Until recently, using a financial advisor meant picking up the phone or going to a local office. Now, you have another option: Using a robo-advisor.

Before hiring, though, you’ll need to answer the following: Are you a good candidate for its benefits? When would a human financial advisor be a better option?

The good, the bad, and the not so ugly

Robo-advising uses computer algorithms and artificial intelligence to provide financial advice and investment management services.

There is minimal human interaction, which makes robo-advising perfect for introverted investors.

The automated system offers many traditional financial services, including portfolio rebalancing, asset allocation, automated deposits, goal-based investing, and specialty investment tracking and reporting.

Some sites are 100 percent automated, while others are human-assisted (although that might mean higher fees).

One of the biggest pros to robo-advising is that it’s relatively affordable. Some have annual fees, and others charge monthly. In either case, however, the fees are less than what you’d pay a human broker.

The number of robo-advising sites is growing. Nerdwallet has a list of the current leaders in robo-investing.

Before choosing a specific site, make sure you check out tax-loss harvesting and investment fund fees. You’ll want to know of any additional costs you might incur as a result of your investments (robo-advised or not).

Then, compare the performance of your top robo-advising choices to major market benchmarks, such as the S&P 500. You want the best fit for your money.

How does robo-advising work?

Just as a human advisor would, robo-advising sites start by asking for your financial information.

You’ll take a survey or fill out a questionnaire that combines your self-assessed risk tolerance with your age and your goals before assigning you a risk level.

Then, you deposit whatever money you want, and the robo-advisor uses algorithms to invest your funds in an efficient, optimized collection of investments that matches your risk level and automatically manages it.

Who is a good candidate for robo-advising?

Those who prefer not to deal with a human advisor, and young people who lack investment experience and have a simple portfolio are good candidates for robo-advising.

If you’re interested but not certain yet if it’s right for you, answer these questions:

1)  What is your risk tolerance?

Robo-advising offers low-risk clients a chance to sigh in relief as an algorithm does the work of buying, selling, and rebalancing your portfolio for optimum results. It’s as hands-off as you want it to be.

2)  Do you have money invested elsewhere, and do you want to keep it there?

A lot of investment sites have robo-advising portals already. Otherwise, think about whether you want your monies divided. A lot of people want to keep their money in one place because they feel better able to manage it.

3)  Do you want to be able to talk to a human?

The truth is some people prefer talking to a human about financial situations that are more complicated, like estate planning or taking care of aging parents.

Who is a good candidate for traditional financial advising?

Many robo-advising sites offer the opportunity to talk to a person as a low-cost add-on.

If you prefer ongoing advising, however, you might want to find and build a relationship with a traditional financial advisor. They are worth the money when you find a good one.

The bottom line

Robo-advising is a viable option as long as you’re smart about your goals and objectives and maintain reasonable expectations.

Your path to financial freedom starts here.

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