Robo-advisors or robo-advisers are financial advisers that provide financial advice and investment management online with moderate to minimal human intervention.[1] A robo-advisor provides digital financial advice based on mathematical rules or algorithms. These algorithms are designed by human financial advisors, investment managers and data scientists, and coded in software by programmers. These algorithms are executed by software and do not require a human advisor to impart financial advice to a client. The software utilizes its algorithms to automatically allocate, manage and optimize clients' assets for either short-run or long-run investment.[2]
Robo-advisors are categorized based on the extent of personalization, discretion, involvement, and human interaction.[3] There are over 100 robo-advisory services.[4][5] Investment management robo-advice is considered a breakthrough in formerly exclusive wealth management services, bringing services to a broader audience at a lower cost than traditional human advice.[6] Robo-advisors collect financial situation information from the client to determine risk tolerance. Then, robo-advisors allocate a client's assets on the basis of risk preferences and desired target return.[7] While robo-advisors have the capability of allocating client assets in many investment products such as stocks, bonds, futures, commodities, and real estate, the advice is often directed towards exchange-traded funds.[4] Clients can choose between offerings with passive asset allocation techniques or active asset management styles.[4]
- ^ Lieber, Ron (April 11, 2014). "Financial Advice for People Who Aren't Rich". The New York Times.
- ^ D'Acunto, Francesco & Prabhala, N. & Rossi, Alberto G. (2019). "The Promises and Pitfalls of Robo-Advising" Review of Financial Studies
- ^ D'Acunto, Francesco & Rossi, Alberto G. (2020). "Robo-Advising." Available at SSRN
- ^ a b c "Robo-Advisory in Wealth Management" (PDF). Deloitte Consulting GmbH. October 2016.
- ^ "Hype vs. Reality: The Coming Waves of "Robo" Adoption" (PDF). A.T. Kearney. June 2015.
- ^ "The expansion of Robo-Advisory in Wealth Management" (PDF). Deloitte Consulting. August 2016.
- ^ Meola, Andrew (January 4, 2017). "Robo Advisors: Online Financial Advisors That Fit in Your Pocket". Business Insider.