A millennial tests robo-advisors

We asked a 19-year-old to take some robo-advisors for a spin

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From the June 2016 issue of the magazine.

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We asked Madeleine Aston, 19, a student at Wilfrid Laurier University, to take a few robo-advisors for a run. Here’s what she found:

I looked into robo-advisors as a way to invest for someone young like myself who might only have $5,000. I went to the websites of five robo-advisors (in the table below) and tried each of their sign-up processes. I stopped short of opening an account.

What did I think? These services have lots to offer people who want the process of investing to be fast and easy. I liked how simple it was to get a diversified portfolio composed of ETFs that matches the level of risk I’m comfortable with. While some might prefer to be more involved in day-to-day investment decisions, I like the idea of turning it over to someone else.

Which robo-advisor is right for you? »

Robo-advisors let you do pretty much everything online through your computer or through an app on your smartphone. You can communicate with human advisors via chat, email or phone. While an older person may see this use of technology as innovative, it’s just the way someone my age does things. Face-to-face meetings filling out paper forms seems out of date to me.

If you’re interested in investing with a robo-advisor, it pays to check them out. Most have you complete a questionnaire about your risk preferences and show you a potential portfolio before you open an account, so you can see what you’d be getting. Also, the investment philosophies range from purely “passive” to fairly “active,” so you need to make sure you’re comfortable with the approach.

Fees tend to be complex, so look carefully, especially with small balances. Counting both robo-advisor fees and the fees built into ETFs, I found that total annual charge on a $5,000 account ranged from $12 to $347!

Overall I think robo-advisors are a great way to invest a small amount of money, and I’d seriously consider turning my $5,000 over to one.

Which robo-advisor is right for you?

2 comments on “A millennial tests robo-advisors

  1. As in the authors daughter? Full disclosure? I would believe that she may be more educated in the world of investing than your typical 19 year old.

    Reply

  2. Robo-advisors may offer a cookie cutter portfolio, be aware that a portfolio is only a subset of what a human financial advisor does for clients. I love technology and I am a big fan of apps. I use them regularly, including banking. If you are looking for pure transactional service and don’t really care about lifetime financial goals (short and long term), minimization of taxes, estate planning and protection of assets, try it. Before you do this, why don’t you invest one hour in yourself and talk to a financial advisor, preferably one who does not push proprietary products.

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