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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]

History

The first robo-advisor Betterment was launched in 2010 as a direct-to-consumer model by Jon Stein.^[8] Thereafter, robo-advisors increased in popularity.^[9] The first robo-advisers were used as online interfaces by financial managers to manage and balance clients' assets. Robo-adviser technology was not new to this field, as this kind of software has been in use by financial advisers and managers since the early 2000s. But they were made publicly available in 2008 for the first time to the general public who were in dire need of managing their assets personally. By the end of 2015, robo-advisers from almost 100 companies around the globe were managing $60 billion in assets of clients.^[10] In June 2016, robo-advisor Wealthfront announced a partnership with the Nevada State Treasurer to offer a 529 plan for college savings.^[11]

In 2015, Hong Kong based 8 Securities launched one of Asia's first robo-advisors in Japan,^[12] followed there in 2016 by Money Design, Co., under the brand name THEO, and WealthNavi.^[13] In 2017, Singapore based StashAway received a capital markets services license from the Monetary Authority of Singapore.^[14]

Definition

A robo-advisor can be defined as "a self-guided online wealth management service that provides automated investment advice at low costs and low account minimums, employing portfolio management algorithms". Some robo-advisors do have an element of human interference and supervision.

Legally, the term "financial advisor" applies to any entity giving financial advice. Most robo-advisor services are instead limited to providing portfolio management,^[15] that is the allocation of investments among asset classes, without addressing issues such as estate and retirement planning and cash-flow management, which are also the domain of financial planning.^{[citation needed]} Robo advisors provide "personal financial advice" in addition to "general financial advice". Personal financial advice is tailored to the financial situation and goals of the client, and is in their best interests. General financial advice doesn't take into account the personal situation or goals of the client, or how it might affect them personally.^[16]

Other designations for the financial technology companies that program robo advisor software include "automated investment advisor", "automated investment management", "online investment advisor" and "digital investment advisor".^[17]

Areas served

While robo-advisors are most common in the United States, they are also present in Germany,^[4] Australia,^[18] India,^[19] Canada,^[20] and Singapore.^[21]

Robo-advisors are extending into different aspects of financial advice, such as advising retail customers on how much money to spend versus save, how to plan for retirement and decumulation (selling off securities over time),^[3] and tax loss harvesting.

Methodology

The tools they employ to manage client portfolios differ little from the portfolio management software already widely used in the profession.^[22]

The portfolios that robo-advisors offer are typically exchange-traded funds, but some offer portfolios of individual stocks.^[2]^[23] Typically they employ modern portfolio theory, which minimizes risk for a given expected return. Some are designed for use with socially responsible investing, Halal investing, or strategies similar to hedge funds.

Consumer access

The customer acquisition costs and time constraints faced by traditional human advisors have left many middle-class investors underadvised or unable to obtain portfolio management services because of the minimums imposed on investable assets.^[24] The average financial planner has a minimum investment amount of $50,000,^[25] while minimum investment amounts for robo-advisors start as low as $500 in the United States^[26] and as low as £1 in the United Kingdom.^[27] In addition to having lower minimums on investable assets compared to traditional human advisors, robo-advisors charge fees ranging from 0.2 percentt to 1.0 percent of Assets Under Management,^[28] while traditional financial planners charged average fees of 1.35 percent of Assets Under Management, according to a survey conducted by AdvisoryHQ News.^[25]

Regulation

In the United States, robo-advisors must be registered investment advisors, which are regulated by the Securities and Exchange Commission.^[29] In the United Kingdom they are regulated by the Financial Conduct Authority.

Robo advisors that manage client money offer discretionary accounts for the clients. This sets them apart from micro investing firms, managed funds and investing platforms. In Australia, the robo-advisors manage the client money through the Managed Discretionary Account (MDA) structure.

Total assets under management

The following are the largest robo-advisors by assets under management:^[30]

Company	Country	Assets under management	Clients
The Vanguard Group	U.S.	$206.6 billion	1,100,000
Wealthfront	U.S.	$75.0 billion	1,000,000
Charles Schwab	U.S.	$65.8 billion	262,000
Betterment	U.S.	$26.8 billion	615,000
Personal Capital	U.S.	$16.1 billion	26,000

