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Ideally, Robo advisory Platforms or Robo Advisors are digital platforms that offer automated financial planning services. The algorithm-driven services feature very little or no supervision at all.

A standard Robo advisor gathers information from the clients about the economic situation and their goals through an online survey.

The advisor uses the data to provide some advice to the clients, and lastly, the investment is made into the client’s assets.

The best part about Robo advisors is they offer robust goal planning, portfolio management, account services, and some essential security features.

In simple terms, a robot advisor is nothing but a financial advisor who offers automated investment solutions.

Thus, you don’t need to appoint any financial advisor in person to make any investments.

You might be feeling that Robo advisory services are quite complicated, but that’s not the case as once upon a time, even internet banking was considered as dreaded, but today it is one of the most hassle free processes.

The digital devices are mainly based on mathematical rules or algorithms, and they are executed by software.

Above all, you can have access to this service 24*7. Emotions don’t influence these services as they follow a particular structure.


About Robo Advisors or Robo Advisory Platforms

Back in 2008, the Robo advisors were launched, and in 2010 they started taking investor money. It was during the great recession that the Robo advisors got some popularity.

Robo Advisory Platforms or Robo AdvisorsInitially, the purpose of Robo advisors was to rebalance the assets amid the target date funds.

No doubt the technology was not new as human advisors have been using this automated portfolio allocation software since 2000s.

Until 2008, only professionals could avail of it, and clients had to hire professionals to take advantage of the technology.

Currently, almost all Robo advisory platforms rely on f modern portfolio theory. While a few Robo advisors also provide optimized portfolios for the purpose of Hallal investing or tactical strategies that copy hedge funds.

The advent of contemporary Robo advisors changes the narrative of delivering service to the clients.

Today, after years of development, Robo advisors can handle complex tasks, including investment selection,   retirement planning, and tax-loss harvesting.

The industry experiences explosive growth and it is expected to grow by $7 trillion globally by 2025.

Some of the standard designations for Robo advisors include “automated investment management,” digital advice platforms, and “automated investment advisor.

All of them refer to the consumer shift using applications for investment management.


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    What is Portfolio Rebalancing in Robo Advisory?

    Almost all Robo advisors today use modern portfolio theory to create passive portfolios for their clients.

    After establishing the Robo, advisors tend to monitor the portfolios to maintain optimal asset class weightings.

    By using rebalancing bands, Robo advisors can quickly achieve this. Almost all the asset classes have a corresponding tolerance range and a target weight.

    The technique is said to be failed in the past, so Robo advisors now also use tax-loss harvesting. It is ideally a strategy that is all about selling securities at a loss opposite a capital gains tax liability.

    You can implement this technique to minimize the recognition of short-term capital gains.


    Should you hire a Robo advisor?

    Often when it comes to hiring a Robo advisor, you need to entail some risk. You also need to evaluate your financial condition, potential investment goals, and time horizon.

    You can also link your bank account directly and easily fund your Robo advisory account in many cases. The best part about Robo advisory services is that you can easily access them online.

    A plethora of digital platforms attract some demographics as compared to others. The platform is ideal for generation X investors who mostly depend on technology.

    It is mainly because the younger generation is quite comfortable sharing information online and entrusting technology with essential tasks, including wealth management.

    The technology is most likely to improve soon so they can attract more baby boomers.


    How do Robo Advisors earn money?

    The Robo advisors most likely make money through a wrap fee. It depends upon assets under management.

    Typically, the human, financial advisors charge 1% or more per year of AUM. On the other hand, Robo advisors charge just 0.25% per year.

    They mainly charge minimum fees because they tend to use algorithms to automate trades.

    Additionally, the Robo advisors must attract a plethora of smaller accounts to charge low fees to generate the same revenues.

    Besides the management fees, the Robo advisor also makes money in other ways, including earning interest on cash balances.

    Another stream of income for Robo advisors comes from payment for order flow. Ideally, Robo-advisors collect funds from deposits, interest, and dividends and then add them together into huge a block.

    Lastly, Robo-advisors can make money by marketing financial products and services to clients, including credit cards, insurance policies, or mortgages.

    Often they do it through strategic partnerships instead of advertising networks.


    Top Features of Robo Advisory Platforms

    24*7 Accessibility – The Robo advisory platforms are ideal for almost all investors irrespective of the amount of wealth. The best part is it is accessible 24*7.

    Minimum Costs – The fees are reduced drastically as there is no human intervention. Above all, the Robo advisors are way cheaper than social financial planners.

    Transparency – The Robo advisors are transparent in terms of fees, portfolios, and trades.

    Efficiency – All the changes in the portfolio are efficient and effective.

    Targeting Small Investors – There are several Robo Advisors that tend to target small investors, and they are potentially wealthy.


    What services do Robo Advisors offer?

    Almost all the companies operating as Robo Advisors tend to have comfortable and interactive platforms. It maintains all the information with regards to financial transactions effectively.

    The complete risk profiling is done through a plethora of questions at the time of account opening.

    Almost all online platforms feature goal and portfolio trackers, which help in monitoring the progress and check if the user is on the right path of the goal or no.

    The automated advisors suggest some changes if the user is not on the right path.


    How can you evaluate a Robo Advisor?

    Firstly you need to understand the type of financial services you need. Almost all Robo Advisors manage money in one form or other.

