A Robo Advisor is a digital application that offers clients financial advice created by algorithms, artificial intelligence, or mathematical formulas. The term Robo Advisor is short for robot advisor. However, the phrase Robo Advisor is inaccurate. To explain, a Robo Advisor is a digital construct, usually an algorithm or artificial intelligence (AI) rather than an actual robot.
A Brief History of Robo Advisors
The first known Robo Advisor was a semi-automated financial manager offered by Mint in 2006. More sophisticated Robo Advisors appeared during the Great Financial Meltdown in 2008. In fact, Robo Advisors’ appearance resulted from the popular distrust of human financial advisors and investment bankers.
In 2010, John Stein launched Betterment, the first Robo Advisor marketed to the general public. Over the next few years traditional asset managers like Vanguard, Morgan Stanley, Charles Schwab, and JPMorgan Chase entered the Robo Advisor market.
By 2018 Robo Advisors were managing $200 billion in assets, Barrons estimates. Notably, Vanguard’s Personal Advisor Services was the largest Robo Advisor overseeing $101 billion in assets. Schwab is the second largest Robo Advisor managing $27 billion assets. In addition, government agencies like the Nevada State Treasurer are turning to Robo Advisors to manage public investments.
5 Reasons Why Even Robo Financial Advisors Do Not Beat The Market
The goal of most Robo Advisors is not actually to beat the market but to automatically invest your money based on your requirements and risk tolerance. Most legitimate Robo Advisors do not even claim to beat the market.
Beating the market means beating the yearly return of the S
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