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Robo-advisors or robo-advisers are financial advisers that provide personalized 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] Before robo-advisers, online portfolio management interfaces existed since the early 2000s and these interfaces were used by financial managers to manage and balance clients' assets. By the end of 2015, robo-advisers from almost 100 companies around the globe were managing $60 billion in assets of clients.^[10]

In 2015, Hong Kong based 8 Securities launched one of Asia's first robo-advisors in Japan,^[11] followed there in 2016 by Money Design, Co., under the brand name THEO, and WealthNavi.^[12] In 2017, Singapore based StashAway received a capital markets services license from the Monetary Authority of Singapore.^[13]

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,^[14] 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.^[15]

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".^[16]

An investment platform, even if it provides automated service, cannot be termed as a robo advisor if it does not provide personalised investment advice.

Areas served

While robo-advisors are most common in the United States, they are also present in Germany,^[4] Australia,^[17] India,^[18] Canada,^[19] and Singapore.^[20]

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.^[21]

The portfolios that robo-advisors offer are typically exchange-traded funds, but some offer portfolios of individual stocks.^[2]^[22] 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.^[23] The average financial planner has a minimum investment amount of $50,000,^[24] while minimum investment amounts for robo-advisors start as low as $500 in the United States^[25] and as low as £1 in the United Kingdom.^[26] 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,^[27] while traditional financial planners charged average fees of 1.35 percent of Assets Under Management, according to a survey conducted by AdvisoryHQ News.^[24]

Regulation

In the United States, robo-advisors must be registered investment advisors, which are regulated by the Securities and Exchange Commission.^[28] 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:^[29]

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

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

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

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

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

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

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

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

[19] 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.

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

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

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

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

[AdvisorCost-24] "How Much Does a Financial Advisor Cost? (Average RIA & Financial Advisor Fees in 2016)".

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

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

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

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

[Friedberg_2021-29] Friedberg, Barbara (2021-09-27). "Top-10 Robo-Advisors By Assets Under Management". Forbes Advisor. Retrieved 2023-01-28.

