Robo-Advisors and Digital Wealth Management: Revolutionizing Investment Strategies

Abstract

Over the last two decades, the finance sector has seen remarkable changes primarily due to having robo advisors and digital wealth management services at their side. These new technologies utilize the power of AI, machine learning and big data algorithms to deliver tailor-made investment solutions automatically. Moreover, with such levels of automation, financial services go directly into the customer’s pockets, altering how people invest and make plans for their money. 
Robo advisors, in particular, became popular after the 2008 recession, partly due to criticism aimed at traditional financial advisors who charged exorbitant fees while offering very little transparency. This was a perfect opportunity for automated platforms to fill in the gaps. Robo advisors have democratized wealth management by leveraging algorithms considering risk appetite, goals, and market factors. For example, Betterment, Wealthfront, and Robinhood are popular among millennials and Gen Z investors. These platforms are usually cheaper than traditional advisors, charging between 0.25% and 0.50% yearly fees on assets managed by the provider, and most of them require very little to no initial investment, particularly appealing to beginner investors.