These algorithms are designed by human financial advisors, investment managers and data scientists, and coded in software by programmers.
These algorithms are executed by software and do not require a human advisor to impart financial advice to a client.
The software utilizes its algorithms to automatically allocate, manage and optimize clients' assets for either short-run or long-run investment.
[7] While robo-advisors have the capability of allocating client assets in many investment products such as stocks, bonds, futures, commodities, and real estate, the advice is often directed towards exchange-traded funds.
[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.
While robo-advisors are most common in the United States, they are also present in Germany,[4] Australia,[17] India,[18] Canada,[19] and Singapore.
[20] Robo-advisors are extending into different aspects of financial advice, such as advising retail customers on how much money to spend versus save, how to plan for retirement and decumulation (selling off securities over time),[3] and tax loss harvesting.
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.