Robo-advisor in Wealth Management: Benefits & Features to Develop

Robo-advisor is a digital platform offering investment opportunities to the customer based on their risk profile and investment goals. 

It embodies the service wealth managers would dream of providing to their clients: fully-personalized data-driven management of an investor’s portfolio of assets – anything from monthly household spend to complex stock movements. In this regard, digital advisors outperform the best human advisors, as they are capable of searching, analyzing and processing large volumes of structured and unstructured data 24/7.

At its core, a robo financial advisor provides automated, algorithm-driven financial planning services with little to no human supervision. This way, robo wealth management advisors:

  • translate client data into investment logic, such as risk appetite or liquidity factors;
  • propose adequate investment opportunities out of thousands of possibilities, 
  • create portfolios based on individual preferences. 

Why has robo-advisory become so important in wealth management, which relies heavily on trust and human touch? Because the target audience, their habits and preferences are changing. According to a Credit Karma survey, 46% of consumers find finances too complicated. They prefer robo-investing and the personal finance management software market, which features on-demand advice powered by chatbots, gamification mechanisms, and other tools that engage and educate users with different levels of financial literacy. Adding robo-investing functionality leads to augmenting a customer base, effectively handling the most daunting aspects of consumers’ financial lives, and promoting a more personalized experience in wealth management. 

As a major consequence of the above-mentioned trends, Business Insider Intelligence expects that robo-advisors will be managing $4.6 trillion by 2022. Fintech startups know that and incrementally enhance their presence on the market:  60% of wealth managers fear that part of their business is at risk to new entrants.

To stay competitive in the wealth management business, attract new customers and retain the existing ones, established wealth management companies incrementally cooperate with Fintech software developers to ensure the implementation of their own robo-advisors and transform their business.This article addresses the following two questions:

  • How can a robo-advisor bring benefit to your business today, not tomorrow?
  • What core features must be implemented into a robo-advisor?

What Benefits Does Robo-advisory Bring to Wealth Managers?

1. Addressing changing needs

The wave of digitalization has changed market expectations regarding asset and wealth management. As customers are searching for a more simplified way to manage their assets, wealth managers need to adapt to this new reality. 

It is much more simple for a customer to get started with an automated investment advisor: he/she answers questions about his/her financial goals, income, and risk tolerance. The algorithms inherent in the robo-advisor’s mechanism create a personalized asset allocation model, and pick out different securities to diversify a client’s portfolio and decrease its volatility. Users don’t need to monitor the market themselves and figure out where to invest their money. On top of that, robo-advisors are available 24/7 on any computer, from any device.

2. Targeting new client segments

Robo-advisors make investment accessible for new types of clients, attracting new audiences to the product. 

First, robo-advisors are a low-cost alternative to traditional wealth managers. As stated by Investopedia, human financial planners generally charge a 1-2% rate with the potential to add on a commission-based fee or apply their hourly or daily rates for consultation services. Robo-advisors charge a much lower fee or even provide services which are free of charge. 

Second, robo-advisors attract customers with lower investment amounts. Some digital advisors, like Wealthsimple, have no account minimum at all: a user can get started with as little as $1. 

Third, robo-advisors are an effective tool for private investors with profound knowledge of investments and the financial market trends. They allow investors to manage their accounts, pick and choose investment without the need to interact with an advisor. 

3. Automation of financial advisory processes

A robo investing advisor fulfils time-consuming, yet simple tasks: it collects data, assigns portfolios, and adjusts them for changes in market forces or client profiles. This way, wealth management companies can optimize their back office processes, save their financial and human resources, and increase their own capacity and productivity, focusing on more complicated tasks. 

Robo-advisory Technologies: Now & in the Future

At the current moment robo-advisors predominantly use rule-based automation and apply preset algorithms to customize client portfolios. This software figures out an optimal asset allocation, sets up an investment portfolio, and offers automatic rebalancing services, which means that the platform will execute the buys and sells to get the account to a target asset allocation at a set time interval, such as once per month, quarter, or year.

However, today we already see more intelligent hybrid advisors with a human touch. Such digital advisors provide more customized wealth management operations in line with the client’s needs. Those can include algorithm-generated recommendations, portfolio comparison, or access to a dedicated advisor. 

