Would you trust a robot as a financial advisor? This is not a far-fetched question for most people. Robo-Advisors are utilized to do various financial advice, such as investments, and to trade stocks automatically. Today, you will find quite a few firms that include these types of advisors. If you want to know more about Robo-Advisors, please keep on reading.
What is a Robo-Advisor?
To understand the bot’s concept of giving financial advice, you need to know what Robo-Advisors are. First introduced in 2008, during the financial crisis, these advisors are financial advisors who provide financial information or investment management online with little to no human intervention. Their advice is based on mathematical rules or algorithms run by software that manage and value a client’s assets. Clients can choose to participate in the process actively to improve their financial life.
How Does Robo-Advisors Work?
When a human client first meets with a Robo-Advisor, they are asked to provide information about their current financial situation and potential goals. The Robo-Advisor needs this advice and calculates what the client should spend their money on. All advice is based on a specific market risk level to get the highest return for a given level of risk. Robo-Advisors can also give you data about various stock tradings before you invest your money.
These machines, for example, IBM’s Watson, can assess an individual customer’s personality to determine how it affects their risk behavior when making financial decisions. The machine uses personality insights to determine a person’s disposition from accessible content provided by the customer. The inferred personality is then used to learn the client’s risk appetite and helps the machine select recommendations.
Who Uses Robo-Advisors?
Registered financial and investment advisors benefit from Robo-Advisors because they simplify investment tax and administrative advice, making the client service process more efficient. The human advisor can focus on tasks that a robot cannot do. Millennials love using Robo-Advisors because they have grown up with technology. It is an integral part of their lifestyle. Millennials also love this type of investment because it’s less expensive than relying on …