12 Reasons to Hire a Robo Advisor.

Bill Parrott |

The Robo Advisor market is booming with billions of dollars invested in these programs.  According to Cerulli Associates the assets managed by Robo Advisors will rise to $489 billion by the year 2020.[1]   That’s a lot of binary digits!  I’m all for new technology and can’t image life without my remote, microwave or iPhone.   I’m also a fan of robo-advisors.  

How do you know if you’re ready for a robo advisor?   Here are twelve signs you’re ready to commit your capital to a robo.

1.       Your financial plan is complete.   Your finished financial plan is giving you a clear path to your financial future and has helped you establish your asset allocation, savings goals and asset targets.   Your completed financial plan is delivering you peace and comfort.

2.       Your estate plan is complete.  Your family will or trust is up date and all your children are listed -by name.   Your estate plan identifies your healthcare directives and recognizes your end of life wishes.   Your family also knows where you keep your estate planning documents.

3.       If you’re retired, you have an income distribution policy.  Your income distribution plan lets you know how much you can extract from your accounts each year so you never run out of money.

4.       Your charitable and philanthropic plan is in force.   Your giving goals are well documented.

5.       You are maxing out your annual 401(k) or company retirement plan contributions.   A person under the age of 50 can contribute $18,000 per year while an individual over the age of 50 is allowed to add another $6,000 for a total of $24,000.

6.       The beneficiaries on your retirement accounts and life insurance policies are current.

7.       Your cash management is secure and you have six months or more of household expenses in a checking, savings or money market fund.   If your monthly household expenses are $10,000, your emergency fund should be worth $60,000.

8.       Your debt and liabilities are under control.   The suggested debt payments for your household should be less than 36% of your gross income.    If your monthly gross income is $10,000, then your total debt payments should be less than $3,600.

9.       If you have children, your education plans are completely funded.    The annual cost for a private university is $47,381 while a public university is $24,061.

10.   You own an adequate amount of life insurance.   Your life insurance coverage will benefit your beneficiaries by paying off all of your debt obligations, paying for your children’s college education and fund your family’s lifestyle for the rest of their lives.    

11.   You’re familiar with the efficient market hypothesis and modern portfolio theory.  You’re a stout believer in the long term appreciation of stocks and you don’t panic over the market’s gyrations.

12.   You don’t need any guidance with your investments or planning and have no desire to talk to a human being.

If you’re able to check the boxes on these categories, then you’re ready to move forward with a robo. 

This mission is too important for me to allow you to jeopardize it. ~ HAL

Bill Parrott is the President and CEO of Parrott Wealth Management, LLC.  www.parrotwealth.com

September 22, 2016




[1] http://www.cnbc.com/2016/07/25/robo-advisors-may-have-too-much-control-o..., By Tom Anderson, July 26, 2016, site accessed 9/22/2016.