Let’s Talk Robo

Have you seen the TV commercials about a machine or robot as your investment advisor?  As funny as they may be, they may be giving you the wrong idea of what a robo-advisor really is.  A robo-advisor is technology (an automation platform) that allows automation for certain aspects of portfolio management.  One of the misnomers in the industry about automated platforms (robo-advisor) is that they constitute advice. This has led to the misunderstanding that a robo-advisor provides advice.  They do not advise but instead provide a way to implement the customized advice of a human adviser through technology.

There are two uses of robo-advisors in the financial services industry.  The first one is online shops where an investor uses the technology on their own to make their investment decisions through automation.  There is no human advisor involved, and technology has given options for you to select based on the information you inputted into the technology platform.  In the ‘robo shop’ life changes you experience are unknown to the technology, and it remains on its trajectory unless you make a selection yourself to change it.  This option is for those ‘do it yourself’ investors that usually don’t work with a human advisor.

Another way robo-advisors (aka the technology) are active is through real financial advisors.  This robo technology used by financial advisors is highly efficient, low cost, and allows transparent investment management and client communication through the use automated platforms. If properly utilized, robo technology promotes engagement between the client and the advisor, and assists in monitoring and adjusting client portfolios to keep the client moving forward to their financial future. It is this second benefit that opens the door for using automated platforms for all clients under the direction of a human advisor.  In this instance, robo platforms make the advisor more efficient and allow the client access to better financial offerings.

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