Considerations before using a robo-adviser
- Human interaction: While some programs have investment professionals available to answer questions, others may just have technical support staff, leaving you to rely on other sources for investment questions.
- Limited information: Robo-advisers only know what you tell them and what they’ve been programmed to do with that information. This means they may be making financial decisions with limited information.
- Investment choices: Robo-advisers have different, and potentially limited, investment products depending on which platform you choose.
- Unique business model: Algorithmic decision-making and limited human interaction may increase your exposure to risk; this should be addressed through the company’s written policies and procedures.
- Regulation: There isn’t a separate registration process or exemption for robo-advisers, and Know-Your-Client (KYC) and suitability obligations of portfolio managers also apply to robo-advisers.