One recurring theme of the 21st century has been the ascendance of automation technologies that replace human workers. For example, the travel industry has changed dramatically in the past 15 years, as people bypass a local agent and head for Expedia, Orbitz or Priceline.

The financial services industry is also in the throes of a transformation. The baby boom generation is retiring en masse, registered investment advisors are replacing traditional stock brokers, regulatory scrutiny is on the rise and so-called “robo-advisors” are offering investment management outside the confines of a traditional financial advisor’s office.

Robo-advisors use algorithms and model portfolios to allocate investments according to a client’s particular objectives and risk tolerance. They are not equipped to provide more detailed and nuanced financial planning services, which are the specialty of traditional advisory firms. Some of the larger robo-advisor firms are Wealthfront, Betterment and FutureAdvisor.

Michael Kitces is a partner and director of planning research at Pinnacle Advisory Group in Columbia, Maryland. He also runs a blog on financial planning, Nerd’s Eye View, and consults the advisory industry on best practices, industry trends and planning strategies. He explains that the business of a robo-advisor is very narrow.

“Robo-advisors are basically designed to do one thing: give you an asset-allocated passive strategic portfolio,” he says. Wealthfront, for example, has billed itself as “The Automated Investment Service for Everyone.”

“That’s the scope of what they do, period. If someone wants actual advice about anything beyond ‘Give us your money and we’ll invest your portfolio in a diversified manner,’ you’re outside the capabilities of robo-advisors and into working with an actual financial advisor,” Kitces says.

Mary Beth Storjohann, founder of Workable Wealth, a San Diego firm specializing in financial planning for Generation Y, meets with clients in person, but also uses the Internet to work with clients throughout the country and holds meetings using technologies such as Skype or Google Hangouts.

She says traditional advisors and robo-advisors offer complementary services, and clients can use both services for financial planning.

As a certified financial planner, she views investing as a piece of the overall planning puzzle. “Let’s say you have a Roth [individual retirement account], and you’re not sure what to do with it,” Storjohann says. “… as a financial planner, I’ll say, ‘Do you have your emergency fund in place?’ … I’m going to look at the whole picture. Even in the most basic of situations, there are a few more questions that need to be asked before someone says, ‘I have a pot of money, let’s invest it.'”

However, once she’s determined the proper investment strategy, Storjohann says it could be appropriate to send a client to a robo-advisor for the actual portfolio implementation.

“Being an online advisor, I would go to an online firm like Betterment before I went to a commission broker,” she says. “It fits with my model. I’m already online. My clients are online. A robo-advisor is easy to use and seamless. It’s complementary service, versus me being online and trying to refer to somebody who’s a little more old-school with an office and more barriers.”

Accessibility is one area in which robo-advisors hold appeal for tech-savvy investors, regardless of age. Jon Stein, CEO of Betterment, points out that it’s not only Generation Y or millennial investors who use his company’s service. One quarter of his customers are over age 50.

Kitces also says it’s something of a myth that younger investors are turning in droves to online advisors, considering that a small portion of investors are using these services. But as millennials age and roll employer-sponsored plans from the 401(k) structure and into IRAs, that will likely change. At the moment, however, robo-advisors account for only a tiny fraction of the overall investment management industry.

Stein views Betterment as complementing, rather than detracting from, traditional financial planners. In October, his firm launched Betterment Institutional, an automated platform giving financial advisors access to Betterment’s portfolio models and other capabilities.

“We built it due to popular demand. We had heard from so many advisors that they wanted to leverage our portfolio construction. They wanted to leverage our automated tax-loss harvesting,” he says. Tax-efficient portfolio rebalancing is another feature available to advisors on the Betterment platform.

Stein says many financial advisors are using his firm’s capabilities as an adjunct to other portfolio models they design themselves. This gives them more time for financial and estate planning, as well as more time to spend with clients rather than managing stock and bond portfolios.

David Lyon, CEO of Main Street Financial in Chicago, offers traditional financial planning and investment advisory services to high-net-worth individuals as well as a Web-based service for younger clients or those with fewer assets to manage. He sees a role for both in-person and Web-based services but cautions that not all aspects of the process can be automated.

“There’s not really an algorithm to help investors get through periods of market volatility. A lot of investing is emotionally based, as it relates to the market,” he says. In other words, a traditional planner can provide more hand-holding and coaching through rough patches in the market.

However, Lyon believes the traditional investment advisory business is not always friendly to younger investors. That’s where online investing technologies play an important role.

“Technology is really a way to help people get connected and stay connected, of making investing accessible,” he says. “What we’ve done here is to provide technology that helps people connect to their goals and what’s ultimately important to them.”

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Financial Advisors vs. Robo-Advisors: Which is Right for You? originally appeared on usnews.com