References

^ Lieber, Ron (April 11, 2014). "Financial Advice for People Who Aren't Rich". The New York Times.
^ ^a ^b D'Acunto, Francesco & Prabhala, N. & Rossi, Alberto G. (2019). "The Promises and Pitfalls of Robo-Advising" Review of Financial Studies
^ ^a ^b D'Acunto, Francesco & Rossi, Alberto G. (2020). "Robo-Advising." Available at SSRN
^ ^a ^b ^c ^d "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.
^ "The History of Betterment: Changing an Industry". betterment.com. Archived from the original on 2022-04-05. Retrieved 2016-07-20.
^ Eule, Alexander (May 23, 2015). "Robo Advisors Take On Wall Street". Barron's newspaper.
^ "Robo-Advisor: Future to Financial Management?". algonest.com. Archived from the original on 2019-01-06. Retrieved 2018-06-27.
^ Davis, Andrea (June 3, 2016). "Wealthfront leads robo expansion into college savings plans".
^ "Nomura buys into HK robo-advisor". 3 April 2018. Retrieved 2019-08-29.
^ "First-time investors urged to turn to inexpensive 'robo-advisers'". 25 April 2016. Retrieved 2019-08-29.
^ Cua, Genevieve. "MAS proposes moves to support growth of robo advisory firms". The Business Times. Retrieved 2018-08-31.
^ "Robo-Advisors: An Introduction to Online Financial Advice". Betterment. Retrieved 2019-01-11.
^ "Choosing a financial adviser". Moneysmart by Australian Securities and Investments Commission (ASIC). Retrieved December 12, 2021.
^ Byrnes, Mike (2016-03-17). "Robo-Advisor Warns: The Zombies Are Coming!" (in Spanish). Economía Personal. Retrieved 2021-09-11.
^ "ASIC's Greg Medcraft says 'robo advice' can reduce fees and conflicts". 5 November 2015.
^ Adajania, Kayezad E. (September 22, 2015). "Robo advisory could change distribution". LiveMint.
^ François Desjardins (October 17, 2015). "Préparer sa retraite, un texto à la fois" [Preparing your retirement, one SMS at a time]. Le Devoir (in French). Retrieved December 5, 2015.
^ "Singapore start-up to launch robo adviser to tap tech-savvy rich". Reuters. June 15, 2016.
^ "Best of the Online Investment Advisers". June 2014.
^ "The Stock Advantage". Retrieved 2021-12-24.
^ "The Real Hidden Cost That Has Been Inhibiting Financial Planning For The Masses". December 16, 2013.
^ ^a ^b "How Much Does a Financial Advisor Cost? (Average RIA & Financial Advisor Fees in 2016)".
^ "What is the Best Robo Advisor?".
^ "Robo-Advisors Comparison with OFF3R". off3r.com. Retrieved 2018-01-03.
^ "Cost-Income Ratios and Robo-Advisory" (PDF). Deloitte Consulting GmbH. December 2016.
^ "Print 2 | PDF | Financial Technology | Finance & Money Management". Scribd. Retrieved 2021-09-11.
^ Friedberg, Barbara (2021-09-27). "Top-10 Robo-Advisors By Assets Under Management". Forbes Advisor. Retrieved 2023-01-28.

[1] Lieber, Ron (April 11, 2014). "Financial Advice for People Who Aren't Rich". The New York Times.

[academic.oup.com-2] D'Acunto, Francesco & Prabhala, N. & Rossi, Alberto G. (2019). "The Promises and Pitfalls of Robo-Advising" Review of Financial Studies

[Robo-Advising._Available_at_SSRN-3] D'Acunto, Francesco & Rossi, Alberto G. (2020). "Robo-Advising." Available at SSRN

[robo-4] "Robo-Advisory in Wealth Management" (PDF). Deloitte Consulting GmbH. October 2016.

[5] "Hype vs. Reality: The Coming Waves of "Robo" Adoption" (PDF). A.T. Kearney. June 2015.

[6] "The expansion of Robo-Advisory in Wealth Management" (PDF). Deloitte Consulting. August 2016.

[7] Meola, Andrew (January 4, 2017). "Robo Advisors: Online Financial Advisors That Fit in Your Pocket". Business Insider.

[first-roboadvisor-8] "The History of Betterment: Changing an Industry". betterment.com. Archived from the original on 2022-04-05. Retrieved 2016-07-20.

[9] Eule, Alexander (May 23, 2015). "Robo Advisors Take On Wall Street". Barron's newspaper.

[:0-10] "Robo-Advisor: Future to Financial Management?". algonest.com. Archived from the original on 2019-01-06. Retrieved 2018-06-27.

[11] Davis, Andrea (June 3, 2016). "Wealthfront leads robo expansion into college savings plans".

[12] "Nomura buys into HK robo-advisor". 3 April 2018. Retrieved 2019-08-29.

[13] "First-time investors urged to turn to inexpensive 'robo-advisers'". 25 April 2016. Retrieved 2019-08-29.

[14] Cua, Genevieve. "MAS proposes moves to support growth of robo advisory firms". The Business Times. Retrieved 2018-08-31.

[15] "Robo-Advisors: An Introduction to Online Financial Advice". Betterment. Retrieved 2019-01-11.

[16] "Choosing a financial adviser". Moneysmart by Australian Securities and Investments Commission (ASIC). Retrieved December 12, 2021.

[17] Byrnes, Mike (2016-03-17). "Robo-Advisor Warns: The Zombies Are Coming!" (in Spanish). Economía Personal. Retrieved 2021-09-11.

[18] "ASIC's Greg Medcraft says 'robo advice' can reduce fees and conflicts". 5 November 2015.

[19] Adajania, Kayezad E. (September 22, 2015). "Robo advisory could change distribution". LiveMint.

[20] François Desjardins (October 17, 2015). "Préparer sa retraite, un texto à la fois" [Preparing your retirement, one SMS at a time]. Le Devoir (in French). Retrieved December 5, 2015.

[21] "Singapore start-up to launch robo adviser to tap tech-savvy rich". Reuters. June 15, 2016.

[22] "Best of the Online Investment Advisers". June 2014.

[23] "The Stock Advantage". Retrieved 2021-12-24.

[24] "The Real Hidden Cost That Has Been Inhibiting Financial Planning For The Masses". December 16, 2013.

[AdvisorCost-25] "How Much Does a Financial Advisor Cost? (Average RIA & Financial Advisor Fees in 2016)".

[26] "What is the Best Robo Advisor?".

[27] "Robo-Advisors Comparison with OFF3R". off3r.com. Retrieved 2018-01-03.

