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How advancements in fintech and robo-advisors can help people with retirement

Planning your retirement is a drag, letting an algorithm-crunching robot handle the work can help

Financial trends and news by Josiah Motley
September 14, 2018 last edited September 14, 2018 12:25 PM
Short URL: http://vator.tv/n/4c1d

Fintech continues to grow in influence, investments, and products available to end users, and it makes sense. The financial industry is one of the oldest around and with technology continuing to become cheaper, more powerful, and more easily accessible from the general public.

Just look at what is happening with apps like Acorns and Robinhood. These types of apps have all but removed the gatekeepers that have traditionally kept many people from investing in, and in some cases, understanding, the financial market. 

These same types of technologies can be used in other sectors of fintech, as well. Just look at retirement and investing in your future. And this applies to everyone, both young and old.

Image: Unsplash

Take for example a recent study by EverQuote. While it looks at things from credit card debt to coffee expenditures in recently graduated college students, it also looks at things like retirement funds and planning. 

According to the survey, 78% of recent college grads had a full-time job. Among those, 69% have access to a 401(k) plan through their job. 89% of those say they are putting money into it every month.

Honestly, I was a bit surprised to see that number as high as it was, and while that is great, it doesn't account for a greater swath of people that are without. When looking at statistics from the Federal Reserve, we see that number is quite a bit different.

From the Federal Reserve's stats, approximately 40% of people in the US, age 18 to 29, have no retirement savings whatsoever. That number becomes smaller as the age range goes up, with 18% of those in their 40s who lack any sort of retirement savings.

So, how can fintech help? Well, for one, it's finding a system that can appeal to both the young and old, that a) doesn't require vast knowledge on the subject and b) is convenient. That's where robo-advisors come in. And people are warming up to the idea of it.

Image: Empirica

Image: Empirica

Already deployed by places like TD Ameritrade, robo-advisors can quickly help end users make decisions on the best way to invest for a better future, without that user having to feel pressured to make complex financial decisions on their own. Yes, it can feel overwhelming at first, trusting these types of decisions to an algorithm-crunching bot, but between baked in safeguards and limits you can set yourself, it makes the process much easier.

Another benefit is the cost to the end user. With traditional advisors, there can be quite a bit of cost, as their expertise and time are valuable, but with a robo-advisor, those fees can all but disappear, with some companies offering 0% fees for accounts that invest under a certain threshold (typically $10-20k).

Are robo-advisors the answer to all fintech and financial problems? Absolutely not, but for those that are looking to put a bit away into savings or invest their money quickly and wisely, robo-advisors can be that stepping stone.