Ric Edelman once said that there are three key things you must have to be a good do-it-yourself investor: time, desire and knowledge. 

Maybe that was a good option a decade ago. But today, time, desire and knowledge are not sufficient to rival some of the best options for managing portfolios. Technology now offers a better option than a flesh-and-blood human constantly monitoring positions. It’s typically faster, more robust, less emotional, less likely to be biased and can work across thousands of accounts concurrently. And it can help you serve many more clients than you ever could alone.

There are certain services an advisor offers their clients — things like estate planning, insurance selection, and goal prioritization — that can’t always be done with technology alone.

But when it comes to working around the clock to systematically execute a financial plan at an efficient cost for a multitude of clients, the standalone human can’t cut it. Only by integrating with technology, like an automated investing service, can advisors give their clients a better chance of success. (Disclosure: Betterment offers Betterment Institutional for advisors).


An automated investing service uses algorithms — a set of logical rules followed in computer calculations — to recommend and manage portfolios and savings amounts and accounts based on clients’ circumstances. It then automatically manages those portfolios (everything from rebalancing and reinvesting dividends to updating allocation advice) to help keep investment plans on track. 

These algorithms are always on, solving complex mathematical or logical problems that, for example, can quickly identify opportunities in real time, such as a tax arbitrage trades, which may reduce a client’s tax liability. They can also focus on minutiae, which might not be efficient for you to spend time on, but which are virtually effortless for algorithms to provide. 

Algorithms can also make investment advice available to investors at any time, anywhere they have Internet access. For example, if your client wants advice at midnight on a Sunday or April 14 about which type of IRA he should invest in, it’s available for him to review.

This is not to say that automated investing services or advisor technology solutions are devoid of human input. The algorithms are designed by professionals such as yourself — CFP professionals, CFA charterholders, tax attorneys, and PhDs. They’ve just formalized their advice in logical code.


No human, no matter how sophisticated, can operate as consistently, quickly or as efficiently as technology like an automated investing service.

He or she can’t analyze thousands of tax lots to figure out the potential tax owed from a prospective change within fractions of a second to make quick decisions consistent with a personalized investment plan. An automated investment service can. It will not only monitor your clients’ asset allocations and determine when they have broken through key thresholds, but it can also consider the tax consequences and drift in other goals with different allocations, and make the necessary portfolio adjustments to help minimize transaction costs.

When markets take a deep dive, an automated investing service is designed to not freak out or panic. It will rebalance, tax loss harvest and make adjustments to savings rates if necessary. It won’t be anxious about its reputation or make hasty decisions. It will be consistent and disciplined and not be tempted to purchase a particular stock or ETF that doesn’t fit a chosen investment plan. It’s just not in its programming.

In fact, many of the most efficient financial advisors today are also using technology to automate these parts of their services. They can charge more because they offer services automated investing services don’t, and to more customers. While traditional advisors also aren’t available at all hours to provide advice, they can set up their systems for customers to better self-service for easier tasks and utilize technology to make them more productive and able to serve more customers.


Much as the rise of spreadsheet software didn’t put accountants out of business (or if it did, they weren’t very adaptable…), automated investing services won’t put good, adaptable advisors out of business. Far from it. Good advisors will use it to scale themselves vertically and horizontally, delivering a higher quality of more varied advice. Good technology allows for more what-ifs, more time talking with clients and less time struggling with spreadsheets.

You can choose to fight technology or you can use it to expand your own capabilities. Just be aware that if you fight it, you may win the battle but lose the war.

Dan Egan is director of behavioral finance and investing at Betterment.

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