[28] "Cost-Income Ratios and Robo-Advisory" (PDF). Deloitte Consulting GmbH. December 2016.

[29] "Print 2 | PDF | Financial Technology | Finance & Money Management". Scribd. Retrieved 2021-09-11.

[Friedberg_2021-30] Friedberg, Barbara (2021-09-27). "Top-10 Robo-Advisors By Assets Under Management". Forbes Advisor. Retrieved 2023-01-28.

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+{{Short description|Financial advisory software}}
-'''Robo-advisors''' or '''robo-advisers''' are a class of [[financial adviser]] that provide financial advice and [[investment management]] online with moderate to minimal human intervention.<ref>{{cite news | url=https://www.nytimes.com/2014/04/12/your-money/start-ups-offer-financial-advice-to-people-who-arent-rich.html | title=Financial Advice for People Who Aren't Rich | first=Ron | last=Lieber | work=[[The New York Times]] | date=April 11, 2014}}{{subscription required}}</ref> They provide digital financial advice based on mathematical rules or algorithms. These algorithms are designed by 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.<ref name="academic.oup.com">D'Acunto, Francesco & Prabhala, N. & Rossi, Alberto G. (2019). [https://academic.oup.com/rfs/article/32/5/1983/5427774 "The Promises and Pitfalls of Robo-Advising."   Review of Financial Studies ]</ref> Robo-advisors are categorized based on the extent of personalization, discretion, involvement, and human interaction.<ref name="Robo-Advising. Available at SSRN">D'Acunto, Francesco & Rossi, Alberto G. (2020). [https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3545554 "Robo-Advising." Available at SSRN ]</ref>
+{{Personal finance}}
+'''Robo-advisors''' or '''robo-advisers''' are [[financial adviser]]s that provide financial advice and [[investment management]] online with moderate to minimal human intervention.<ref>{{cite news | url=https://www.nytimes.com/2014/04/12/your-money/start-ups-offer-financial-advice-to-people-who-arent-rich.html | title=Financial Advice for People Who Aren't Rich | first=Ron | last=Lieber | publisher=The New York Times | date=April 11, 2014}}</ref> 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.<ref name="academic.oup.com">D'Acunto, Francesco & Prabhala, N. & Rossi, Alberto G. (2019). [https://academic.oup.com/rfs/article/32/5/1983/5427774 "The Promises and Pitfalls of Robo-Advising"   Review of Financial Studies ]</ref>
-There are over 100 robo-advisory services.<ref name=robo>{{cite web | url=https://www2.deloitte.com/content/dam/Deloitte/de/Documents/financial-services/Robo_No_2.pdf | title=Robo-Advisory in Wealth Management | publisher=Deloitte Consulting GmbH | date=October 2016}}</ref><ref>{{Cite web | url=https://www.atkearney.com/documents/10192/7132014/Hype+vs.+Reality_The+Coming+Waves+of+Robo+Adoption.pdf | title=Hype vs. Reality: The Coming Waves of "Robo" Adoption | publisher=[[A.T. Kearney]] | date=June 2015}}</ref> Investment management robo-advice is considered a breakthrough in formerly exclusive wealth management services, bringing services to a broader audience with lower cost compared to traditional human advice.<ref>{{Cite web | url=https://www2.deloitte.com/content/dam/Deloitte/de/Documents/financial-services/Deloitte-Robo-safe.pdf | title=The expansion of Robo-Advisory in Wealth Management | publisher=Deloitte Consulting GmbH | date=August 2016}}</ref> 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.<ref>{{cite news | url=http://www.businessinsider.com/robo-advisors-online-financial-advisors-automated-investing-2017-1 | title=Robo Advisors: Online Financial Advisors That Fit in Your Pocket | first=Andrew | last=Meola | publisher=[[Business Insider]] | date=January 4, 2017}}</ref> 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 fund]]s.<ref name=robo/> Clients can choose between offerings with passive asset allocation techniques or active asset management styles.<ref name=robo/>
+Robo-advisors are categorized based on the extent of personalization, discretion, involvement, and human interaction.<ref name="Robo-Advising. Available at SSRN">D'Acunto, Francesco & Rossi, Alberto G. (2020). [https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3545554 "Robo-Advising." Available at SSRN ]</ref> There are over 100 robo-advisory services.<ref name=robo>{{cite web | url=https://www2.deloitte.com/content/dam/Deloitte/de/Documents/financial-services/Robo_No_2.pdf | title=Robo-Advisory in Wealth Management | publisher=Deloitte Consulting GmbH | date=October 2016}}</ref><ref>{{Cite web | url=https://www.atkearney.com/documents/10192/7132014/Hype+vs.+Reality_The+Coming+Waves+of+Robo+Adoption.pdf | title=Hype vs. Reality: The Coming Waves of "Robo" Adoption | publisher=A.T. Kearney | date=June 2015}}</ref> 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.<ref>{{Cite web | url=https://www2.deloitte.com/content/dam/Deloitte/de/Documents/financial-services/Deloitte-Robo-safe.pdf | title=The expansion of Robo-Advisory in Wealth Management | publisher=Deloitte Consulting | date=August 2016}}</ref> 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.<ref>{{cite news | url=http://www.businessinsider.com/robo-advisors-online-financial-advisors-automated-investing-2017-1 | title=Robo Advisors: Online Financial Advisors That Fit in Your Pocket | first=Andrew | last=Meola | publisher=Business Insider | date=January 4, 2017}}</ref> While robo-advisors have the capability of allocating client assets in many investment products such as [[stock (finance)|stocks]], [[bond (finance)|bonds]], futures, commodities, and real estate, the advice is often directed towards [[exchange-traded fund]]s.<ref name=robo/> Clients can choose between offerings with [[passive management|passive]] asset allocation techniques or [[active management|active]] asset management styles.<ref name=robo/>
