Have you ever considered ditching your human investment advisor and going with an online automated service instead? In the last few years we have witnessed the rise of automated algorithmic financial advisors, also known more colloquially as robo-advisers. Being initially introduced to the general public in 2008 by start-up companies that offer automated financial advice and wealth management services, such as Betterment , Wealthfront and Personal Capital, such services have gained greater market acceptance. Two main factors explain the excitement around these automated algorithmic financial advisers – performance and accessibility. In terms of performance, robo-advisers have proved to be very efficient and highly accurate. In terms of accessibility, robo-advisers are more accessible than traditional financial advisors. Robo-advisors never sleep, so they are available online 24/7. Fully automated algorithmic financial advisors are also cheaper than traditional human financial advisors, so more people opt to use them, given that they charge minimal to no fees at all. And lastly, because robo-advisers are cheaper to use, the minimal amount of money they require their users to invest is much lower than the amounts required by human advisors, and by doing so robo-advisers enable more individuals – even ones with very little money – to use their services. Given these advantages, it is not all that surprising that by 2020, robo-advisers are expected to manage $2.2-$3.7 trillion in assets.
December 19, 20180
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