Should You take a Robo Loan?


They're called 'robo advisors' and they're known as a convenient tool for helping with wealth management. For example, you can consult your robo advisor in the middle of the night in your pajamas, if you so desire. But now robo adviser "Wealthfront" says it'll start offering loans. Experts say "buyer beware."

Houston financial planner and Rice Professor Michael Parmet says the robo adviser's greatest benefit could also be its biggest weakness.

"You don't need to be signing up on a loan at 2:30 in the morning; if you want it you need to do it after you've thought about it, compared rates and maybe talked to your friend or spouse or significant other."

Parmet says you should literally 'sleep on it' before you rush into any loan. He says the biggest worry is that the loan would be based on your investment portfolio, which can go south in a hurry if we see a Wall Street crisis like we did in 2008.

"If you invest, invest; don't borrow money against it. If you can break the two apart with the robo investor, that'd be great but right now that's not the situation. Don't borrow against your stocks or investments; that's the general rule."

Wealthfront says its clients must meet the balance requirement in a taxable account, which eliminates the majority of its customers.


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