Chapter 2Robo-Advisors: Neither Robots Nor Advisors

“Carneades, who was he?”

—Alessandro Manzoni (1785–1873)

This chapter is dedicated to the innovation of Robo-Advisors. We clear the table of journalistic buzz about robo-technology and discuss what they really are, where they originate from, and how they are evolving. Their key points are explored: digital focus, single business mindedness, passive investment management, long-term portfolio rebalancing, effective on-boarding mechanisms, as well as tax-loss harvesting.

2.1 Introduction

Many of us enjoy our morning rites, reading a newspaper while toasting bread, drinking a cup of coffee before going to work. The youngest and most tech-savvy might scroll the latest tweets on global finance. Recently, there has not been a day without a new blog post about Robo-Advisors and their disruptive potential. This topic has clearly made an impact on professional media, although there seems to be a lot of journalistic biz-buzz around it, which might not facilitate a rational debate about the characteristics of these FinTechs.

We can just ponder for a moment the term “Robo-Advisor”. This bloggers' term conveys a biased perception about what these companies really are and do. For the many tech enthusiasts, Robo-Advisors are fully automated machines which make investment decisions without any human interaction and can fully replace professionals to provide advice that eliminates any conflict of interests to benefit final investors. Many ...

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