Alvaro Gonzalez | Moment | Getty Images<\/p>\n
In some cases, an investor can simply rely on a robo-advisor<\/a> to manage their portfolios. But some instances may require a human financial advisor to take the lead, experts say.<\/p>\n A robo-advisor is an automated digital program that creates and manages your portfolio based on your investment preferences and risk tolerance, according <\/a>to Investor.gov<\/a>.\u00a0<\/p>\n Such programs typically come at a lower cost than traditional financial advisor services. In 2024, the median robo-advisor fee was 0.25% of assets per year, according <\/a>to a recent Morningstar report. Human advisors typically charge around four times that amount, or 1% of assets under management.<\/p>\n More from Financial Advisor Playbook:<\/p>\n Here’s a look at other stories affecting the financial advisor business.<\/p>\n However, a robo-advisor is “not going to look at your entire picture,” said Melissa Caro, a New York-based certified financial planner and founder of My Retirement Network, a financial literacy platform.<\/p>\n Here’s how to understand if you can stick to a robo-advisor, if you need a human financial advisor, or if you can have a combination of both.<\/p>\n A robo-advisor helps during the ‘accumulation phase’<\/p>\n A robo advisor can be suitable for someone who’s still in the so-called “accumulation phase” \u2014 when they are starting out and building wealth by saving and investing, and don’t need more intricate services like tax planning, said Caro.<\/p>\n “Things aren’t complicated in your life yet,” she said.\u00a0<\/p>\n What’s more, most robo-advisor platforms require low minimum investment balances.<\/p>\n According to the Morningstar report, a quarter of the robo-advisor platforms reviewed have an account minimum of $50 or less for the most basic services. Nearly every other provider has a minimum of $5,000 or less.<\/p>\n Meanwhile, some financial advisors require higher minimum investment balances. Some might require $25,000 while others can be as much as $500,000, $1 million or more, according<\/a> to SmartAsset.<\/p>\n Still, such investment thresholds can be beneficial for both advisor and consumer, said Caro. For consumers, it helps you discern when a traditional advisor’s services may make sense.<\/p>\n For example, if you’re someone who has their emergency fund set up and has an additional $10,000 to invest, using a robo-advisor platform can be a “great way to just start to familiarize yourself” with investing and how compounding works, she said.\u00a0<\/p>\n “You don’t need to nor should you be paying a percentage of assets under management fee for your $10,000,” she said.<\/p>\n