In a way, these computer algorithms do automatically what was once completed by individuals.  These Robo Advisors replace what was once handled in several ways:

1. Do-It-Yourself (DIY). In reality, DIY was often set and forget, and often a form of Benign Neglect.
2. Registered Investment Advisers (RIAs). These advisers usually get a fee of 1% or more on investment assets managed for constructing and maintaining a portfolio. These RIAs often offered a combination of investment advice and financial planning.
3. Brokers. Stock brokers and commission-based advisory firms did not charge a flat fee but rather charged clients based on the trades that they completed. Obviously, there was an incentive to do more trades to get more commissions.  Some of these brokers and commission-based advisery firms also offered some financial planning.

I believe that these programs offer good value and performance.  I have spent significant time researching these products, and I think that Schwab and Vanguard offer good potential for long-term investors.  Schwab has a $5,000 minimum starting level and they do not charge any fee for the assets that they manage.  Schwab does not offer financial planning with this service, but they say informallly that financial planning is being developed.  I think that Vanguard is worth exploring for individuals who currently have Vanguard accounts and want to keep things simple.  Vanguard is also beneficial because you work with a person instead of simply working online.  Vanguard requires at least $50,000 to get started, and they charge 0.3% of assets managed.  I have a preference for Schwab Intelligent Portfolios because they do not charge a fee, I believe that they offer a better risk/return profile, and more professional customer service.

These Robo services are great for millennials or for a stand-alone portfolio.  These funds are also good for those who want adviser diversification.These accounts are less beneficial for older investors where a transfer of assets into these robo products would cause significant increased taxes.

Finally, it must be stated that these robo services lack the personal human touch and judgment.  For many people, there is significant value to being able to talk to an experienced adviser during a sharp market decline.  As a result, the robo approach may not be appropriate for many individuals.  We believe that the robo business will continue to grow and we expect that there will be increased integration between these robo services and skilled financial practitioners.