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What is a robo-advisor and
why are so many women using them for their family finances?
A Q&A with Chris Costello, Chris
Costello, Co-Founder & CEO of blooom.
1.) What is a
robo-advisor?
A robo-advisor is an online investment service that
automates the recommendations and asset management on behalf of the
investor. It is typically low-cost, has
low account minimums, and attracts investors who are comfortable doing things
online.
2.) Why do you think
so many women are utilizing the same for their family finances?
It’s a matter of convenience and the ability to delegate. Women
can get overwhelmed with the responsibility they hold for themselves, their
career and their families. Robo-advisors give women the ability to delegate at
least some of their financial responsibility to a service that will provide
professional and consistent management. This frees them up to tackle the more pressing
day-to-day matters. Finally, as the
saying goes: women (much more so than men) are willing to “stop and ask for
directions.” In other words, women are much less likely to let their egos trump
what is best for their financial future!
3.) Typically, are
women the ones that are handling the family finances?
Women are more likely to handle the day-to-day family finances. Knowing what the routine household expenses are is essential to the financial health of the family. So with this knowledge, they generally share the responsibility of making the overall financial decisions. Moreover, a recent study shows that millennial women are taking increased responsibility as the overall financial decision-maker in their home.
Women are more likely to handle the day-to-day family finances. Knowing what the routine household expenses are is essential to the financial health of the family. So with this knowledge, they generally share the responsibility of making the overall financial decisions. Moreover, a recent study shows that millennial women are taking increased responsibility as the overall financial decision-maker in their home.
4.) What are some of
the benefits of a robo-advisor?
The biggest benefit is it provides access to a professional
portfolio management service to people who don’t have large enough accounts to
attract the help of a traditional face-to-face advisor or who don’t have the
time/desire to manage the account properly on their own.
And as explained above, it is a good match for people who
are comfortable utilizing online tools and delegating this responsibility to a
professional.
5.) What’s blooom and
how does it compare with other robo-advisors?
Blooom is an online Registered Investment Advisor built
exclusively for helping middle class Americans with their single largest
financial asset – their 401(k), 403(b), 457, or TSP. Other robo-advisors, such as Wealthfront and
Betterment, can only deal with IRA’s and taxable accounts.
Personal service is very important to blooom. Ironically, most robo-advisors don’t advise,
they merely manage. Blooom, on the other hand, not only manages its clients’
retirement portfolios, it has a certified financial planner available to advise
clients on their financial questions as well.
Blooom is a fiduciary service. This means it is required by
law to act in the best interest of its clients, not its own. Remarkably, not all advisors (robo or
otherwise) are held to this standard.
Blooom charges a flat fee for its service. Many robo and
traditional advisors still utilize the complicated basis point system of
charging. With blooom you pay a low
monthly fee. You also understand exactly how much you are being charged, which
is difficult to discern through the traditional basis point system.
6.) What is your fee
structure?
Blooom will analyze your 401k for free. To manage, if you
have greater than $20,000 in your 401k it charges $15/month. If you have less
than $20,000 in your 401k it charges $1/month. This expense can be paid via a
credit or debit card.
7.) What is the best
piece of advice you would offer a mother when it comes to their family
finances?
Have a financial plan.
Having a financial plan leads to greater confidence and lower debt,
which results in less stress. Fortunately,
with today’s technology there are convenient and reliable online tools to not
only help make short-and long-term plans, but to help people carry them out as
well. This allows them to take control
of their finances, rather than their finances controlling them.
Sources:
STRESS TEST: AMERICANS, ESPECIALLY WOMEN AND YOUNGER PEOPLE,STRESSED BY FINANCES CFP Board, April 13, 2015
WOMEN AND FINANCIAL POWER STUDY,
Ameriprise Financial, June 2014.
About blooom
Named "one of the best online tools for retirement planning" by the
Wall Street Journal, one of the “Top 10 Most Innovative Companies in Personal Finance” in 2015 by
Fast Company and “Best in Show” at the annual Finovate
conference, blooom is an online tool that assesses a consumer’s 401(k)
in about five minutes from start to finish—and provides ongoing
professional management for only $1/month for those with less
than $20,000 invested ($15/month for those with more than $20,000).
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