Robo-advisers. Background and Concept.

2016/12/11

Among the “digitalization” processes of financial technology (fintech) services is the recent phenomenon of the “automation” of financial advising that entails direct interaction between the investor and an investment technology platform with little or no human intervention.
These types of advisers, called “robo-advisers”, focus basically on generating an investment portfolio. They can also be called “automated investment managers” because in some cases they manage the portfolio as well. A.T. Kearney defines them as “providers that offer automated, low-cost, investment advisory services through web-based and/or mobile platforms”. The key to what they offer lies in providing a simple and transparent service that is financially and fiscally optimised, in addition to low costs for the customer.

Although they are still in an initial phase and are not well known on the majority of markets, there is a favourable breeding ground inasmuch as many relationship models are moving towards a progressive digitalisation and automation of the fintech offer (buyers, search tools, simulators, digital-only banks, etc.). Behavioural finance theories, which posit that discretionary decision-making by investors can suffer from flaws (or behavioural bias), are also in fashion.

According to Bloomberg1, the automated management industry in the US has evolved from almost zero assets in 2012 to a forecast $3 billion this year. Despite the huge disparity of forecasts, what is certain is that significant growth is projected.

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