-==History==
-The first robo-advisors were launched in 2008 during the [[financial crisis of 2007-2008|financial crisis]].<ref>{{cite news | url=https://www.investors.com/etfs-and-funds/etfs/fund-industry-wakens-from-slumber-to-take-on-digital-advice-upstarts/ | title=As Robo Advisors Go Viral, Where Do Traditional Money Managers Go? | first=APARNA | last=NARAYANAN | work=[[Investor's Business Daily]] | date=June 27, 2016}}</ref> In 2010, Jon Stein, a 30-year old entrepreneur, launched [[Betterment (company)|Betterment]], and robo-advisors increased in popularity.<ref>{{cite news | url=http://www.barrons.com/articles/robo-advisors-take-on-wall-street-1432349473 | title=Robo Advisors Take On Wall Street | first=ALEXANDER | last=EULE | work=[[Barron's (newspaper)|Barron's]] | date=May 23, 2015}}</ref> The first robo-advisers were used as online interfaces by financial managers to manage and balance clients' assets. Robo-adviser technology was not new to this field, as this kind of software has been in use by financial advisers and managers since the early 2000s. But they were made publicly available in 2008 for the first to general public who were in dire need of managing their assets personally. By the end of 2015, robo-advisers from almost 100 companies around the globe were managing $60 billion assets of clients.<ref name=":0">{{Cite web|url=https://www.algonest.com/site/robo-content/|title=Robo-Advisor: Future to Financial Management? |website=www.algonest.com|language=en-US |access-date=2018-06-27 |url-status=dead |archive-url=https://web.archive.org/web/20190106025105/https://www.algonest.com/site/robo-content |archive-date=2019-01-06}}</ref> In June 2016, robo-advisor [[Wealthfront]] announced a partnership with the [[Nevada State Treasurer]] to offer a [[529 plan]] for college savings.<ref>{{cite web | url=https://www.financial-planning.com/news/wealthfront-leads-robo-expansion-into-college-savings | title=Wealthfront leads robo expansion into college savings plans | first=Andrea | last=Davis | date=June 3, 2016}}</ref>
+== History ==
-In 2015, [[Hong Kong]] based 8 Securities launched one of [[Asia|Asia's]] first robo-advisors in [[Japan]],<ref>{{Cite web|url=https://fundselectorasia.com/nomura-buys-into-hk-robo-advisor|title=Nomura buys into HK robo-advisor|language=en-US|access-date=2019-08-29}}</ref> followed there in 2016 by Money Design, Co., under the brand name THEO, and WealthNavi.<ref>{{Cite web|url=https://www.japantimes.co.jp/news/2016/04/25/reference/first-time-investors-urged-turn-inexpensive-robo-advisers/#.XWdvXOj7SUk|title=First-time investors urged to turn to inexpensive 'robo-advisers'|language=en-US|access-date=2019-08-29}}</ref> In 2017, Singapore based [[StashAway]] received a capital markets services license from the [[Monetary Authority of Singapore]].<ref>{{Cite news|url=https://www.businesstimes.com.sg/companies-markets/mas-proposes-moves-to-support-growth-of-robo-advisory-firms-0|title=MAS proposes moves to support growth of robo advisory firms|last=Cua|first=Genevieve|work=The Business Times|access-date=2018-08-31|language=en}}</ref> In 2019, another Singapore-based digital wealth management platform, Syfe, received a capital markets services license from MAS.<ref>{{Cite news|url=https://techcrunch.com/2020/09/22/singapore-based-syfe-a-robo-advisor-with-a-human-touch-raises-18-6-million-led-by-valar-ventures/|title=Singapore-based Syfe, a robo-advisor with a human touch, raises $18.6 million led by Valar Ventures|last=Shu|first=Catherine|work=TechCrunch|access-date=2022-04-27}}</ref><ref>{{cite web |url=https://eservices.mas.gov.sg/fid/institution/detail/225171-SYFE-PTE-LTD/|title=Financial Institutions Dirrectory - Syfe Pte. Ltd.|website=Monetary Authority of Singapore|access-date=2022-04-27}}</ref>
+The first robo-advisor [[Betterment (company)|Betterment]] was launched in 2010 as a direct-to-consumer model by [[Jon Stein]].<ref name="first-roboadvisor">{{Cite web |url=https://betterment.com/resources/the-history-of-betterment |publisher=betterment.com | title=The History of Betterment: Changing an Industry |access-date=2016-07-20 |url-status=dead |archive-url=https://web.archive.org/web/20220405210702/betterment.com/resources/the-history-of-betterment |archive-date=2022-04-05}}</ref> Thereafter, robo-advisors increased in popularity.