Home > Personal Finance > Banks Now Offering Low-Risk Automated Investing

Comments 0 Comments

By the end of 2017, the U.S. banking system had $17.4 trillion in assets and a net income of $164.8 billion.

As technology advances, banks are looking for innovative ways to keep up and stay relevant. Over the years, banks have been changing their product offerings. They are releasing new products that enable them to offer a better value proposition to customers.

Today’s innovations involve the use of technology to offer financial advice to its users.

What is a Robo-advisor?

A robo-advisor is a fully automated portfolio management service. Customers who use robo-advisors can access them online anytime. Several major banks like Chase and Wells Fargo offer these services to customers.

Companies use computer-generated algorithms to choose low-risk investments for customers. These algorithms also factor in time and risk tolerance. These robo-advisors are also a fraction of the cost of a human finance advisor.

What Are the Advantages of Robo-advisors?

Using robo-advisors can ultimately translate into more money for the average investor. This is due to the lower cost and other features like tax-loss harvesting and automated investment portfolio rebalancing.

Using a robo-advisor is a good choice if you would rather maintain a hands-off approach with investing. You also might not have the financial know-how required to build and maintain a successful portfolio. Or, you might not be able to afford a financial adviser. Robo-advisers tend to be cheaper, which allows you to invest more.

How Do They Work?

Once you open an account, you’ll fill out a questionnaire so the system can understand your risk tolerance and investment goals. Your asset allocation recommendation will then be calculated and presented to you. The robo-advisor builds you a portfolio of low-cost exchange-traded funds (ETFs). Robo-advisors don’t usually trade stocks.

After your account has been customized, the system automatically monitors and rebalances your portfolio. Some systems also give you access to a human professional if you need a review of a portfolio from time to time or if you simply need advice.

Multiple platforms are showing off their own robo-advisors. It’s important to do all the necessary research before making the decision to commit to one.

Benefits of Robo-Advisors

Choosing to put your investment in the hands of a robo-advisor offers a host of benefits:

It’s cheaper: this is one of the greatest advantages a robo-advisor has over a human financial advisor. A financial advisor usually charges a flat fee between $1,500-$2,000. Not only that, but they also usually charge 1%-2% of your assets as long as they’re managing your portfolio. Robo-advisors on the other hand only charge about .25%-.89% of the assets.

Convenience: Robo-advisors give you the opportunity to create an account and access it quickly online at any time. You won’t have to wait for an appointment with your finance expert.

Simplicity: by simply answering a few questions, robo-advisors can able to generate a robust investment portfolio that works for you. And if you want to change the direction your portfolio is headed, you can change your risk tolerance which alerts your robo-advisor to change your portfolio.

With all these benefits, it’s no surprise that several banks around the country are now offering these low-risk services to their customers. And although there are still some fears about robo-advisors, one thing is evident: This technology has the potential to revolutionize the finance industry completely and help consumers reach their financial goals.

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team