Compare traditional wealth management platforms like Merrill Lynch vs. robo-advisors such as Betterment and Wealthfront. Learn which investment platform is best for your financial goals and wealth management style. Also, discover what it takes to choosing the right wealth management platform.
As the financial ecosystem continues to evolve, it becomes even more critical today to select the right wealth management platform. For quite some time, Robo-advisors have offered an alternative to the classical approach of wealth management. This has always been a sought after aspect in the process of financial planning. In this article, we will examine the main points that separate the two methods: traditional wealth management vs. robo-advisors. We will help you choose the right method of planning for your future.
Understanding Traditional Wealth Management
Regular financial wealth management is all about the personal human advisors who provide tailored one on one financial planning. Clients work with advisors in order to develop comprehensive plans. Plans that encompass all of their financial needs, aspirations and risk appetite.
Personalized Approach and Human Touch
Perhaps the most striking advantage of traditional wealth management services is that they are very personal in nature. It is common for the advisor-client relationship to extend beyond mere investment management. Clients can be assisted with estate and tax planning, retirement provisions, and even acquiring investments. These advisory services are most crucial when the markets are volatile, and all other entities are likely to panic. Also, continue reading the article to find out best investment platforms for wealth management and know which is better, traditional wealth management vs. robo-advisors.
Investment Flexibility and Active Management
Human advisors generally offer a wide array of investment vehicles. These includes stocks and bonds to more complex alternatives like real estate or hedge funds. While robo-advisors follow a passive approach using algorithms based on a given strategy, traditional advisors can utilize active management with the intent of beating the market through making strategic investments. Also, discover what it takes to choosing the right wealth management platform by reading this article.
Cost and Accessibility
However, the traditional wealth management services are quite expensive. A number of advisors place their service fee at between 1% and 2% of the assets under management (AUM) and may also charge fees for other special services. This means that traditional wealth management is not favorable for people with smaller portfolios as most companies have large minimum balances requirements.
Understanding Robo-Advisors
On the other hand, robo-advisors have appeared as an alternative as well as technology-sustained way to replace the traditional financial advisors. These platforms implement investment strategies by means of powerful algorithms. They also do the difficult work for you which substantially simplifies, speeds up and lessens the cost of the process.
Automation and Algorithm-Driven Management
The main principle that is under the usage of robo-advisors is that of technology. Clients usually fill an online form with information about the financial objectives they wish to achieve. They also state how long one may be willing to wait to achieve those goals. Then, the platform creates a well diversified portfolio based on low-cost ETFs (Exchange Traded Funds) and mutual funds. The portfolios created are usually rebalanced automatically. Also, the tax-loss harvesting is extended by a good number of robo-advisors to enhance performance. Need help choosing the right wealth management platform? Read this article.
Cost-Effectiveness
The costs involved in using robo-advisors is one of the advantages of most marketing strategies. Most Robo-advisors will charge the client within a low range of 0.25 and 0.50% of the AUM. This is much less than traditional advisors. Additionally, many platforms have low or no minimum account requirements. Thus, making them accessible to a broader audience, including young investors or those with smaller portfolios
Limited Human Interaction
The limitation of robo-advisors is that there is no face-to-face consultation with a human being. Although some of the applications are capable of implementing a hybrid model with the touch of a button, the situation is more often than not fully automated. This maybe a disadvantage to those that want the assistance of advisors. Most especially, for complicated financial matters, or during crucial transitions in life such as a retirement or a divorce. Furthermore, read this article to know the best investment platforms for wealth management between Merrill Lynch vs. Betterment and Wealthfront.
Traditional Wealth Management vs. Robo-advisors: Which One Is Right for You?
If one is faced with a decision of whether to stick to the traditional method or opt for the newer robo-advisors, the mode of one’s finances likely will decide the choice. Let’s dissect the important things to think about.
Cost and Investment Size
If you prefer having lesser charges and also do not need a lot of human engagement with your investment management, robo-advisors come in handy. Implementation and management of investments at a low to medium cost is what they offer. Also, this is great for people with less funds to invest or have little knowledge in investing. However, if you possess a more aggressive investment style or have other complex needs, a traditional financial advisor may justify the additional cost.
Level of Personalization
Traditional advisors excel in providing highly tailored advice. They can adapt your financial plan as your life changes, whether it’s getting married, having children, or navigating a complex tax scenario. While robo-advisors allow for some degree of post-investment adjustment, most adhere to standard investment strategies Templates. If your financial situation is straightforward and you prefer a hands-off approach, robo-advisors may be all you need. Also, if you need help in choosing the right wealth management platform, read this article.
Complexity of Financial Needs
With regard to more complicated finances, the assistance of an advisor becomes extremely important. Because such people have the ability to provide comprehensive and thorough individualized assessment on areas relating factors in your financial life. This may include the total amount taken up on financial services costs and how much is likely to be saved in the course of time. However, this does not negate the fact that where the investment objectives are simple and the only need is for investment exposure, then robo-advisors have very cheap and effective means of service provision.
