A robo advisor is an artificial intelligence service designed to provide financial advice to clients. Its main characteristic is that the advice is delivered through the use of algorithms, and users can access it without needing to visit a physical office or branch. The advantage of these robots lies in cost reduction and the flexibility in investment options they provide.
These advisors, although they can be designed for many economic sectors—their possibilities are infinite—are currently more focused on the banking sector, especially in investment banking. The algorithms these robots use are capable of performing complex calculations that allow them to select the financial products that best suit the client and their risk-return profile.
Given that a large number of clients already conduct their routine financial transactions online or through their bank’s mobile applications, it can be concluded that one of the purposes of robo advisors is to extend this remote model to investment decision-making.
The robo-advisor model is ideal for clients with simple needs, or for small accounts that are beginning to invest. This type of client includes non-traditional investors, especially younger individuals with limited investment capacity.
Given that personal relationships remain fundamental for many investors, a robo advisor aims to assist in investment decision-making, complementing the work of financial advisors rather than replacing them.
On the other hand, although financial advisors may continue to play an essential role in wealth management, robo-advisors incorporate new capabilities that institutions need to adopt and integrate into their current business model. They can ultimately enable new business channels. Some banking institutions will be able to launch their own robo-advisory services, while others may opt for participation in independent platforms or partnerships with existing market solutions.
