Robo Advisor, regardless of the literal translation from English, identifies software that offers investment portfolios, built on the basis of risk management and asset allocation algorithms and managed through a digital channel, without interaction with a financial consultant. But what is to be known, right away, is that with the word robo there is no reference to the presence of real robots, but rather of algorithms that allow you to profile each customer via the web and offer customized investment portfolios.
The interesting question to understand at this point is whether or not the Robo Adivisors are in antithesis with the figure of the Human Advisor or at least if they can be identified as a support or a real substitute.
Undoubtedly these software allow to study, calculate and manage investment portfolios, eliminating a problem of no small importance, namely emotionality. They are in fact immune to emotions and do not run the risk of making thoughtless or subjective and little-considered choices. They proceed by analyzing the data and the market trend for the past years, taking into consideration the volatility of the stock, of the various changes that have occurred over time and based on these data create portfolios on which to invest. Obviously since the data of the past years may not reflect the future trend of the share, but they can undoubtedly allow us to understand its stability over time.
But if the Robo Advisor succeed apart from the human element, which is inessential and in some cases even counterproductive in the design and management phase of the portfolio, it becomes instead a component that is anything but superfluous in the immediately following phase, namely that of implementation.
To understand this better: the software performs an almost impeccable job but if those who receive them do not follow them, everything is useless. In other words, even if the indications provided by the Robo Advisor are more than reliable, without the human assistance that explains to the consumer these same indications and that makes it aware, the work will lose its effectiveness. The strongest criticism, however, that is moved towards the Robo Advisor, and which concerns more specifically not so much those who are seeking for enter the first time on the market but the old investors, is the fact that this technology does not allow to maintain our own positions and instead tends to dismantle all those already in place. The Robo Advisors, essentially, propose a closure from one day to the next of those that are already existing investments in favor of the purchase of the suggested securities, unlike a Human Advisor that probably would consider a shift, towards new titles, but gradually.