Robo-advisors or robo-advisers are a class of financial adviser that provide financial advice or Investment management online with moderate to minimal human intervention.[1] They provide digital financial advice based on mathematical rules or algorithms. These algorithms are executed by software and thus financial advice do not require a human advisor. The software utilizes its algorithms to automatically allocate, manage and optimize clients’ assets.

There are over 100 robo-advisory services.[2][3] Investment management robo-advice is considered a breakthrough in formerly exclusive wealth management services, bringing services to a broader audience with lower cost compared to traditional human advice.[4] Robo-advisors typically allocate a client’s assets on the basis of risk preferences and desired target return.[5] While robo-advisors have the capability of allocating client assets in many investment products such as stocks, bonds, futures, commodities, real estate, the funds are often directed towards ETF portfolios.[2] Clients can choose between offerings with passive asset allocation techniques or active asset management styles.[2]


The first robo-advisors were launched in 2008 during the financial crisis.[6] In 2010, Jon Stein, a 30-year old entrepreneur, launched Betterment, and robo-advisors increased in popularity.[7] The first robo-advisers were used as online interface to manage and balance client’s assets by financial managers. Robo-adviser technology was not new to this field, as this kind of software has been in use by financial advisers and managers since early 2000’s. But they were made publicly available in 2008 for the first to general public who were in dire need to manage their assets personally. By the end of 2015, robo-advisers from almost 100 companies around the globe were managing $60 billion assets of clients and it is estimated that it will hit $2 trillion by the end of 2020.[8] In June 2016, robo-advisor Wealthfront announced a partnership with the Nevada State Treasurer to offer a 529 plan for college savings.[9] In 2017, Betterment raised $70 million of financing and Personal Capital raised $40 million of financing.[10]

In 2015, Hong Kong based 8 Securities launched one of Asia’s first robo-advisors in Japan,[11] followed there in 2016 by Money Design, Co., under the brand name THEO, and WealthNavi.[12] In 2017, Singapore based StashAway received a capital markets services license from the Monetary Authority of Singapore.[13]


A robo-advisor can be defined as “a self-guided online wealth management service that provides automated investment advice at low costs and low account minimums, employing portfolio management algorithms”.[14]

Legally, the term “financial advisor” applies to any entity giving advice about securities. Most robo-advisor services are instead limited to providing portfolio management[15] (i.e. allocating investments among asset classes) without addressing issues such as estate and retirement planning and cash-flow management, which are also the domain of financial planning.

Other designations for these financial technology companies include “automated investment advisor”, “automated investment management”, “online investment advisor” and “digital investment advisor”.

Areas served

While robo-advisors are most common in the United States, they are also present in Europe,[2] Australia,[16] India,[17], Canada[18], and Asia[19] In Canada, BMO SmartFolio and Wealthsimple are examples of robo-advisors.[20][21]


The tools they employ to manage client portfolios differ little from the portfolio management software already widely used in the profession. The main difference is in distribution channel. Until recently, portfolio management was almost exclusively conducted through human advisors and sold in a bundle with other services. Now, consumers have direct access to portfolio management tools, in the same way that they obtained access to brokerage houses like Charles Schwab and stock trading services with the advent of the Internet.[22] Robo-advisors are extending into newer business avenues.

The portfolios that robo-advisors offer are typically exchange-traded funds. However, some offer pure equity portfolios.[23]

The customer acquisition costs and time constraints faced by traditional human advisors have left many middle-class investors underadvised or unable to obtain portfolio management services because of the minimums imposed on investable assets.[24] The average financial planner has a minimum investment amount of $50,000,[25] while minimum investment amounts for robo-advisors start as low as $500 in the United States[26] and as low as £1 in the United Kingdom.[27] In addition to having lower minimums on investable assets compared to traditional human advisors, robo-advisors charge fees ranging from 0.2% to 1.0% of Assets Under Management[28] while traditional financial planners charged average fees of 1.35% of Assets Under Management according to a survey conducted by AdvisoryHQ News.[25]

In the United States, robo-advisors must be registered investment advisors, which are regulated by the Securities and Exchange Commission. In the United Kingdom they are regulated by the Financial Conduct Authority.

