There is a lot of information and opinions on the concept of so-called Robo-Advisors. So what exactly as we talking about when we use the term “Robo-Advisor”? While the term is becoming a catch-all phrase for all  technology enhanced investment advice it typically breaks out into four distinct categories – direct channel advice providers, online investment management firms, technology enablers, and traditional RIAs powered by the web.

What started out as a pure technology play is now evolving or should I say morphing into another value-add feature for financial planners and RIAs. In other words the Robo-Advisor can be standalone or part of a comprehensive financial planning relationship.

So far, about $19 billion dollars have flowed into these Robo-Advisors such as Betterment, Wealthfront, Personal Capital and Motif Investing. While that figure seems impressive, consider the $33 trillion of investable assets in the US today. While the original intent may have been to tap into the tech savvy Gen Xers the concept is now viewed as a way to tap into the Mass Affluent. We are also learning that it isn’t only the youngsters who are attracted to a tech based investing platform.

Their Moms and Dads are also interested in a technology based platform. When LPL Financial launched its NestWise financial planning service in 2012 it was looking to capture the underserved Middle Class market which is traditionally shunned by most large investment companies as they are perceived to not have much money to invest. Although the project was shut down in less than a year after launching for reasons largely still unknown, one takeaway from the experiment was that Baby Boomers made up a large part of the clients taking advantage of many of the automated features.

What impact will the Robo-Advisor technology have on the financial planning industry and how can you use that information to decide if it’s right for you? Well, there are three ways the technology is impacting our industry. Putting it simply:

1. Robo-advisors may actually be drawing out more consumers who are interested in getting financial advice. This increased awareness is making the “pie” bigger in a sense. So it is expanding the playing field and forcing financial planning firms to “up their game” and improve their service.
2. The Robo technology is providing a tool for advisors to incorporate into their practices to help invest client funds. Kind of a best of both worlds approach.
3. It is taking away the excuse that the so-called small investor is too expensive to serve. These new platforms can accommodate investors of all sizes at a competitive cost, as low as .20%. The Mass Market now can get advice alongside the Mass Affluent. It’s a leveling of the playing field.

So back to the question of, “Is it right for me”. If you are a relationship oriented person, in other words, you want the human interaction then I recommend that you seek out a CERTIFIED FINANCIAL PLANNER™ with whom you can build a solid working relationship. If you are tech savvy and still want the personal relationship then one of the hybrid models should work for you – where you get the personal service with the tech tools added on. If you are a complete do-it-yourselfer then a pure Robo-Advisor may be just right for you. Need more information? For a more in-depth look at the Robo-Advisor phenomenon, click here.

Time Out! Does the idea of Robo-Advisor technology appeal to you? Why or why not? You can leave a comment here.