Efforts to automate portfolios have been tried before, with mixed success. But proponents say consumers are ready this time because of:
• Lower fees. Many automated portfolio management systems in the past charged lofty fees of 0.5 percent or even more. But fees on the services have come down.
Both Betterment and SigFig charge a flat rate of $10 a month. Wealthfront charges 0.25 percent on portfolios worth $10,000 or more. Low fees would be the only way for some investors, such as Gene Sandler, a 45-year-old engineer in Minneapolis, to even entertain the idea.
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• Greater comfort level. Consumers have gotten increasingly comfortable conducting business online. These services require a pretty big leap of faith. For instance, when signing up for SigFig, investors give the company, which is registered as an investment adviser, limited power of attorney rights to their existing brokerage accounts, be it with Schwab or TD Ameritrade.
Betterment, on the other hand, is the brokerage, so it holds the customers' money. But consumers are getting used to doing more online. Brian Flynn, a 32-year-old graphic designer in Stamford, Conn., says he'd consider such services, as he doesn't have enough assets to warrant hiring a human.
• Similar efforts in retirement accounts. There are also systems in place that largely automate investors' retirement accounts. Companies such as Morningstar and Financial Engines, not to mention premade retirement portfolios, have made investors more comfortable with the idea of automating their money management.
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Computer systems don't have many of the possible conflicts of interest that have worried investors about human financial advisers or brokers, says Ellie Figueroa, a 29-year-old physics student in the Houston area.
But some still think the judgment of a human, who takes the time to understand a person's entire financial picture, will make better decisions.
"I wouldn't trust a preprogrammed system to make my financial decisions," says Ezra Nazareth, a 31-year-old business owner in Tampa.
—By Matt Krantz of USA TODAY