What is ‘robo-advice’?

Online investment advice and management is frequently referred to as “robo-advice”. Quite simply, robo-advice services use technology and automation to streamline many of the investment management activities that do not need to be done by humans. By automating much of this process and delivering the service online, the costs are typically quite low, and the service can be made available to more people.

By asking people questions about how much risk they may be seeking to take with their investments, and how long they plan to invest for, robo-advice (as the name suggests) actually provides advice in the form of recommended investment strategies for each client. In this way, it is quite different to a “do-it-yourself” investment approach.

Importantly, the investment approach used is based on a proven investment philosophy that focuses on using low cost, passive index funds (exchange-traded funds, or ETFs) to construct well-diversified investment portfolios for clients, where a person’s investments are allocated across a range of low and high growth investments to align with their recommended investment strategy.

Robo-advice then helps with smart and effective investment management activities like automated portfolio rebalancing. Also, most good robo-advice services have experienced professionals assessing the parameters of the investment framework, recommendations and ETF selection.

It’s pretty simple. Technology to enable efficiency, accessibility and affordability. A simple but effective way to invest and manage portfolios using ETFs.