PERHAPS YOU HEARD OF A ROBO-ADVISOR, or use one for your investments. Robo-advisors are technology platforms that provide automated investment services, ranging from trade execution only to those that employ algorithms to determine a client’s asset allocation and risk tolerance. The typical roboadvisor uses a generic questionnaire to collect information from its clients. It then applies that information to determine the client’s risk tolerance and an appropriate mix of investments, generally low-cost exchange-traded funds (ETFs) or other passive investments. This model completely eliminates human labor from the financial planning and investment process — hence the term “robo.” Several robo firms expanded this model to offer access to human financial professionals for an additional fee. Such access, however, is usually limited to electronic communication.

The use of technology and algorithms makes asset allocation and investing accessible to many individuals previously unable to work with a traditional advisor. The main disruption roboadvisors bring to the industry is pricing, offering a lower-cost alternative to traditional advisors. Robo-advisors typically charge a flat 0.2–0.5 percent assets management fee, compared to the 0.8–1 percent fees a human advisor charges for a small account.

Before robo-advisors, automated portfolio allocation software was only accessible through a professional financial advisor. An individual provided personal information — financial situation, goals, expectations and so on — to an advisor who, in turn, input this information into the firm’s proprietary software to determine an automated asset allocation. The financial advisor used knowledge about the client’s emotional biases to tweak the asset allocation and overall financial plan to make it suitable to the individual. With the advent of the robo-advisor, this technology became directly available to the public. Many investors of modest means or without complicated situations are happy to forgo professional human advice.

Most traditional advisors have account minimums that render them inaccessible to certain investor groups such as small business owners whose net worth is tied up in illiquid assets or millennials just starting to accumulate assets. Robo-advisors usually have low ($500) to no minimums to begin investing, making them indiscriminately accessed by all. To its credit, the success of the robo-advisor industry indicates there is a demand across all demographics for financial advice, including those previously underserved by the big banks and Wall Street.

As with any technology, robo-advisors present pros and cons. In an environment where interest rates are near all-time lows and equity returns are expected to be lower than historical averages, it is important to minimize fees, which can have a material effect on performance. One can argue, however, robos are actually expensive, since a portfolio of ETFs can be easily replicated for less than what robos charge.

And lower fees come with a cost. The robo-investor does not benefit from human experience and expertise. Often, a traditional advisor provides an investor the emotional support and fortitude to stick with the investment and financial plan; a computer cannot take into account the human element. Human financial advisors provide much more than automatic asset allocation. They often offer family planning and governance, asset protection, wealth transfer, risk management, tax strategies, business succession and exit planning.

The robo-advisor model does not allow for customization or special circumstances. All investors are segmented into risk buckets and invested accordingly in a pre-determined model without considering elements like unrealized capital gains in legacy positions, emotional attachments to certain stocks or specific investment needs. The entire portfolio is pushed into the robo model. The model may assume investors are aware of their risk tolerance. Traditional advisors often require several meetings with clients in order to ascertain their true tolerance for risk and volatility. Many younger investors using a robo-advisor have not experienced a so-called black swan event or significant market loss. Consequently, without human advice many investors may not stay the course that would help them achieve their financial goals.