A Robo-advisor is a digital advisor that is built to handle financial services, including advice and investments, with a very small portion of human interaction or involvement.
Robo-advisors are created to provide recommendations digitally based on the investor’s inputs. Although Robo-advisors are designed to function with little to no human involvement, this is rarely the case in actual use.
The benefits
Robo-advisors bring on the benefits of digital distribution, increased accessibility, and provide a faster way of getting advice.
This, of course, is based on an algorithm that is more or less, responsible for each piece of advice. In fact, the automation of this process is highly valued when it comes to alleviating risks related to filling in forms without any mistakes that stem from the lack of experience and knowledge.
Another fair point that adds to the case of Robo-advisors is the fact that they do have much lower fees. According to recent studies, Robo-advisors charge 0.25% for advice, while their human counterparts are charging above 0.75% and up to 1.5%. Therefore, Robo-advisors are considered a pretty cost-efficient choice when it comes to net returns.
