How to Pick a Robo Advisor
With the growing popularity of robo advisors, investors have more options than ever when it comes to automated investment platforms. But not all robo advisors are created equal. Choosing the right one involves careful consideration of your financial goals, investment preferences, and the specific features offered by each platform. Here's a guide to help you navigate the selection process.
Assess Your Financial Goals and Needs
Before selecting a robo advisor, it's essential to have a clear understanding of your financial objectives. Are you saving for retirement, planning for a major purchase, or building an emergency fund? Your goals will influence the type of investment strategy that suits you best. Consider your investment horizon, risk tolerance, and any specific requirements you might have.
Evaluate Investment Strategies and Portfolio Options
Different robo advisors employ various investment philosophies. Some focus on passive investing with a diversified portfolio of index funds, while others offer more active management or thematic investing options like socially responsible investing (SRI). Review each platform's approach to asset allocation to ensure it aligns with your investment preferences.
Compare Fees and Minimum Investment Requirements
Fees can significantly impact your investment returns over time. Robo advisors typically charge lower fees than traditional advisors, but these fees can vary among platforms. Common fees include management fees and expense ratios of the underlying funds. Also, check the minimum investment required to open an account, as some platforms may have higher thresholds.
Consider Account Types and Additional Services
Ensure the robo advisor supports the type of account you need, such as individual taxable accounts, IRAs, or joint accounts. Some platforms offer additional services like tax-loss harvesting, automatic rebalancing, or access to human advisors for personalized advice. Determine which features are important to you and whether the platform provides them.
Examine the Platform's Technology and User Experience
A user-friendly interface can make managing your investments more convenient. Explore the platform's website and mobile app to assess ease of use, availability of educational resources, and overall functionality. A well-designed platform can enhance your investment experience.
Review Security Measures and Regulatory Compliance
Your chosen robo advisor should prioritize the security of your personal and financial information. Look for platforms that use encryption, two-factor authentication, and other robust security protocols. Additionally, verify that the robo advisor is registered with regulatory bodies like the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA).
Check Customer Support and Accessibility
Even with automated services, having access to customer support is crucial. Assess the availability of support channels such as phone, email, or live chat. Good customer service can provide peace of mind and assist with any issues that may arise.
Read Reviews and Seek Recommendations
Research what other users and financial experts say about the robo advisor. Reviews can provide insights into the platform's performance, reliability, and customer satisfaction. Recommendations from trusted sources can help you make a more informed decision.
Test the Platform with a Small Investment
If you're still uncertain, consider starting with a small investment to test the platform's features and services. This approach allows you to experience the robo advisor firsthand without committing a significant portion of your assets.
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Disclosures
In previous reports, the initial target asset allocation was calculated as the asset allocation at the end of the first month after the account was opened. In the Q3 2018 report, we adjusted our method to calculate the initial target asset allocation as of the end of the trading day after all initial trades were placed in the accounts. This adjustment has caused some portfolio’s initial target allocation to be updated from previous reports. These updates did not change any initial target allocations of equity, fixed income, cash, or other by more than 1%.
Prior to Q3 2018, due to technological limitations of our portfolio management system, some accounts which contained fractional shares had misstated the quantity of shares when transactions quantities were smaller than 1/1000th of a share in a position as a result of purchases, sales, or dividend reinvestments. This had a marginal effect on the historical performance of the accounts. The rounding of position quantities caused by this limitation has been resolved, and quantities have been adjusted to reflect the full position to the 1/1,000,000th of a share as of the end of Q3 2018. Therefore, this rounding of fractional shares will not be necessary in the future.
At certain custodians, a combination of the custodian providing us a limited number of digits on fractional share and fractional cent transactions rounding errors are introduced into our tracking. At quarter-end starting 3/31/2020, we implemented a process to enter small transactions to eliminate any rounding errors that have built up to more than a full cent. These transactions are small and do not have an appreciable effect on performance. Sharpe ratios and Standard Deviation calculations are calculated with the assumption of 252 trading days in a year.
This report represents Condor Capital Wealth Management’s research, analysis and opinion only; the period tested was short in duration and may not provide a meaningful analysis; and, there can be no assurance that the performance trend demonstrated by Robos vs indices during the short period will continue. A copy of Condor’s Disclosure Brochure is available at www.condorcapital.com. Condor Capital holds a position in Schwab in one of the strategies used in many of their discretionary accounts. As of 9/30/2024, the total size of the position was 63,086 shares of Schwab common stock. As of 9/30/2024, accounts discretionarily managed by Condor Capital Management held bonds issued by the following companies: Morgan Stanley, Bank of America, Wells Fargo, E*Trade, Citi Group, Citizens Financial Group, Ally Financial, Charles Schwab, Fidelity, and TD Bank
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