Robo Advisors, A Buzz!

In the past, there were people writing accounts and there were people giving advice about utilizing the wealth in a proper manner. Even today, people prefer financial advisors. Financial advisors are the ones, whose job is to advice people about finance, for example, advice regarding investment of money on stocks and shares or any other things related to wealth.
Everything has an influence of technology today. Even in this field of financial advisors, something known as automated investment advice has been introduced. This was introduced in the year 2008, initially with its scope only in the US, Australia and Europe emerging as a new buzz globally.

What are robo advisors?
Automated investment advice is nothing but providing financial advice with the help of computers called as robo advisors. Robo advisors are nothing but computers designed with specific algorithms to manage your money and give guidance about where to invest your money and where not to with the help of software, for example, xplan configuration, which is very popular in Australia. When it comes to investing money, emotions also play a vital role in that. Change in the market might also have huge impact on a person’s life who has invested money. As we know, machines are emotionless. The advice provided is completely practical without considering any emotions.

How does this robo advisor work?
As it is mentioned above, robo advisors are not real people. The question is, how do they provide financial advice without knowing you? Let us look into the answer in a simple way below:

  • Computers crunch data from real world observations and give financial advice with algorithms and formulae which has been designed for that task.finance-manager
  • These algorithms are executed with the help of software.
  • The algorithms built within this software automatically allocate data and manage client’s assets.
  • This is how robo advisors provide financial advice.

Pros and cons of robo advisors
Pros

  • Based on demographics, robo advisors provide financial advice on investment based on accurate calculations.
  • Robo advisors provide advice at cheaper rates than human financial advisor.

Cons

  • As we know robo advisors are emotionless. That’s why it can’t understand an individual’s situation and other feelings while providing advice.
  • We cannot trust a machine with money aspects easily, as it doesn’t know us or understand us.

Final words
Technology is evolving at a faster rate, yes agreed! The reason behind this evolution is humans itself. It depends on the human smart brains to create things. If the question is of creating no room for human jobs with this kind of technology, then that would be wrong. Opting for robo advisors is not a bad thing, as everything comes with pros and cons. There are advantages also to opt for robo advisors which might also turn out to be great.