What is a robo-advisor?

What is a robo-advisor?

Robo-advisors are often referred to as online advisors, although this is not always the right epithet. These automated assistants do not cost a lot of money, so you can get started in the shortest time possible with good efficiency.

But to understand whether a robo-advisor is right for you, whether it will help you, you need to do a little research before using it. If you need to minimize the human factor, this option is exactly right.

What are robo-advisors?

Robo-advisors are like an autopilot, only for the financial market participants. Without human intervention, and therefore saving time, you can create a financial planner.

Do not be surprised that you will need to provide information for analysis by the system, including – your financial capabilities, your strategy. This data is analyzed by the robot for automatic trading.

Also automatic advisors are used for portfolio management, account management or as a goal planner.

How robo-advisors work?

Robo-advisors’ range of functions varies depending on your preference and might contain a variety of options as well as training materials.

Advanced software is used in the work of advisors.

Standardly, after setting up such an Expert Advisor, your intervention is not required, but again, it all depends on your requirements. For example, some have an option – the consultation of a professional financial advisor in case of any questions.

Let us say that the work with the robot greatly saves the trader’s budget, and the initial deposit, as a rule, is not great. Creation of a portfolio does not take much time.

Services of robot-advisor

Expert advisors differ from one another at times, yet there are several characteristics that they all share:

  • Rebalancing (this is a complicated notion; in principle, it should be understood as restoring the percentage of the portfolio to its initial position; for example, stocks grew to 65 percent of the portfolio, while indices decreased to 35 percent.) The percentage will be returned to 50/50 by rebalancing). Depending on the market and your objectives.
  • The pension calculator is the clearest illustration of financial planning with a robo-advisor.
  • Collection of Tax Losses: If you have a taxable account, the robot should look into tax losses and deductions. This is something you should be aware of.

Advantages and disadvantages of robo-advisors.


No investment experience is required from the client. Suitable for beginners who have not yet developed their strategy. At the same time, time expenditures are minimized, it is possible to combine work on the exchange with the main work. With this advisor, you no longer need to spend hours in front of your computer to manage your investment portfolio.

Very accessible strategies will help newcomers to understand the investment market. You will also get an idea about the correctness of your portfolio.


The absence of real-time communication. Some robots, of course, have the ability to contact a live consultant, but this is the exception rather than the rule. Because of the lack of communication with an employee, the cost of the product for the corporation is greatly reduced, and commissions are acquired at a lower rate.

However, robots reduce your investment potential. If you have decided to create a diverse portfolio, you should rather refuse the help of robots, because they provide only standard ideas for investment and you will not be able to change anything.

Makes it necessary to have several accounts and some traders might not like that.

So should I use a Robo-Advisor?

Before you make any choice, read some of the considerations for automated trading.

Account Type

There are plenty of Expert Advisors and applications to suit every taste. You should set clear investment goals to begin with, and you should consider your budget, or rather, the amount you want to start with. To be exact, the amount you want to start with.

Usually, robo-advisors offer either personal trusts, which are subject to taxation, or retirement accounts. Don’t be surprised if you see an offer for trusts or help with 401(k) management.

Minimum investment requirements

It’s important to research the structure and fees before opening an account, and calculate your potential benefit. This is to avoid any hidden fees that may surprise you.

A minimum permanent balance on your trading account is required. It can be either $500 or $5,000, for example. This is up to the company and the robot advisor that you have chosen.

Some tips for your portfolio

Once you have subscribed to a robo-advisor, you are required to fill out a form that will help you to better borrow and assess an acceptable risk and strategy.

Immediately afterwards you will be offered the portfolio that best suits you and your finances.

Again, the right to choose is always up to you, you can also choose another portfolio if you are not satisfied with something.

A choice of investments is available

However, for all its usefulness, the selection of assets available for investment is very limited, as a rule it consists of low-cost ETFs and index funds.

Some clients are picky about the composition of the portfolio and want a more diverse portfolio. In that case, it’s worth reconsidering the need for an assistant.

In conclusion.

Despite the lack of communication with an employee, the pluses are small commissions and portfolio management fees.

Basic services usually include account rebalancing, planning tools and investment management. In some cases, often not free of charge, a live chat service is active in case there are any questions.

Suitable for beginners without much investment or risk knowledge or experience.

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