Millions of Americans need retirement advice. The ones who already have considerable assets, and are heading for a secure retirement, can usually find and pay for it. However, those just starting out, with little or no assets, the ones who desperately need to get started now, often can’t find help.

It is a paradox as striking as the people I see and don’t see jogging in the park. Why is it the joggers almost always look in great shape and probably don’t need to be jogging while the people who should be taking exercise are usually back home in front of the tube working on their third corn dog and emptying an extra large Colt45?

Back to the financially flabbies who want to take up exercise but can’t find someone who will help them.


They don’t have assets or can only save small amounts. That discourages many advisors from taking them on as new clients. But what about those who need help? How will they start to accumulate assets if no one is helping them?

A New Part of the Advisory World

Robo investment services, some say, are their best chance to obtain advisory services that are now unreachable for many.

It’s because the traditional advisor usually charges 1.25 percent or more on an account. He or she often has a minimum account requirement beyond the means of many starting out. How can they build up assets if they don’t have the advisors to help them get started or if the fees charged are too much for them?

The advisory industry, says Adam Nash, CEO of Wealthfront, has a “perverse habit” of giving the best prices to people who don’t need them and the highest prices to those who need their services.

Thus, the recent emergence of the robo advisor. Wealthfront, which is one such advisor, is an automated advisory service offered for a fraction of the fee that human advisors get. Robos usually charge about 0.25 percent.

“We are trying to help those people who need retirement help who can’t afford a traditional adviser,” says Jon Stein, founder of Betterment, another independent advisory firm also offering robo services.

Stein charges a 0.25 percent fee on assets, which goes down to 0.15 percent if a client accumulates $100,000 or more. But Stein, who believes the advisory industry overlooks many people needing help, says even those without assets but making the commitment to save can open a Betterment account.

A problem of funding retirement, advisers say, is starting too late. Clients end up with inadequate final balances. (Mein Gott! I know a number of fellow Baby Boomers without any private saving!). So some never get started because advisory services are often too pricey. However, delaying a retirement saving program can be devastating.

Stein contrasts robos with the “average fiduciary adviser who is charging $10,000 a year in fees.” His 0.25 percent fee or lower, Stein adds, over the long term can result in a retirement nest egg that is one third bigger than the person who paid 1.25 percent over many years.


Robos sets up a diversified portfolio of ETFs and other low-cost funds. Nash says his firm requires a $500 minimum to open—contrasted, he notes, with hundreds of thousands of dollars for many traditional advisors—and charges a zero fee until an account reaches $10,000. Stein emphasizes that, since there are no minimums at Betterment, someone can start saving with him immediately.

Critics Say You Get What You Pay For

Still, many traditional advisors, such as Ric Edelman, who has his own firm and is a syndicated radio talk show host, question the value of robo services.

“If you give robo advisors money, they will invest it for you – that’s it,” Edelman says. They will not, he warns, provide retirement planning or financial planning services.

“You cannot ask them questions about employee benefits, Social Security, wills & trusts, credit and debt, mortgages and home ownership, or anything related to helping you determine how much income you need, and how to generate it from your various sources,” Edelman contends.

Nevertheless, Stein says that his firm also offers tax advice along with investments. He argues the industry now serves the well-heeled, but fails others: “The idea of having someone to call who will do anything for you is pretty appealing. If you have a lot of money, you are going to want that. But people with less than $10 million cannot afford that can kind of service.”

Betterment is filling a gap, he says. Last year accounts went from 50,000 to 130,000. Assets under management rose from $1 billion to $3.3 billion.

Yes, but Will the New Model Survive?

Still, that doesn’t mean the robos are here to stay or will become the dominant model in the advisory industry. Indeed, a number of these untraditional firms have recently died. And Evan Simonoff, the editor of Financial Services Magazine, says Betterment is one of the few untraditional advisory firms that is still around. He believes the future of robos is clouded. Since charges are low, firms often don’t generate enough in fees.

“I doubt he (Stein) is making money,” Simonoff says.

Edelman agrees.

“None has demonstrated a sustainable business model based on their current fee schedule. So you must ask yourself what will happen to your account when your robo advisor goes out of business.”

An Alternate View

Charles Hughes, a traditional adviser in Bayshore, New York and one of the founders of the modern advisory industry, agrees that robos can’t do all the things that traditional advisors do. Still, he says “as a first step,” these non-traditional advisors could be useful.

“They can help people save and invest on a regular basis and accumulate their first significant assets,” Hughes says. Hughes, a man widely respected in the advisory industry for his ethical standards and considerable knowledge, emphasizes that getting started is critically important for millions of Americans who are falling behind in their retirement goals. The sooner they start, the better, Hughes notes.


The answer comes in what I believe is the most important reason why wealth is accumulated over the long term. This is an issue that has discussed many times.

How Is Wealth Built?

Is it getting a good rate of returns without taking ridiculous risks?

Yes, this is important, but not the most important.

Is it ensuring that your investment costs are the lowest they can be; that you don’t waste precious dollars that could be used toward more saving and investing?

Yes, again this is important but not the most important.

The paramount reason why some people build up significant amounts and achieve their life dreams while others don’t can be summed up in one word: Compounding.

The sooner one starts saving and investing on a regular, the longer the compounding continues, the greater one’s final balance. Get started early. And, for many, the robo adviser will get them started early.


Gregory Bresiger
Gregory Bresiger

Gregory Bresiger is an independent financial journalist from Queens, New York. His articles have appeared in publications such as Financial Planner Magazine and The New York Post.