<ref>{{cite news | url=http://www.barrons.com/articles/robo-advisors-take-on-wall-street-1432349473 | title=Robo Advisors Take On Wall Street | first=Alexander | last=Eule | publisher=Barron's newspaper | date=May 23, 2015}}</ref> The first robo-advisers were used as online interfaces by financial managers to manage and balance clients' assets. Robo-adviser technology was not new to this field, as this kind of software has been in use by financial advisers and managers since the early 2000s. But they were made publicly available in 2008 for the first time to the general public who were in dire need of managing their assets personally. By the end of 2015, robo-advisers from almost 100 companies around the globe were managing $60 billion in assets of clients.<ref name=":0">{{Cite web |url=https://www.algonest.com/site/robo-content/|title=Robo-Advisor: Future to Financial Management? |publisher=algonest.com |access-date=2018-06-27 |url-status=dead |archive-url=https://web.archive.org/web/20190106025105/https://www.algonest.com/site/robo-content |archive-date=2019-01-06}}</ref> In June 2016, robo-advisor [[Wealthfront]] announced a partnership with the [[Nevada State Treasurer]] to offer a [[529 plan]] for college savings.<ref>{{cite web | url=https://www.financial-planning.com/news/wealthfront-leads-robo-expansion-into-college-savings | title=Wealthfront leads robo expansion into college savings plans | first=Andrea | last=Davis | date=June 3, 2016}}</ref>
+In 2015, [[Hong Kong]] based 8 Securities launched one of [[Asia|Asia's]] first robo-advisors in [[Japan]],<ref>{{Cite web |url=https://fundselectorasia.com/nomura-buys-into-hk-robo-advisor |title=Nomura buys into HK robo-advisor |date=3 April 2018 |access-date=2019-08-29}}</ref> followed there in 2016 by Money Design, Co., under the brand name THEO, and WealthNavi.<ref>{{Cite web |url=https://www.japantimes.co.jp/news/2016/04/25/reference/first-time-investors-urged-turn-inexpensive-robo-advisers/#.XWdvXOj7SUk |title=First-time investors urged to turn to inexpensive 'robo-advisers' |date=25 April 2016 |access-date=2019-08-29}}</ref> In 2017, Singapore based [[StashAway]] received a capital markets services license from the [[Monetary Authority of Singapore]].<ref>{{Cite news |url=https://www.businesstimes.com.sg/companies-markets/mas-proposes-moves-to-support-growth-of-robo-advisory-firms-0 |title=MAS proposes moves to support growth of robo advisory firms |last=Cua |first=Genevieve |publisher=The Business Times |access-date=2018-08-31}}</ref>
-==Definition==
-A robo-advisor can be defined as "a self-guided online wealth management service that provides automated investment advice at low costs and low account minimums, employing portfolio management algorithms". Some robo-advisors do have an element of human interference and supervision.<ref>{{Cite web|title=What Is a Robo-Advisor?|url=https://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp|access-date=2021-09-27|website=Investopedia|language=en}}</ref>
+== Definition ==
-Legally, the term "financial advisor" applies to any entity giving advice about securities. Most robo-advisor services are instead limited to providing portfolio management<ref>{{Cite news|url=https://www.betterment.com/category/robo-advisor|title=Robo-Advisors: An Introduction to Online Financial Advice|work=Betterment|access-date=2019-01-11|language=en}}</ref> (i.e. allocating investments among asset classes) without addressing issues such as estate and retirement planning and cash-flow management, which are also the domain of financial planning.
+A robo-advisor can be defined as "a self-guided online wealth management service that provides automated investment advice at low costs and low account minimums, employing portfolio management algorithms". Some robo-advisors do have an element of human interference and supervision.
-Robo advisors provide "personal financial advice" in addition to "general financial advice". Personal financial advice is tailored to the financial situation and goals of the client, and is in their best interests. General financial advice doesn't take into account the personal situation or goals of the client, or how it might affect them personally.<ref>{{Cite web|url=https://moneysmart.gov.au/financial-advice/choosing-a-financial-adviser|title=Choosing a financial adviser|publisher=Moneysmart by Australian Securities and Investments Commission (ASIC)|access-date=December 12, 2021|language=en}}</ref>
+Legally, the term "[[financial advisor]]" applies to any entity giving financial advice. Most robo-advisor services are instead limited to providing portfolio management,<ref>{{Cite news|url=https://www.betterment.com/category/robo-advisor|title=Robo-Advisors: An Introduction to Online Financial Advice|publisher=Betterment|access-date=2019-01-11}}</ref> that is the allocation of investments among asset classes, without addressing issues such as estate and retirement planning and cash-flow management, which are also the domain of financial planning.{{citation needed||date=October 2024}} Robo advisors provide "personal financial advice" in addition to "general financial advice". Personal financial advice is tailored to the financial situation and goals of the client, and is in their best interests. General financial advice doesn't take into account the personal situation or goals of the client, or how it might affect them personally.<ref>{{Cite web|url=https://moneysmart.gov.au/financial-advice/choosing-a-financial-adviser|title=Choosing a financial adviser|publisher=Moneysmart by Australian Securities and Investments Commission (ASIC)|access-date=December 12, 2021}}</ref>
