Raqamyah Platform

ROBO ADVISOR


A robo advisor is a digital platform-based financial advisor who uses data algorithms and artificial intelligence to come up with an automated financial plan for investors with little or no human interaction.
A robo advisor will provide a list of basic finance and investment questions, based on your age and current assets, accumulated debt, investment-risk tolerance and long-term goals. When the questions are answered, the robo advisor will tailor a unique investment plan for the respondent, including the creation of an investment portfolio usually filled with low-cost exchange-traded funds (known as ETF's.)

The idea behind robo-advisory investing is to simplify the investment process using technology to build wealth-creating and risk-managed investment portfolios that are also tax efficient and that offer low fees. Previously, when investing, investors choices were pretty limited. They had only two options to choose from:

  • Do-it-yourself (DIY)
  • Hire a financial investment advisor (FIA)

Historically, there’s been a problem with trying to get an FIA: Many have minimum asset requirements of $500,000 or more. These requirements put many FIAs out of reach for younger and lower-net-worth individuals. So if an investor fell into this category, he has to fend himself or get generalized advice from a financial advisor that may not be an informed advice. In addition, it’s not uncommon for FIAs to charge 1% to 2% annually (or even more via the loaded investment products they push you into). That’s 1% to 2% you have to do better than the market just to keep up. As history has shown, this is a steep fee to overcome, and in many cases, FIAs also came with substandard financial advice to boot. Let’s also not forget that — if the investment advisor isn’t a fiduciary — they may not offer investments in your best interest but recommend investment products that best line their wallets.


  Do-It-Yourself Robo-Advisor Financial Advisor
Cost Low Medium High
Investment Flexibility High Low Medium
Account Minimums Low Low High
Time & Research High Medium Low

Should You Use a Robo Advisor?
If you don't want to be directly involved with your finance and investment management, and don't require any human interaction when making financial decisions, a robo advisor could be for you. Or, your life could be so busy with a growing family, demanding job, or health considerations that hamper your ability to pay close attention to your personal finances. If that's the case, a robo advisor could also be for you. There are many benefits of using a robo advisor, such as:

  • Robo advisors give you access to good portfolios at a low price: Exchange traded funds are low-cost, with management fees of about 0.25% for so-called "index funds." Compare that figure to traditional mutual funds, which usually charge 1.00% or more in fees. What's more, ETF's also match up well against mutual funds in terms of performance.
  • Robo advisors are user-friendly: All you really need to do to open a robo advisory account is sign on with a robo-advisor online, deposit money in an account, answer a few questions, and you're good to go with a new investment portfolio that's matched to your unique needs.
  • Robo advisors are always there for you: Robo advisors are available 24/7 for you