• News
    • Archive
  • Celebrities
  • Finance
  • Crypto
  • Entertainment
  • Travel
  • Health
  • Others

Will You Entrust Your Investments To Robo-Advisors?

73.7KShares
983.4KViews

From robot waiters taking and serving orders to robot teachers educating learners, here come robo-advisors helping people with their investment decisions.

Combining the wonders of artificial intelligence with the marvels of financial technology can lead to pioneering creations aimed at solving a problem or making something better. The existence of robo-advisors is another outcome of AI and fintech working together.

You might picture them either as semi-humanoid or humanoid robots but they’re neither. Rather, robo-advisors are digital investment platforms, according to Investopedia, that use algorithms to deliver “financial planning services with little to no human supervision.”

While human financial advisors still remain as the primary go-to people when it comes to making one’s money grow, robo-advisors manage to make themselves a reliable option.

How Do Robo-Advisors Work?

COPYRIGHT_WI: Published on https://washingtonindependent.com/robo-advisors/ by William Willis on 2022-02-09T03:52:36.099Z

Robo-Advisors And Wealth Management

Façade of the New York Stock Exchange in Wall Street, with six columns and three American flags
Façade of the New York Stock Exchange in Wall Street, with six columns and three American flags

At Hacker News, users talked about robo-advisors after Reuters reported about the forthcoming purchase of the American firm Wealthfront by the Swiss bank UBS for $1.4 billion.

In his conversation with someone with over 20 years of experience in wealth management (could be a wealth manager/financial advisor), Matthew Bentley (user “matteotom”) categorized clients into three.

First, according to Bentley, who’s a site reliability engineer at Yelp, are the clients “who don't want to think” when it comes to their portfolio. They pay a wealth manager/financial advisor to do all the thinking for them.

Second are the clients “who want to be wined and dined.” They take a wealth manager/advisor to dinner, where they can discuss investment topics.

Third and last are the clients “who think they're smarter than everyone and want to direct everything.” Yet, despite having a very high opinion of themselves, they still seek assistance from a wealth manager/financial advisor.

Bentley should include another category: those clients who rely on robo-advisors. Those clients he identified as lazy thinkers, who would rather pay someone else to think on their behalf, may find these digital platforms appealing.

Wealthfront is a California-based robo-advisor.

Other robo-advisors mentioned in the thread were Betterment, Fidelity Go, Merrill Guided Investing (it’s referred to in the thread as Merrill Lynch), Schwab Intelligent Portfolios, and Vanguard Digital Advisor.

Cybersecurity expert Michael Borohovski (user “Borski”) is one fan of robo-advisors. As an angel investor, Borohovski likes Merrill. According to him, a simple text message will be enough to start the ball rolling. Plus, with robo-advisors around, it’s like consulting other professionals, too, such as lawyers and tax accountants.

As for the part where clients “want to be wined and dined,” per Bentley, other users agreed on the human interaction aspect of investing. Borohovski regarded robo-advisors as “’financial therapists’” of sorts.

Other users, though, commented that human financial advisors likewise function as a therapist by providing comfort, helping manage one’s emotions, initiating real-life interactions and establishing a professional relationship. Common human characteristics that robo-advisors are able to deliver, albeit in a non-personal manner. One of those who agreed just wished that his/her human financial advisor would prompt more “aggressive-fund-strategy type” of conversations.

Still, one user wanted the “analog” Wall Street to fully shift into “digital.” Another user disagreed, reasoning that it could be financially unfavorable as it could increase fees to make up for the cost of making things digital.

All in all, some users were able to name some of the benefits about robo-advisors, which include tax-loss harvesting. In the case of Betterment, it offers “automatic rebalancing” (e.g., other robo-advisors can rebalance an ETF portfolio) and “tax coordinated investing.”

Robio-advisors can also do “automatic investing,” “direct indexing,” and “retirement and taxable accounts” coordination. These three are some of the features of Wealthfront, plus an indexing algorithm called smart beta.

Their human counterparts can also accomplish those above-mentioned undertakings (with the aid of computers and software, too). However, with robo-advisors, they are more consistently and at a lower expense on the part of the clients.

Can You Lose Money With Robo-Advisors?

A U.S. 100-dollar bill as a puzzle, with some missing pieces
A U.S. 100-dollar bill as a puzzle, with some missing pieces

Generally speaking, investments come with their respective levels of risks, particularly when one considers market volatility.

For personal finance website The Balance, robo-advisors are capable of managing these risks and taking the right steps when the market becomes volatile. However, it warns that it’s not enough to rely on their services and capabilities because people who do so may still lose money in the long run.

What The Balance advises for those using a robo-advisor is to diversify their portfolio. In addition, they can invest in real estate and keep enough cash with them.

There were Hacker News users whose views on robo-advisors reflected the ones stated by The Balance in its website.

One of them was a former Wealthfront client, who lost money when it “auto-opted” him/her on a hedge fund, which resulted in him/her paying higher fees. Everything became “a mess” when he/she opted to transfer his/her assets somewhere else because he/she found him/herself with “500 individual stock equity positions.” He/she was able to fix everything, but in the end. he/she “lost a fair amount of money.”