Robo-advisors of the future will take the form of a personal full service financial advisor. Its implementation will be driven by the advent in cognitive science-based technologies and Machine Learning (ML).

Robo-advisor in Wealth Management: Core Features

Self-registration and risk tolerance assessment 

Must have

Robo-advisors collect key information such as personal data and investment goals via a detailed questionnaire. 

Basic robo-advisors analyze the customer’s current life stage, interests, and portfolio goals. The implemented profiling process will evaluate the investor’s ability and willingness to take risk, determine her or his risk aversion profile, and recommend the most relevant securities.

Nice to have

A more advanced version of the robo-advisor is capable of more complicated and data-rich operations:

  • Gathering data from different external sources, such as bank and broker accounts, for additional information and more accurate risk profile assessment;
  • Gauging the customer’s investment style in addition to the standard aggressive, conservative, or balanced boxes. For example, it can be a choice between six, eight, or more investing styles;
  • Performing AML and KYC checks in the background by pulling data from both internal and external sources, if a robo-advisor goes beyond mere consulting services and is authorized to make financial transactions.

Another way for wealth management companies to distinguish their robo-advisory services from competition, is to add new features to their interface, like gamification, investment education manuals, or dynamic questionnaires.

Analytics for investment advice and customization options

Must have

In case of a simple version of the robo-advisor, the system applies predefined rule-based algorithms and works within a limited scope of prescriptions and personalization that an organization can deliver to end clients. 

At its core, the robo-advisor decides how to allocate clients’ contributions in portfolios without involving them in choosing investments.

Nice to have

But what to do if a wealth management company is willing to offer a more personalized approach to clients of different types and with a different income? 

More advanced robo-advisors tailor digital banking functionality, user interfaces, marketing, next best actions, and calls to action to different audience segments in order to achieve a positive user experience. The functionality behind it is based on collecting data attributes per user and pairing it with AI technologies. 

Such robo-advisors can:

  • perform behavior-based customer segmentation;
  • allocate portfolios and provide investment advice based on different data sources besides a single questionnaire, for example payment card and credit data; 

and so on. 


Must have

Robo-advisors automate periodic reporting for the client – quarterly, yearly or as often as needed. These digital solutions record each interaction, both for regulatory purposes and to enhance future interactions. They showcase transaction history and performance benchmarking, provide quick access to the necessary metrics in form of charts or dashboards, and offer a clear view of the investment goal progress.

Nice to have

Top robo-advisors file much more solid and data-rich reports of trades and transactions. 

  • They consolidate external accounts and assets at other financial institutions. The generated holding and portfolio report helps a user investing in different investment products (stocks, ULIPs, ETFs, and so on), known as holdings, get a clear picture of his/her overall net worth and overall performance. 
  • They provide tax reports. This tool helps a user identify in advance the amount of taxes he/she will pay on their investments at the end of the year. 
  • They contain built-in tools, like AI-based tools, that help interpret a performance report, or explain the relevant market trends.

Bonus: NLP Processing

The recent advances in the AI technologies, namely NLP, allow robo-advisors to gather information from news feeds, analyse public filings, and evaluate news and social media content, which provides new opportunities for asset management solutions. Robo-advisors equipped with such tools find out the information which can influence an investor, assemble the most relevant sentences into a contextual report, and display it for him/her. 

The Bottom Line

One thing is clear – robo-advisors are not going anywhere. Nor can they stay unremarked by wealth managers. As customers are getting increasingly tech savvy, they will be more and more attracted by the easily accessible, gamified, and seamlessly integrated services of robo-advisors.

Robo-advisors will continue to mature and evolve in order to better connect physical and digital experiences powering personalized and effective interactions with customers. Implementing them into their offering is becoming essential for wealth management and investment companies if they want to survive on a market which is quickly turning digital.

Itexus with 7-year experience has worked on a number of robo-advisory projects, helping wealth management companies enter the field. Check out Itexus recent live project – Wealth Management Platform with Robo-advisor. Contact us for a free consultation!

Back to top

Any questions?

Drop us a line.