    The staple services that the Robo Advisors offer are portfolio management and asset allocation.

    They offer these services through an algorithm that is based on Modern Portfolio Theory. They also provide services as per the client’s goals and risk-taking appetite.

    Additionally, Robo Advisors also offer tax-loss harvesting services for portfolios that don’t have a tax advantage.

    They even provide tax optimization strategies, but you need to know that tax-loss harvesting is not always advantageous.

    Above all, it depends upon your tax situation. You need to read the specifications carefully if you want to implement tax-loss harvesting.


    How much do the Robo Advisors charge?

    The charges are most likely to vary from services to services. Generally, they charge 0.15% to 0.50% of the assets under management.

    A few of the advisors even offer free for a one-time setup.


    Pros and Cons of hiring Robo Advisory Platform

    Robo-Advisors are one of the shiniest platforms. The automated advisors differ from brokerage to brokerage.

    The catch is here, it features fantastic investment managers and software that uses complex algorithms to manage your investment portfolio.

    Irrespective of the model you choose, they will offer service throughout the process.

    Additionally, a lot of companies still doubt the robot’s viability as it tends to lack empathy and sophistication. They cannot deal with an unexpected crisis.

    Pros of hiring Robo Advisory Platform

    Minium fees– Before the introduction of Robo advisors platforms, investors were quite fortunate to receive professionally managed investment assistance for 1% of assets.

    Significantly, the robot’s paradigm has changed. There are several models available for cost-conscious consumers.

    Prize-winning investment model– Almost all Robo-advisor’s algorithms rely on Nobel Prize-winning theory to drive the majority of the models.

    Generally, the best practices investment theory works hard to build an investment portfolio with maximum return for minimum risk.

    Access the Robo Advisor services through a financial advisor-It is quite famous for typical financial planning services to offer white label Robo advisor platforms for the users as this is a cumbersome task.

    The professional finance needs to spend more time with the clients as they have to address estate and financial planning problems.

    Besides giving the opportunity to minimize the cost, the services also offer a personal touch.

    Enhance the market for financial advice– A few consumers or young investors having low net worth consider financial advice from professionals.

    Robo Advisors tend to increase the current market of financial advisory clients. It is mainly because they charge less and are also easy to access.

    Low minimum balance– It is beneficial for investors with a minimum net worth to get professional Robo advisory management.

    To get started, Robo advisors just need Rs.10,000 to Rs15,000. Additionally, there is no charge for personal capital.

    Cons of hiring Robo Advisors

    No complete customization– You are way more than just an investment portfolio as you have many goals.

    Though Robo advisors will allow you to edit and set your goals through their financial planning software, they also have some money-related issues which might benefit from a chat with a human advisor.

    Above all, unlike compassionate advisors, the Robo Advisors won’t hold your hand and talk to you about the investments that are most likely to work.

    They will bash the investor’s price schedules– The Robo Advisors are most likely to have low price schedules, but it is not right for all.

    On the other hand, it is also not true that all financial advisors are expensive.

    But there are financial advisors who charge as less than 1% of AUM on their services, and it is way less than the majority of the Robo Advisors.

    You can also hire advisors who charge an hourly rate or a fee for use, or they can combine both leasing Robo advisors and their service.

    Cannot meet face to face– if you want to maintain a relationship with your financial advisor, then you must hire human, financial advisors instead of Robo advisors.

    It is mainly because the robots don’t have an office where you can walk and talk to the advisor.


    RoboAdvisors and Young Investors

    Irrespective of where you stand in the Robo Advisor debate, one thing you must know surely is that the automated advisors offer some benefits for young investors, especially.

    Firstly they are relatively easy to use. Instead, the user interfaces are intuitive. When you use automation, you can make sure you can make contributions without thinking twice.

    They are mainly popular among young investors because they can invest whatever they have.

    One of the compelling aspects of Robo Advisor is the lower fees as they offer not only free trades but also no transaction fees at times. Annually they charge a fee of  0.25% while human advisors charge 1%.

    Irrespective of which slice you try upon, you need to know that a machine can never replace a human completely.

    No doubt, devices can help in minimizing the costs and make the entry barrier easier for young investors to attain.

    As compared to traditional investing, the Robo Advisors are relatively new to typical investing methods.

    Above all, young investors have a plethora of investment options open now, and they can be a great option.


    Are Robo Advisory Platforms safe?

    The millennial generation has seen the worst of all, from the Dotcom Bubble to the 2008 financial crisis. You might think if the bear market is approaching.

    But you should see one thing that when you pay for an excellent financial advisor, then it is entirely worth it even in the bear market.

    All you need to know is that you should spend money on advisors that understand the market economy truly.

    A Robo advisory Platform is most likely your best bet if you are young and planning to save up for your retirement.

    Above all, when you hire a Robo advisor, then you are most likely to bet on the bull market.


    Robo Advisors or Robo Advisory – Conclusion

    While each and every investor is free to draw their conclusion, which is of course on the basis of individual perspectives.

    What really must be taken into account is the personal preference and needs.

    Since we have already mentioned how cheap robo advisors are, you can invest, given you aim to minimize cost.

    We have also mentioned the group of investors who are likely to be benefitted by availing for robo advisory.

    Make sure you route for all the aspects you are in search of and they, make your final call of action. This would ensure fruitful returns.


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