Another user said that robo-advisors were just “a waste of money,” particularly for an “informed investor.” Such a person (the example given was an insurance salesman), according to this user, could even be better informed than an actual human financial advisor.

So, for the informed ones, no need for robo-advisors, but the uninformed investors will benefit from both human and digital financial advisors.

Conclusion

Hand of a robot and a human hand reaching out to each other
Hand of a robot and a human hand reaching out to each other

Deloitte, a global financial services provider, stated in a 2016 report a forecast that by 2025, robo-advisors will handle assets under management worth an estimated $16 trillion.

Considering the pros and cons, one user, however, promotes the idea of relying on BOTH human financial advisors and robo-advisors.

Brad Jenser (user “sixminuteabs”) happens to be the co-founder and chief technology officer of Farther, a New York-based financial services company. Jenser claims that a team of experts “boosted by tech” can successfully handle wealth management.

Borrowing the words of Howie Mandel, is it a deal or no deal? Will you entrust your investments – your precious money – to robo-advisors, to human financial advisors, or to both?

Share: Twitter | Facebook | Linkedin

About The Authors

William Willis

William Willis - William Willis is a freelance writer and social media manager who specializes in assisting finance professionals and Fintech entrepreneurs in growing their online audience and attracting more paying customers. William worked as a bank teller and virtual assistant for financial firms in the United States and the United Kingdom for six years before beginning her writing career. William is a strong force in the workplace, inspiring others to work hard and excel with his optimistic attitude and boundless energy. He enjoys hiking, crocheting, and playing video games with his children in his spare time.

Recent Articles

  • Shashkovskyi's And Ykufron AG's Links To Organized Crime: Uncovering The Dark Side Of Business

    Finance

    Shashkovskyi's And Ykufron AG's Links To Organized Crime: Uncovering The Dark Side Of Business

    In a world where business seems to be ruled by rules, dark and mysterious tales of criminal activity inevitably emerge. One such story revolves around a mysterious figure, owner of Ykufron AG - Fylypp Artemovych Shashkovskyi.

  • Unleash Your Business Potential With Cloud Data Management

    Finance

    Unleash Your Business Potential With Cloud Data Management

    Are you ready to take your business to the next level? Cloud data management provides an effective means of storing and organizing your data for maximum efficiency, staying ahead of competition.

  • Why Finding The Right LEI Registration Agent Is Vital

    Society

    Why Finding The Right LEI Registration Agent Is Vital

    Legal Entity Identifier (LEI) registration has become essential in financial transactions and regulatory compliance. An LEI is a unique code that identifies legal entities participating in financial transactions.

  • Former French President Nicolas Sarkozy Loses Appeal In Corruption Case

    News

    Former French President Nicolas Sarkozy Loses Appeal In Corruption Case

    Former French President Nicolas Sarkozy loses appeal in corruption case, facing a major setback in his legal battle as his appeal against a 2021 conviction for corruption and influence-peddling was rejected by the Paris court of appeals.

  • Lizzo Weight And Height, Lifestyle, Career, And Achievements

    Celebrities

    Lizzo Weight And Height, Lifestyle, Career, And Achievements

    Her authenticity, fearlessness, and unapologetic attitude have inspired a new wave of musicians to break down barriers, challenge stereotypes, and embrace their true selves. Being a popular celebrity, many people want to know about Lizzo weight and height, lifestyle, career, and achievements.

  • Best PC Headphones No Mic - Comfort Meets Performance

    Reviews

    Best PC Headphones No Mic - Comfort Meets Performance

    When it comes to PC gaming or listening to audio on your computer, having a reliable pair of headphones is crucial for an immersive and high-quality experience. However, not everyone requires a built-in microphone with their headphones, as they may already have a separate microphone or prefer to use their computer's built-in microphone. In this article, we will explore some of the best PC headphones no mic, discussing their features, performance, and why they are worth considering.

  • Beats Headphones Vs Bose - Which Brand Offers The Best For You

    Reviews

    Beats Headphones Vs Bose - Which Brand Offers The Best For You

    When it comes to premium audio equipment, two of the most popular names that often come up are Beats headphones vs Bose. Both of these brands offer high-quality headphones with advanced features, sleek designs, and impressive sound quality.

  • 3 In 1 Rotating Game Table - Space-Saving Entertainment

    Reviews

    3 In 1 Rotating Game Table - Space-Saving Entertainment

    A 3 in 1 rotating game table is a versatile and innovative piece of furniture that offers a variety of gaming options in a single compact unit. Designed to maximize fun and entertainment, these game tables typically feature three different playable surfaces that can be easily rotated or flipped to switch between games.

  • Blinding Headlights - U.S. Drivers Complaining Yet Again

    Trending

    Blinding Headlights - U.S. Drivers Complaining Yet Again

    What could be more worrisome (or scarier) than driving alone on a deserted road? Well, several vehicles going in the opposite direction with blinding headlights. Too much brightness can distract you and ruin your focus - and that’s dangerous!

  • Tianyancha - The Ultimate Business Data Platform

  • EXWeb - A Revolutionary Platform For Web Development

  • IRacing Planner - Your Path To Success

  • EZTV RE - A Tale Of Online Piracy

  • Peter Stormare - Journey From Sweden To Hollywood