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@@ Line 1: / Line 1: @@
+{{Short description|Financial advisory software}}
-'''Robo-advisors''' are a class of [[financial adviser]] that provides [[Investment management|portfolio management]] online with minimal human intervention.<ref>{{cite web | url = http://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 }}</ref>
+{{Personal finance}}
+'''Robo-advisors''' or '''robo-advisers''' are [[financial adviser]]s that provide personalized 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>
-While their exact recommended portfolio allocations may vary,<ref>{{ cite web | url = http://blogs.wsj.com/totalreturn/2015/04/24/five-robo-advisers-five-very-different-portfolios/ | title = Five Robo Advisers, Five Very Different Portfolios }}</ref> currently all robo-advisors employ algorithms such as [[Modern portfolio theory]] that originally served the traditional advisory community, which has used algorithmically-based automated investment solutions (dubbed in the industry as "rebalancing software") to conduct portfolio management since at least 2005.<ref>{{cite web | url = http://www.fa-mag.com/news/article-1019.html | title = For some advisors, it's the best $50,000 you'll ever spend }}</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> 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/>
-==Presence==
+== History ==
-While robo-advisors are most common in the [[United States]], they are also present in [[Europe]],<ref>{{cite web | url = http://venturebeat.com/2012/06/18/nutmeg-secures-5m/ | title = Financial advising service Nutmeg gets its own $5M investment }}</ref> [[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|title = Robo advisory could change distribution|url = http://www.livemint.com/Money/DOnQjdoOqd38ijz30HgtGM/Robo-advisory-could-change-distribution.html|website = http://www.livemint.com/|accessdate = 2015-12-09}}</ref> and [[Canada]].<ref>{{cite news
+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> Before robo-advisers, online portfolio management interfaces existed since the early 2000s and these interfaces were used by financial managers to manage and balance clients' assets. 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>
-| author = François Desjardins
-| title = Préparer sa retraite, un texto à la fois
-| trans-title= Preparing your retirement, one SMS at a time
-| newspaper = [[Le Devoir]]
-| date = October 17, 2015
-| pages =
-| url = http://www.ledevoir.com/economie/actualites-economiques/452848/investissement-preparer-sa-retraite-un-texto-a-la-fois
-| accessdate =  December 5, 2015
-| language = French
-}}</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==
+== Definition ==
-Legally, the term "financial advisor" applies to any entity giving advice about securities. But most robo-advisors limit themselves to providing portfolio management (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.
+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."
+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>
-==Total assets under management==
+An investment platform, even if it provides automated service, cannot be termed as a robo advisor if it does not provide personalised investment advice.
-Collectively, robo-advisors directly managed about $19 billion as of December 2014, according to a study by Corporate Insight. This figure represents a 21 percent increase in assets under management since July, and a 65 percent increase since April.<ref>{{cite web | url = http://www.businessinsider.com/robo-adviser-growth-2014-12 | title = Robo-Advisers Now Manage 21% More Money Than They Did 5 Months Ago }}</ref> By 2020 the global assets under management of robo-advisers is forecast to grow to an estimated US$255bn, according to a research report by MyPrivateBanking Research.<ref>{{cite web | url = http://www.ftadviser.com/2015/04/29/investments/dawn-of-the-robo-adviser-SVo7hs9oXRHmOVOwoLjvCP/article-0.html | title = Dawn of the robo-adviser }}</ref> As of August 2015, Charles Schwab, Wealthfront and Betterment lead the pack in gathering assets regarding robo-advisors.<ref>{{cite web | url = http://www.swfinstitute.org/swf-article/everyone-wants-a-robo-advisor-right-8461344// | title = Everyone Wants a Robo-Advisor, Right?? }}</ref>
+== Areas served ==
-==Industry context==
+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 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]].
-The tools they employ to manage client portfolios differ little from the portfolio management software already widely used in the profession. The main difference is in distribution channel. Until recently, portfolio management was almost exclusively conducted through human advisors and sold in a bundle with other services. Now, consumers have direct access to portfolio management tools, in the same way that they obtained access to brokerage houses like Charles Schwab and stock trading services with the advent of the [[Internet]].<ref>{{cite web | url = http://kiplinger.com/slideshow/investing/T023-S002-best-of-the-online-investment-advisers-2014/ | title = Best of the Online Investment Advisers }}</ref>
+== Methodology ==
-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 }}</ref>
+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. Some are designed for use with [[socially responsible investing]], [[Halal investing]], or strategies similar to [[hedge fund]]s.
-In the United States, robo-advisors must be [[registered investment advisor]]s, which are regulated by the [[Securities and Exchange Commission]].  In the United Kingdom they are regulated by the [[Financial Conduct Authority]].
+== Consumer access ==
-==Notable robo-advisors==
+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 ==
-* [[Wealthfront]]
+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]].
-* [[Betterment.com]]
-* [[MoneyFarm]]
+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.
-* [[Nutmeg (investment company)|Nutmeg]]{{cn|date=January 2016}}
-* [[FutureAdvisor]]
+== Total assets under management ==
-* [[Schwab Intelligent Portfolios]]
+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>
+{| class="wikitable"
+! 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 Corporation|Charles Schwab]]
+| U.S. || $65.8 billion || 262,000
+|-
+! [[Betterment (company)|Betterment]]
+| U.S. || $26.8 billion || 615,000
+|-
+! [[Personal Capital]]
+| U.S. || $16.1 billion || 26,000
+|-
+|}
 ==References==
 {{reflist}}
+{{Investment-management}}
-{{Private equity and venture capital}}
-[[Category:Financial services companies of the United States]]
+[[Category:Robo-advisors| ]]
-[[Category:Investment management companies of the United States]]
+[[Category:Financial technology|*]]
-[[Category:Online companies]]
+[[Category:Online financial services companies]]
-[[Category:Y Combinator companies]]
-[[Category:Privately held companies in the United States]]
-[[Category:Financial technology| ]]
-[[Category:Financial services]]
 [[Category:Web applications]]
 [[Category:Financial advisors]]

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
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