Automated investment services are expanding. Many financial service companies are offering “robo advice,” in which investors complete an online questionnaire and a computer program generates and monitors a portfolio of funds. Robo-advisers are also designed to automatically rebalance a portfolio based on changes in the market as well as any changes in the amounts allocated to certain investments.
With many investors already making their own trades online, investment companies believe that robo advisors have these additional benefits:
- lower costs for obtaining advice and conducting transactions.
- an ability to adjust the portfolio for tax purposes by selling shares that have declined to offset gains.
- an easier investment approach for younger clients with less-complicated financial lives.
Some will be concerned about automated portfolio management. Human advisors will still be available to address issues about mortgages, insurance, estate planning, retirement income, and other topics that robo-advisers are not yet equipped to answer.
For additional information on robo advice, click on the following articles:
- Have students ask people to describe the process they use to select investments.
- Have students create a framework to analyze when using robo advice might be appropriate for an investor.
- What are benefits and drawbacks of robo advice?
- What factors might be considered when using robo advice for investment decisions?