Technology has indeed made wonders in the lives of the people including businessmen and traders. With the birth of Robo-advisors back in 2008, trading platforms have assigned them various tasks that would help provide an easy trading session with their clients. You are probably wondering if this technology has replaced the function of human financial advisors. A deeper understanding on the functions of a robo-advisor in CFD trading as well as in other trades will help you realize if it has indeed taken over the work of advisors and wealth managers.
Full Definition of Robo-Advisors
This technology is actually a software which is called in many terms. Some platforms regard them as automated investment advisors, automated investment managers, online investment advisors or digital investment advisors. Since robo advisors are digitally manipulated, it means that it can provide information with less human intervention. Thus, financial advisors, investment managers and data scientists feed the data to robo advisor’s system in the form of mathematical algorithms. When performing for a particular client,a robo-advisor makes use of its algorithms to automatically allocate, manage and optimize clients’ assets for either short-run or long-run investment.
The Extent of Robo-Advisor Service
There are about 100 robo-advisory services that are available in several trading platforms. Because of the several advantages that the software brings to both trading platform owners and clients, it is now considered as an ultimate upgrade and achievement in the field of wealth management. Said software offers tips and advice on stocks, bonds, futures, commodities and even CFD trading.
Common Tasks of Robo-Advisors in the Trade
1.Task Loss Harvesting
- Selection of Investment
- Retirement Planning
Advantage of Availing Robo- Advisor Services
1.Alternative for Traditional Advisors
In most trading scenarios, human advisor services can cause additional cost as the client needs to pay professional fees and commissions. Since robo-advisors are software based, this lessens your expenses. Explaining further, robo advisors deduct an annual flat fee of 0.2% to 0.5% from your account for service fee. Humans on the other hand require a range of 1% to 2% for service fee and additional charge for commissions.
Unlike humans, robo-advisors never sleep. Thus, a trader can easily get in touch with them even during wee hours as long as there is an internet signal.
- Requires Less Starting Capital
Trading platforms with human advisors require at least $5,000 to start your trade. They usually require higher initial capital because they have to make sure that their employees are properly compensated. Contrary to digital trading platforms, the management only requires very minimal to zero starting capital to be able to open an account with them simply because they pay a lesser number of employees in the company.
- Easy Access
Robo advisors can easily perform a particular decision by merely clicking some buttons or tab in the application. This is in contrast to traditional advisors who would require you to call them and fill out forms before performing your orders.
- Limits your order
Just like human advisors, the software also has the ability to set limitations. It does not allow you to select mutual funds or ETFs you are invested in, and you cannot purchase individual stocks or bonds in your account.
Robo advisors is indeed a wonderful breakthrough in the field of marketing. And to answer the question of it has really eliminated the need for human advisors, we can say that it actually didn’t do so. Robo advisors have actually helped lessen tasks of human financial advisors in terms of client interaction but they are still needed in the monitoring of the system as robo-advisors are prone to technical glitches. Robo advisors are not supposed to be seen as villains but saviours that help promote a better trading service for platform owners and better trading experience for clients.