Do you need a robo-adviser or a human adviser?

"Nobody thought this was a good idea five years ago," Betterment founder and CEO Jon Stein told an audience of several hundred investment advisers at a conference in New York this summer. He was, of course, referring to his robo-advisory firm, which has since gained 100,000 clients with more than $2 billion in assets. Although they still manage a tiny fraction of the tens of trillions of dollars traded by individual investors, these robo-advisers have been slowly but surely making inroads. 

So it may not come as a surprise to learn that many of those in the audience who put robots into the "Bad Idea" camp may have been advisers. Many of the criticisms levied on robo-advisers are based on what they still can't do well such as provide some of the more individualized financial advice and service that traditional human advisers provide, like estate planning and charitable giving. Nor have robo-advisers yet been tested during periods when markets are roiled, as in 2008. 

Read more about low-cost robo-advisers and what they can offer you. 

But the substantially lower fees that Betterment, Wealthfront, and other robo-advisers charge trump their lack of individualized service from higher-priced traditional advisers, especially among younger savers, many of whom don't yet have complicated estate planning issues to manage. Betterment, for example, charges its clients anywhere from 0.15 to 0.35 percent annually to manage low-cost exchange-traded funds. Compare that to the 1 percent of assets many traditional advisers will charge clients annually.

For many investors, a combination of the two would be the best option. Enter hybrid advisers: traditional human advisers who leverage some of Betterment's online tools. Here's how it works. If an adviser holds his clients' assets with Fidelity Investments, he can use Betterment's online tools to manage the online platform. By delegating some of the everyday office tasks to the robo-adviser—things like generating quarterly statements—the traditional adviser should be able to spend more time with you. Additionally, it might allow traditional advisers to court younger customers with smaller balances, who might otherwise not have enough assets to effectively manage. 

The notion of hybrid advisers isn't exactly new: Humans have been using online software to manage client portfolios for years. As one adviser recently pointed out, it's basically turning the computer monitor around so that the client can see it. But if the convergence of the two approaches leads to lower costs for investors, as well as a lower threshold for personalized advice, we're all for it.

–Chris Horymski