Total assets under management

As of October 2017, robo-advisors had $224 billion in assets under management.[29]

The following are the largest robo-advisors by assets under management:[30]

Company Country Assets under management # of Accounts
The Vanguard Group U.S. $83 billion
Charles Schwab Corporation U.S. $33 billion 223,000
TD Ameritrade U.S. $20 billion
Betterment U.S. $14 billion 361,809
Wealthfront U.S. $11 billion 216,599
Personal Capital U.S. $8 billion 18,308
Wealthsimple Canada $4 billion 100,000
Nutmeg Great Britain $1.9 billion 70.000
Scalable Capital Germany, Great Britain $1.5 billion
Moneyfarm Great Britain, Italy, Germany $1 billion 40.000
FutureAdvisor by BlackRock U.S. $1 billion 8,587
Acorns U.S. $0.8 billion 1.87 million
United Income U.S. $0.4 billion 318
T. Rowe Price U.S. $0.4 billion U.S. $0.1 billion 500


  1. ^Lieber, Ron (April 11, 2014). “Financial Advice for People Who Aren’t Rich”. The New York Times.(subscription required)
  2. ^ Jump up to:ab c d “Robo-Advisory in Wealth Management” (PDF). Deloitte Consulting GmbH. October 2016.
  3. ^“Hype vs. Reality: The Coming Waves of “Robo” Adoption” (PDF). A.T. Kearney. June 2015.
  4. ^“The expansion of Robo-Advisory in Wealth Management” (PDF). Deloitte Consulting GmbH. August 2016.
  5. ^Meola, Andrew (January 4, 2017). “Robo Advisors: Online Financial Advisors That Fit in Your Pocket”. Business Insider.
  6. ^NARAYANAN, APARNA (June 27, 2016). “As Robo Advisors Go Viral, Where Do Traditional Money Managers Go?”. Investor’s Business Daily.
  7. ^EULE, ALEXANDER (May 23, 2015). “Robo Advisors Take On Wall Street”. Barron’s.
  8. ^“”. Retrieved 2018-06-27. External link in |title= (help)
  9. ^Davis, Andrea (June 3, 2016). “Wealthfront leads robo expansion into college savings plans”.
  10. ^EULE, ALEX (July 29, 2017). “Rating the Robo-Advisors”. Barron’s.
  11. ^“Nomura buys into HK robo-advisor”. Retrieved 2019-08-29.
  12. ^“First-time investors urged to turn to inexpensive ‘robo-advisers'”. Retrieved 2019-08-29.
  13. ^Cua, Genevieve. “MAS proposes moves to support growth of robo advisory firms”. The Business Times. Retrieved 2018-08-31.
  14. ^Schueffel, Patrick (2017). The Concise Fintech Compendium. Fribourg: School of Management Fribourg/Switzerland. p. 26.
  15. ^“Robo-Advisors: An Introduction to Online Financial Advice”. Betterment. Retrieved 2019-01-11.
  16. ^“ASIC’s Greg Medcraft says ‘robo advice’ can reduce fees and conflicts”.
  17. ^Adajania, Kayezad E. (September 22, 2015). “Robo advisory could change distribution”. LiveMint.
  18. ^François Desjardins (October 17, 2015). “Préparer sa retraite, un texto à la fois”[Preparing your retirement, one SMS at a time]. Le Devoir (in French). Retrieved December 5, 2015.
  19. ^“Singapore start-up to launch robo adviser to tap tech-savvy rich”. Reuters. June 15, 2016.
  20. ^“Complete Guide to Canada’s Robo Advisors”. Kyle. December 18, 2017.
  21. ^Aston, David (May 18, 2016). “Find out if you should go robo”. MoneySense.
  22. ^“Best of the Online Investment Advisers”. June 2014.
  23. ^“The Equity Advantage”. February 17, 2019.
  24. ^“The Real Hidden Cost That Has Been Inhibiting Financial Planning For The Masses”. December 16, 2013.
  25. ^ Jump up to:ab “How Much Does a Financial Advisor Cost? (Average RIA & Financial Advisor Fees in 2016)”.
  26. ^“What is the Best Robo Advisor?”.
  27. ^“Robo-Advisors Comparison with OFF3R”. Retrieved 2018-01-03.
  28. ^“Cost-Income Ratios and Robo-Advisory” (PDF). Deloitte Consulting GmbH. December 2016.
  29. ^Duggan, Wayne (October 5, 2017). “9 Things to Know About Robo Advisors”. U.S. News & World Report.
  30. ^Grimes, Brittney (November 7, 2018). “10 largest robo-advisers by AUM”.

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