-Other designations for these [[financial technology]] companies include "automated investment advisor", "automated investment management", "online investment advisor" and "digital investment advisor".<ref>{{Cite web|last=October 28|first=Mike Byrnes-|last2=2015.|date=2016-03-17|title=Robo-Advisor Warns: The Zombies Are Coming! {{!}} Economía Personal : Economía Personal|url=https://www.economiapersonal.com.ar/|access-date=2021-09-11|website=Economía Personal {{!}} Planificación y Protección Financiera|language=es}}</ref>
+Other designations for the [[financial technology]] companies that program robo advisor software include "automated investment advisor", "automated investment management", "online investment advisor" and "digital investment advisor".<ref>{{Cite web |first1=Mike |last1=Byrnes |date=2016-03-17 |title=Robo-Advisor Warns: The Zombies Are Coming! |url=https://www.economiapersonal.com.ar/ |access-date=2021-09-11 |publisher=Economía Personal |language=es}}</ref>
-==Areas served==
+== Areas served ==
-While robo-advisors are most common in the [[United States]], they are also present in [[Germany]],<ref name=robo/> [[Australia]],<ref>{{cite web|url=http://www.smh.com.au/business/banking-and-finance/asics-greg-medcraft-says-robo-advice-can-reduce-fees-and-conflicts-20151105-gkrmxw.html|title=ASIC's Greg Medcraft says 'robo advice' can reduce fees and conflicts}}</ref> [[India]],<ref>{{Cite web | url=http://www.livemint.com/Money/DOnQjdoOqd38ijz30HgtGM/Robo-advisory-could-change-distribution.html | title=Robo advisory could change distribution | first=Kayezad E. | last=Adajania | publisher=LiveMint | date=September 22, 2015}}</ref> [[Canada]],<ref>{{cite news|url=https://www.ledevoir.com/economie/actualites-economiques/452848/investissement-preparer-sa-retraite-un-texto-a-la-fois|title=Préparer sa retraite, un texto à la fois|date=October 17, 2015|newspaper=[[Le Devoir]]|language=fr|trans-title=Preparing your retirement, one SMS at a time|author=François Desjardins|access-date=December 5, 2015}}</ref> and [[Singapore]].<ref>{{cite news | url=https://www.reuters.com/article/us-wealth-summit-mesitis/singapore-start-up-to-launch-robo-adviser-to-tap-tech-savvy-rich-idUSKCN0Z10S7 | title=Singapore start-up to launch robo adviser to tap tech-savvy rich | work=[[Reuters]] | date=June 15, 2016}}</ref>
+While robo-advisors are most common in the [[United States]], they are also present in [[Germany]],<ref name=robo/> [[Australia]],<ref>{{cite web|url=http://www.smh.com.au/business/banking-and-finance/asics-greg-medcraft-says-robo-advice-can-reduce-fees-and-conflicts-20151105-gkrmxw.html|title=ASIC's Greg Medcraft says 'robo advice' can reduce fees and conflicts|date=5 November 2015 }}</ref> [[India]],<ref>{{Cite web | url=http://www.livemint.com/Money/DOnQjdoOqd38ijz30HgtGM/Robo-advisory-could-change-distribution.html | title=Robo advisory could change distribution | first=Kayezad E. | last=Adajania | publisher=LiveMint | date=September 22, 2015}}</ref> [[Canada]],<ref>{{cite news|url=https://www.ledevoir.com/economie/actualites-economiques/452848/investissement-preparer-sa-retraite-un-texto-a-la-fois|title=Préparer sa retraite, un texto à la fois|date=October 17, 2015|newspaper=Le Devoir|language=fr|trans-title=Preparing your retirement, one SMS at a time|author=François Desjardins|access-date=December 5, 2015}}</ref> and [[Singapore]].<ref>{{cite news | url=https://www.reuters.com/article/us-wealth-summit-mesitis/singapore-start-up-to-launch-robo-adviser-to-tap-tech-savvy-rich-idUSKCN0Z10S7 | title=Singapore start-up to launch robo adviser to tap tech-savvy rich | work=[[Reuters]] | date=June 15, 2016}}</ref>
-Robo-advisors are extending into newer business avenues, such as advising retail customers on how much money to spend vs. save, how to plan for retirement and decumulation (selling off securities over time),<ref name="Robo-Advising. Available at SSRN"/> and [[tax loss harvesting]].<ref name="investopedia" />
+Robo-advisors are extending into different aspects of financial advice, such as advising retail customers on how much money to spend versus save, how to plan for retirement and decumulation (selling off securities over time),<ref name="Robo-Advising. Available at SSRN"/> and [[tax loss harvesting]].
-==Methodology==
+== Methodology ==
 The tools they employ to manage client portfolios differ little from the portfolio management software already widely used in the profession.<ref>{{cite web | url=https://www.kiplinger.com/slideshow/investing/T023-S002-best-of-the-online-investment-advisers-2014/index.html  |title=Best of the Online Investment Advisers | date=June 2014}}</ref>