Emotional Support and Market Volatility
In times of stock market turbulence, a human advisor can give you all the comfort you need. Hence, assuring you that market moves are temporary, and therefore there is no need to panic. Robo-advisors on the other hand lack this human aspect. Although the robo-advisors have some human input in decision-making, they can never substitute the human assistants in times when the market is down. Furthermore, care to know the best investment platforms for wealth management between Merrill Lynch vs. Betterment and Wealthfront, read this article.
Best Investment Platforms for Wealth Management
The decision to select a certain platform for management of wealth should consider the fees, services, and how the platform is suitable to one’s personal needs. In the current financial market, there are several top traditional and automated platforms that clearly rise above the rest. Furthermore, continue reading this article if you need help in choosing the right wealth management platform.
Merrill Lynch
As one of the leading global private banks that belong to the Bank of America corps, Merrill Lynch specializes in private wealth management services. It provides total financial service, management of your funds and professional help when needed. This is recommended for any investor who wants to receive an individualized service. The platform targets the rich people but however, it has more fees and illustration minimums. Explore Merrill Lynch
Betterment
Of all the leading platforms for investing these days, Betterment is one of the best in offering low cost investing management that is automated. They are perfect for passive investors who are after investment strategies whereby they target objectives, regularly corrective portfolios and seek to minimize losses for taxes. There is also a hybrid version of this where Betterment provides normal human advisors for people who need help from time to time. Explore Betterment
Wealthfront
Wealthfront is another leading robo-advisor, praised for its advanced tax optimization features and user-friendly interface. It includes financial planning tools, automatic rebalancing, and various other features helping create a comprehensive services. Also, affordable intervals for novice and mid-level investors. Through well diversified portfolios, Wealthfront aims at growing the invested funds over a long term. Explore Wealthfront
Vanguard Personal Advisor Services
Vanguard combines some classical financial consultation with the features of robo-advisors. With the presence of human advisors as well as lower fees, this platform is suitable for investors seeking standalone automated platforms with some human interaction. Vanguard has a firm profile for its indexed mutual funds and exchange-traded funds. Explore Vanguard Personal Advisor Services . Continue reading this article if you nee help in choosing the right wealth management platform.
Charles Schwab Intelligent Portfolios
Charles Schwab ‘s Intelligent Portfolios automated tax managed account service provides a well needed gap filled by the Schwab firm. There are no management fees attached to the service. It also sells its premium service which includes human advisors. Schwab’s investment process centers around policy based investing and is based on a balanced fund style. Explore Charles Schwab
These platforms also in fact offer a variety of services that meet different types of investing and financial objectives. Whether you would like human advisers or managers, or whether you would prefer management by a machine alone, there is a service for every category of investor. Look through all of the platforms and find one that suits the needs of your professional portfolio management. Additionally, learn the best investment platforms for wealth management between Merrill Lynch vs. Betterment and Wealthfront, by reading this article.
Merrill Lynch vs. Betterment and Wealthfront
When investing in a platform, it is also important to know which provider is best. Here we will try the comparison of two players in the market built in two different ways: Merrill Lynch representing classical wealth management and robo-advisors Betterment and Wealthfront.
Merrill Lynch: Traditional Wealth Management
Merrill Lynch is capable of providing services extending from investment relations to proper estate planning. Being a subsidiary of Bank of America, it is easy for the firm as it provides professional advice through a lot of advisors. They can help you build a diversified portfolio and navigate complex financial decisions. However, this comes with higher fees and account minimums compared to robo-advisors
Betterment and Wealthfront: Leading Robo-Advisors
Betterment and Wealthfront are two of the most advanced and popular robo-advisors in the industry. This is so, when you consider how easy to use the platforms are and at their inexpensive costs. For such a fee, Betterment includes many useful services in its simple investment management approach. This includes the automatic rebalancing, plans directed toward specific goals as well as the help from professionals if needed. Wealthfront also offers portfolio management on a click of a button. However, it also has some nice features for optimizing tax and engages its clients in financial planning.
A Hybrid Approach: Combining Both Methods
Consequently, there is a need for some firms to develop a hybrid model that consists of both automation and human interaction. Such types of platforms offer the ”hands-off” inexpensive robo-advisors along with human advisors to reach out at any point of time, if needed. Such kind of model is suitable for clients who wish to enjoy all the advantages and efficiency of robo-advisors with only negligible expenses. However, they also feel the need to communicate with the human adviser at least from time to time.
Conclusion
The difference between classic wealth management and robo-advisors is most often depends on preference. It also depends on your financial situation, and long-term goals. If customization and human interaction are important, then traditional advisors will likely be the best suited for you. However, if cost-efficiency, automation, and simplicity appeal to you, then a robo-advisor may be your best bet.
Regardless which way you choose to go, the bottom line is that whatever strategies you are applying in managing your wealth is suitable for your financial objectives and risk/reward profile. In particular, a hybrid platform, which provides the advantages of both approaches, may be the best option if you are in doubt.
See also: https://www.plancorp.com/blog/robo-advisors-vs-traditional-wealth-managers