human relationships when dealing with complex "big picture" planning issues such as meeting their income needs in retirement and setting and managing other long-term financial goals.

Choosing the right path

Every investor has different needs. For some, the low fees and smaller minimum investment make certain robo-advisors an attractive alternative to hiring a financial advisor. But one survey found that just one in three investors say they would be comfortable using an entirely digitized service as their primary investment advisor.4

Many are opting for a hybrid approach such as OCCU Investment Services’ Guided Wealth Portfolios, which combine intuitive technology with a personal advisor. The robo (or automated) portion provides the opportunity for you to access our services and advice at a lower cost, while the human advisor oversees the account and provides a personal touch. 

When shopping around for online investment services, it’s important to keep in mind that no two robo-advisors are the same. They’re programmed to have different investing styles depending on whether you’re young and just starting out or nearing retirement age. They also differ in terms of annual fees, minimum deposits, and the types of accounts they can manage.

Robo-investing has the potential to change the way people invest. As the world of Web-based financial services continues to evolve, investors will no doubt see more exciting new developments in the future.

This communication is not intended to be investment advice and should not be treated as such. Each individual's situation is different. You should contact your financial professional to discuss your personal situation.


Source:, "The Robo-Advising Report," May 2016., "Can Advisors Rebuff Challenge of Automated Investing?" February 25, 2016.

3Allianz Life®, ' "Robo" Financial Advising on the Rise, But Gen Xers and Boomers Still Prefer the Human Touch,' February 16, 2016., “Can Robo Advisers Replace Human Financial Advisers?” February 28, 2016.

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Guided Wealth Portfolios (GWP) is a centrally managed, algorithm-based, investment program sponsored by LPL Financial LLC (LPL). GWP uses proprietary, automated, computer algorithms of FutureAdvisor to generate investment recommendations based upon model portfolios constructed by LPL. FutureAdvisor and LPL are non-affiliated entities. If you are receiving advisory services in GWP from a separately registered investment advisor firm other than LPL or FutureAdvisor, LPL and FutureAdvisor are not affiliates of such advisor. Both LPL and FutureAdvisor are investment advisors registered with the U.S. Securities and Exchange Commission, and LPL is also a Member FINRA/SIPC. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.