-The [[portfolio (finance)|portfolio]]s that robo-advisors offer are typically [[exchange-traded fund]]s, but some offer portfolios of individual [[stock]]s.<ref name="academic.oup.com"/><ref>{{cite web | url=https://www.emperorinvests.com/pure-stock-investing |title=The Stock Advantage |access-date=2021-12-24}}</ref> Typically they employ [[modern portfolio theory]], which minimizes risk for a given expected return.<ref name="investopedia">{{cite web |url=https://www.investopedia.com/terms/r/roboadvisor-roboadviser.asp |title=Robo-Advisor |publisher=[[Investopedia]] |author=Jake Frankenfield |date=16 November 2021}}</ref> Some are designed for use with [[socially responsible investing]], [[Halal investing]], or strategies similar to [[hedge fund]]s.<ref name="investopedia" />
+The [[portfolio (finance)|portfolio]]s that robo-advisors offer are typically [[exchange-traded fund]]s, but some offer portfolios of individual [[stock]]s.<ref name="academic.oup.com"/><ref>{{cite web | url=https://www.emperorinvests.com/pure-stock-investing |title=The Stock Advantage |access-date=2021-12-24}}</ref> Typically they employ [[modern portfolio theory]], which minimizes risk for a given expected return. Some are designed for use with [[socially responsible investing]], [[Halal investing]], or strategies similar to [[hedge fund]]s.
-==Consumer access==
+== Consumer access ==
-The customer acquisition costs and time constraints faced by traditional human advisors have left many middle-class investors underadvised or unable to obtain portfolio management services because of the minimums imposed on investable assets.<ref>{{cite web|url=http://www.kitces.com/blog/the-real-hidden-cost-that-has-been-inhibiting-financial-planning-for-the-masses/|title=The Real Hidden Cost That Has Been Inhibiting Financial Planning For The Masses | date=December 16, 2013}}</ref> The average financial planner has a minimum investment amount of $50,000,<ref name="AdvisorCost">{{cite web | url=http://www.advisoryhq.com/articles/financial-advisor-fees-wealth-managers-planners-and-fee-only-advisors/ | title=How Much Does a Financial Advisor Cost? (Average RIA & Financial Advisor Fees in 2016)}}</ref> while minimum investment amounts for robo-advisors start as low as $500 in the United States<ref>{{cite web|url=http://www.investmentzen.com/best-robo-advisors#account-minimums|title=What is the Best Robo Advisor?}}</ref> and as low as £1 in the [[United Kingdom]].<ref>{{Cite web|url=https://www.off3r.com/compare/best-robo-advisors|title=Robo-Advisors Comparison with OFF3R|website=www.off3r.com|language=en|access-date=2018-01-03}}</ref> In addition to having lower minimums on investable assets compared to traditional human advisors, robo-advisors charge fees ranging from 0.2% to 1.0% of Assets Under Management<ref>{{cite web | url=https://www2.deloitte.com/content/dam/Deloitte/de/Documents/financial-services/Robo-Advisory-in-Wealth-Management.pdf | title=Cost-Income Ratios and Robo-Advisory | publisher=Deloitte Consulting GmbH |date=December 2016}}</ref> while traditional financial planners charged average fees of 1.35% of Assets Under Management according to a survey conducted by AdvisoryHQ News.<ref name="AdvisorCost" />
+The customer acquisition costs and time constraints faced by traditional human advisors have left many middle-class investors underadvised or unable to obtain portfolio management services because of the minimums imposed on investable assets.<ref>{{cite web|url=http://www.kitces.com/blog/the-real-hidden-cost-that-has-been-inhibiting-financial-planning-for-the-masses/|title=The Real Hidden Cost That Has Been Inhibiting Financial Planning For The Masses | date=December 16, 2013}}</ref> The average financial planner has a minimum investment amount of $50,000,<ref name="AdvisorCost">{{cite web | url=http://www.advisoryhq.com/articles/financial-advisor-fees-wealth-managers-planners-and-fee-only-advisors/ | title=How Much Does a Financial Advisor Cost? (Average RIA & Financial Advisor Fees in 2016)}}</ref> while minimum investment amounts for robo-advisors start as low as $500 in the United States<ref>{{cite web|url=http://www.investmentzen.com/best-robo-advisors#account-minimums|title=What is the Best Robo Advisor?}}</ref> and as low as £1 in the [[United Kingdom]].<ref>{{Cite web|url=https://www.off3r.com/compare/best-robo-advisors|title=Robo-Advisors Comparison with OFF3R|publisher=off3r.com|access-date=2018-01-03}}</ref> In addition to having lower minimums on investable assets compared to traditional human advisors, robo-advisors charge fees ranging from 0.2 percentt to 1.0 percent of Assets Under Management,<ref>{{cite web | url=https://www2.deloitte.com/content/dam/Deloitte/de/Documents/financial-services/Robo-Advisory-in-Wealth-Management.pdf | title=Cost-Income Ratios and Robo-Advisory | publisher=Deloitte Consulting GmbH |date=December 2016}}</ref> while traditional financial planners charged average fees of 1.35 percent of Assets Under Management, according to a survey conducted by AdvisoryHQ News.<ref name="AdvisorCost" />
-==Regulation==
+== Regulation ==
-In the United States, robo-advisors must be [[registered investment advisor]]s, which are regulated by the [[Securities and Exchange Commission]].<ref>{{Cite web|title=Print 2 {{!}} PDF {{!}} Financial Technology {{!}} Finance & Money Management|url=https://www.scribd.com/document/435609625/Print2|access-date=2021-09-11|website=Scribd|language=en}}</ref> In the United Kingdom they are regulated by the [[Financial Conduct Authority]].
