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Robo-Advisor VS Financial Advisor – M1 Finance and Betterment Against Real-Person Advisors

Human interaction is always better, right? Human financial advisors are often sought-after for expert knowledge on investment portfolios. In recent decades, technology has advanced enough to bring us robo-advisors, AI that functions on algorithms to give investment advice.

Which is better? This is the ultimate question.

Robo-Advisor is better for:
Human Advisor is better for:
Automating investment strategies
Brings the human element
Low cost
Getting questions answered
Hands-off investors
Hands-on investors
Profile optimization without error
More personalization

We’re going to compare good ol’ human advisors from reliable financial institutions such as banks with robo-advisors from Betterment and M1 Finance. Yes, that’s right. Two companies that we have previously pit against each other are now partnering up and battling it out with humans.

Betterment and M1 Finance Robo-Advisor VS Broker – Determining Factors 

The winner of the robo-advisor VS human advisor competition is subjective as everyone is looking for something different. Some may prefer the simplicity of a robo-advisor and its automation, while others need a more human touch. So, what are the determining factors?

Factor 1: Fees

Let’s start with the fees because they are what a lot of people are concerned about. Whether or not someone can get their money’s worth from a costly human advisor is undetermined, because it largely depends on the person you pick. Sometimes there’s just no chemistry, proper communication, or a mutual understanding, and that’s okay. Just move on to someone else, or you can try your hand at a robo-advisor, which is typically much less expensive and maybe even free of charge with the platform you select.

A financial advisor, depending on experience could command up from a couple up to a few hundred dollars an hour. Those are some insane prices! Betterment charges $0 to start an account with them and the annual fee for investment accounts is just 0.25%. As for the interest on your cash balance, it’s about 0.10%, which is not too bad.

The Betterment robo-advisor also gives you the option to set up a goal-based account, which can help you somewhat tailor your portfolio to mirror your goals and risk tolerance.

As for M1 Finance, there are also fewer fees, helpful tools, and strategies. The account minimum for M1 Finance is only $100, and you get account insurance, and your investment transactions are commission-free! However, there is a $125 annual fee for M1 Plus and fees on some services such as mutual fund sales. 

Factor 2: Investment Strategies and Features

What can a human advisor do for you in terms of investment strategies? Almost anything! Yes, humans can sympathize with your financial hardships, which is definitely a pro. However, robo-advisors from M1 Finance and Betterment are excellent for everyday people who want to take a more hands-off and passive investment approach.

M1 Finance has automated portfolio investing as does Betterment, which really lessens the number of headaches you get from doing research. That’s not to say you shouldn’t do your own due diligence, but having robo-advisors help you out is definitely a plus.

What we really like about the robo-advisors from Betterment and M1 Finance is the tax loss harvesting feature. This feature is used to balance your tax loss with profits in other areas. Robo-advisors can do this quickly and automatically, which is more than we can say for human brokers.

With M1 Finance and Betterment robo-advisors, you can still design your own portfolios as you can with human advisors, but you won’t have to rely on banks and providers to do so. 

Factor 3: Support and Assistance 

Human advisors are more useful when you have a ton of questions, or if you have special circumstances that arise that need immediate adjustments done to your profile. However, can you be sure that another human always has your best interest in mind, or is everyone just trying to look out for themselves?

What you can reply on is AI robo-advisors are not out to get you and they provide unbiased options, advice, and suggestions to help you. Maybe they won’t be able to conduct or understand complex requests, but they are always accessible.

You may think that the algorithms and equations the AI advisors use to calculate can be done by humans as well. While you’re right, humans have a much higher margin of error than robo-advisors like the ones from M1 Finance and Betterment. Not to mention, they’re also faster.

If you are really looking for a set-it-and-forget-it option, there is no better resource than robo-advisors in our opinion. This type of investment strategy is also highly suitable for many beginners, which is another reason why AI advisors are so popular.   

Final Takeaway 

The winner by a longshot would be robo-advisors. Fortunately (or unfortunately, depending on how you look at it), you may not have to pick between the two. Many human advisors now also enlist the help of AI to do provide their services for speed and more accurate execution. 

This only makes us think why we need to spend hundreds of dollars if we can get close to the same services by opting for robo-advisors? Click into M1 Finance or Betterment to find out how you can start saving more money.

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