Welcome to Money for the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I'm your host, David Stein. Today is episode 529. It's titled, Are Robo Advisors worth it?

Recently, I received an email from a member of our membership community, Money for the Rest of Us Plus.

She was curious about my thoughts on robo-advisor platforms.

She has invested with Betterman in her HSA account and has a brokerage account with Wealthfront.

She's read some reports that these robo-advisors

that offer tax loss harvesting, which I'll explain in a minute, that that's more of a

marketing gimmick and doesn't really add a lot of value. And then there was a concern that,

well, their fees are so low and they're not profitable and potentially

they'll have to raise fees in the future. So in this episode, we're going to take a look at

Robo Advisors. We'll look at tax loss harvesting, the potential benefits of that, and an element of

tax loss harvesting called direct indexing. First, a robo advisor, it's an account.

They started just over a decade ago, maybe it's been 15 years now, but they have low account

minimums, often zero. You go through a process of answering questions to determine your risk

profile, and it's all automated. So there's no

individual that you're working with. It's all done online. Once the Robo Advisor platform determines

your risk profile, your portfolio objectives, it selects an asset allocation and chooses the

underlying investments, which are primarily exchange-traded

funds. The Robo Advisor will rebalance your portfolio, and it may offer tax loss harvesting.

Tax loss harvesting is a strategy where investments that have dropped in value are sold to

realize a capital loss, which can then

offset capital gains, reducing one's taxable income. Once that asset is sold, it is typically

invested in a similar type asset. It could be an ETF, or if it's a strategy that is selling individual stocks,

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