+In the United States, robo-advisors must be [[registered investment advisor]]s, which are regulated by the [[Securities and Exchange Commission]].<ref>{{Cite web|title=Print 2 {{!}} PDF {{!}} Financial Technology {{!}} Finance & Money Management|url=https://www.scribd.com/document/435609625/Print2|access-date=2021-09-11|website=Scribd|language=en}}</ref> In the [[United Kingdom]] they are regulated by the [[Financial Conduct Authority]].
-In Australia, the robo-advisors manage the client money through the [[Discretionary investment management|Managed Discretionary Account]] (MDA) structure.<ref>{{Cite web|title=MDA Structure {{!}} MDA Service for Digital Advice {{!}} QuietGrowth|url=https://www.quietgrowth.com.au/mda-structure|url-status=live}}</ref>
+Robo advisors that manage client money offer discretionary accounts for the clients. This sets them apart from micro investing firms, managed funds and investing platforms. In Australia, the robo-advisors manage the client money through the [[Discretionary investment management|Managed Discretionary Account]] (MDA) structure.
-==Total assets under management==
+== Total assets under management ==
-As of October 2017, robo-advisors had $224 billion in [[assets under management]].<ref>{{cite news | url=https://money.usnews.com/investing/investing-101/slideshows/9-things-to-know-about-robo-advisors | title=9 Things to Know About Robo Advisors | first=Wayne | last=Duggan | work=[[U.S. News & World Report]] | date=October 5, 2017}}</ref>
+The following are the largest robo-advisors by assets under management:<ref name="Friedberg 2021">{{cite web | last=Friedberg | first=Barbara | title=Top-10 Robo-Advisors By Assets Under Management | publisher=Forbes Advisor | date=2021-09-27 | url=https://www.forbes.com/advisor/investing/top-robo-advisors-by-aum/ | access-date=2023-01-28}}</ref>
-The following are the largest robo-advisors by assets under management:<ref>{{cite news | url=https://www.investmentnews.com/gallery/20181107/FREE/110709999/PH/10-largest-robo-advisers-by-aum | title=10 largest robo-advisers by AUM | first=Brittney | last=Grimes | work=investmentnews.com | date=November 7, 2018}}</ref>
 {| class="wikitable"
@@ Line 44: / Line 43: @@
 ! Country
 ! [[Assets under management]]
+! Clients
-! # of Accounts
 |-
 ! [[The Vanguard Group]]
-| U.S. || $83 billion ||
+| U.S. || $206.6 billion || 1,100,000
 |-
+! [[Wealthfront]]
-! [[Charles Schwab Corporation]]
-| U.S. || $33 billion || 223,000
+| U.S. || $75.0 billion || 1,000,000
 |-
+! [[Charles Schwab Corporation|Charles Schwab]]
-! [[TD Ameritrade]]
-| U.S. || $20 billion ||
+| U.S. || $65.8 billion || 262,000
 |-
 ! [[Betterment (company)|Betterment]]
-| U.S. || $14 billion || 361,809
+| U.S. || $26.8 billion || 615,000
-|-
-! [[Wealthfront]]
-| U.S. || $11 billion || 216,599
 |-
 ! [[Personal Capital]]
-| U.S. || $8 billion || 18,308
+| U.S. || $16.1 billion || 26,000
-|-
-! [[Wealthsimple]]
-| Canada || $4 billion || 100,000
-|-
-![[Nutmeg (company)|Nutmeg]]
-| Great Britain || $1.9 billion ||70.000
-|-
-!Scalable Capital
-|Germany, Great Britain
-|$3 billion
-|80.000
-|-
-![[MoneyFarm|Moneyfarm]]
-|Great Britain, Italy
-|$2.2 billion<ref>{{Cite web|date=2021-08-26|title=Moneyfarm reaches £1.6bn under management|url=https://www.finextra.com/pressarticle/89039/moneyfarm-reaches-16bn-under-management|access-date=2021-09-03|website=Finextra Research|language=en}}</ref>
-|60.000
-|-
-![[StashAway]]
-|Singapore, Malaysia, MENA,
-Hong Kong
-|$1 billion
-|
-|-
-! FutureAdvisor by [[BlackRock]]
-| U.S. || $1 billion || 8,587
-|-
-!Elm Partners
-| U.S.
-|$0.8 billion
-|
-|-
-! [[Acorns (company)|Acorns]]
-| U.S. || $0.8 billion || 1.87 million
-|-
-! [[United Income]]
-| U.S. || $0.4 billion || 318
-|-
-! [[T. Rowe Price]]
-| U.S. || $0.4 billion ||
 |-
 |}
@@ Line 110: / Line 67: @@
 {{Investment-management}}
+[[Category:Robo-advisors| ]]
 [[Category:Financial technology|*]]
 [[Category:Online financial services companies]]

v t e Investment management
Investment fund structures	Common contractual fund (CCF) Exchange-traded fund (ETF) Fonds commun de placement (FCP) Fund of funds Index fund Investment trust Hedge fund Labour-sponsored venture capital corporation Listed investment company Mutual fund Offshore fund Open-ended fund company Open-ended investment company Pension fund Private-equity fund Qualifying investor alternative investment fund (QIAIF) Real estate investment trust (REIT) Royalty trust Short-term investment fund SICAV Split capital investment trust Tax transparent fund Umbrella fund Unit investment trust Unit trust Unitised insurance fund
Investment styles	Active / passive management Hedge Funds Impact investing Manager of managers Social finance Socially responsible investing Social trading Thematic investing Value / growth investing
Terminology	Closed-end fund Fund governance Institutional investor Net asset value Open-end fund Performance fee
Theory	Arbitrage pricing theory Efficient-market hypothesis Fixed income (Duration, Convexity) Martingale pricing Modern portfolio theory Noisy market hypothesis Yield curve
Related topics	Alternative investment Commodity pool operator Robo-advisor Returns-based style analysis Traditional investments UCITS
Category List