Robo Advisors Take On Wall Street Technology is transforming the insular world of financial advice. That’s good news for investors.

Barron's on computer software taking over the investment world:

THE INSURGENCY BEGAN in 2010, when Jon Stein, a 30-year-old entrepreneur launched Betterment at TechCrunch Disrupt, the prominent technology confab. “We were the voice in the wilderness,” says Stein, who remains Betterment’s CEO. It took New York–based Betterment a year to collect its first $10 million in assets; it now manages $2.2 billion for 85,000 clients. Its biggest rival emerged in late 2011 when Wealthfront launched. The Palo Alto, Calif., rival set its sights squarely on young Silicon Valley professionals and has since amassed $2.3 billion in 27,000 accounts.
Enlarge Image

Wealthfront and Betterment aim to keep it simple; both Websites ask users just a handful of questions about their goals, risk tolerance, and investment horizon. From there, algorithms calculate a recommended asset allocation. After funding the account with an online transfer, a client’s assets are automatically split between several exchange-traded funds. (See the graphic.) The process takes less than 10 minutes and can be done with zero human interaction. Asset allocations are regularly rebalanced and both firms promise tax-loss harvesting, until now the domain of higher-end accounts.

“In general there’s been a lack of imagination about how far technology can go in helping investors,” says Wealthfront CEO Adam Nash. “In the next 10 years, everyone will be using some form of automated investment service. This is like e-commerce in the ’90s.”

An article well worth your time.