Financial Advisor vs. Robo-Advisor vs. DIY Investing – Which is the Right Choice?

financial advisor vs. robo advisor vs. DIY investing

Robo-Advisor vs. Financial Advisors vs. DIY Investing – What’s the Difference?

Choosing between a financial advisor vs. robo advisor can be challenging. Add in DIY investing and it can feel as if you’ve got too many choices. This article is crafted to simplify your robo-advisor vs. financial advisor vs. DIY investing decision. Hint – it doesn’t need to be an either/or choice!

While investing can be simple, like choosing a target date fund or a couple of index funds – choosing between robo investing vs human advisors is another matter.

Then add in robo advisor vs. index fund DIY investing, and choosing the best investment management method can get confusing quickly.

This article will clear up the robo-advisors vs. human advisors vs. DIY investing question and get you started building wealth through investing.

What’s a Robo-Advisor?

A robo-advisor is a digital financial advisor. Using computerized algorithms, robo-advisors choose an investment mix based upon your age, risk tolerance and other factors. But don’t think that robo-advisors are all the same. There is variability within robo-advisors including management fees, investment funds, additional products and services.

In fact, many robo-advisors also offer human financial advisors.

What’s a Financial Advisor?

A financial advisor refers to any individual who helps you manage your money. Within the broad financial advisory category there are many distinctions including level of expertise and credentials. Pricing varies among financial advisors as well. Financial advisors provide services from investment management, to tax and estate planning.

Like robo-advisors, there are many distinctions among financial advisors.

What is DIY Investing?

Do it yourself investing means picking stocks, bonds and investment funds on your own. Self-directed investing isn’t too difficult with a bit of financial education and is appropriate for anyone willing to devote some time to learning about investing.

Just be aware, that it’s sometimes wise to pay a small management fee in order to have someone handle your investment management tasks.

If your head is swimming and it’s difficult to sort out the similarities and differences between a robo-advisor vs. human, it’s understandable.

Let’s break it down, so that you can make the best choice between a robo-advisor, financial advisor or do-it-yourself investment management.

Robo-Advisor vs. Financial Planner vs. DIY Investing Checklist

Our lives are busy and we’re all attempting to squeeze the most value out of every second. And regardless of your age or life stage, you need to transfer some of today’s earnings to pay for things tomorrow.

Investing is an ideal strategy to grow your current earnings and allow that money to compound for tomorrow.

These checklists will get you started choosing whether to choose DIY investing vs. robo advisor vs. financial planner money management.

Decide: M1 Finance vs Betterment – Which Robo-Advisor is the Best for Me?

Robo-Adviser vs Financial Advisor v DIY investing

DIY invest if:

You understand the investment markets, properties and volatility.

You’re willing to learn about investing.

You grasp the types of available investments – stocks, bonds, mutual funds, exchange traded funds, REITS and more.

You’re secure choosing a target date fund for retirement and several index funds for intermediate term investing.

You have the time to pick and choose investments, monitor their performance and rebalance when necessary back to your preferred asset allocation.

You’re level-headed enough not to sell after a market drop and buy at the market peaks.

You want to try to beat the average market returns.

You’re a control freak and are hesitant to trust other with your hard earned cash.

If you want to DIY investing, with a bit of investment management guidance, you might like M1 Finance. It’s a combination DIY and robo-advisor investment platform.

Or you might allocate part of your investment dollars for DIY investing and consider robo-advisors vs. financial advisors for the rest.

Choose the best robo-advisor for you with the Robo-Advisor Selection Wizard.

Invest with a robo-advisor if:

You’re seeking a set it and forget it investment portfolio.

You want a diversified managed investment portfolio that includes international stocks and bonds.

You want to opportunity for investment management plus financial advisor access. Wealthsimple, Betterment, Personal Capital and many other robo-advisors offer this feature.

You want an investment portfolio that will match market returns. Many robo-advisors invest with the highly regarded passive index fund investment strategy.

You want specific active management investment strategies, for low overall management fees.

You want automatic investment portfolio rebalancing.

You’re seeking a free or low fee robo-advisor.

You want a robo-advisor for women‘s style and personality.

You want automatic tax-loss harvesting for your taxable account.

You’re seeking access to hedge fund investing and alternative investments, without the management hassle.

You want investment management help, but also the opportunity to invest in individual stocks with a robo-advisor.

You want a digital investment advisor that allows you to view all of your accounts on one dashboard.

You want a digital investment portfolio with access to impact or socially conscious investing.

Robo-advisors aren’t monolithic. The industry has evolved with digital investment managers differentiating themselves. The ‘robo-advisor’ label encompasses a multitude of investment styles and strategies, as well as fee structures.

Bonus: 2019 Best Robo-Advisor Performance

Invest with a financial advisor if:

You have a complicated financial situation.

You need tax, estate planning and business succession advice.

You enjoy the comfort of having someone to call to discuss your financial situation. (Although, many robo-advisors also offer financial advisor access)

You want someone to consult with about specific investment strategies.

You’re seeking guidance with more niche investing such as options trading or insurance strategies.

You want a fee for service or hourly pay model for your investment management.

You want a detailed and comprehensive financial plan.

You’re willing to pay a bit more for personalized service from an expert Certified Financial Planner.

Free: Financial Management Toolkit, Better Than Quicken

DIY vs. Robo-Advisor vs. Financial Advisor Wrap Up

Whether you fall into the DIY, robo-advisor or financial planner categories, there is some overlap. For example, several robo-advisors provide access to human financial advisors such as Personal Capital, Betterment, Vanguard, Ellevest, SigFig and TD Ameritrade. Betterment even allows all of its investors to text with a financial advisor.

Further blurring the lines between robo-advisors and financial advisors, many individual financial advisors are lowering their fees and offering both human contact and digital investment management.

The hybrid robo-advisor plus financial advisor is becoming more and more popular.

And, if you’re a DIY investor, M1 Finance (INSERT AFFILIATE LINK) allows you to set up your own portfolio with as many types of assets as you desire, and they will rebalance your investments for a low fee.

Read more: Robo-Advisor v Financial Advisor – Which is Best?

The lines are blurring between robo-advisors, DIY and human financial advisors. Human advisor fees are dropping. You can choose a robo advisor with zero management fees such as Schwab’s Intelligent Advisor, M1 Finance, and WiseBanyan or one with higher management fees for more sophisticated investment management services.  In fact, the hybrid robo-advisor model combining humans and automated investment management is becoming one of the most popular investment options.

My advice is to assess exactly what you’re seeking in investment management. If you prefer investing with a financial advisor, make sure to ask about fees and check credibility with broker check.

Although I manage our investment portfolio myself, we do have a few robo-advisor accounts as well. And, I must admit, it’s convenient to turn rebalancing and investment management over to a digital investment manager.

Disclosure: Please note that this article may contain affiliate links which means that – at zero cost to you – I might earn a commission if you sign up or buy through the affiliate link. That said, I never recommend anything I don’t believe is valuable.

Featured image credit: Photo by You X Ventures on Unsplash

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