What is a Robo Advisor?

So, you’ve been browsing a few investment articles and came across the term robo-advisor.

Often called online advisors or automated investing services, robo-advisors come with low costs and little minimum requirements, so you’ll be able to start investing quickly and efficiently. 

It’s a good idea to do your research before working with robo-advisors to make sure it’s the right investment tool for you. If you’re looking for less human interaction in your trading, this might be the way to go.

What are Robo-Advisors?

Robo-advisors are digital or automated platforms that can be thought of as auto-pilot for traders and investors. Robo-advisors can also be considered a financial planning service and it also requires zero human interaction or supervision. 

They have the capability of making decisions on behalf of investors on how to invest their money. Generally, the robo-advisor will gather the client information concerning their financial situation and goals via a survey. It then uses this data to make investment decisions and offer financial advice. 

Robo-advisors can also offer additional services such as goal planning, portfolio management, security, account services, and robust education. If you’re interested in a robo-advisor, these features are a must. 

How do Robo-Advisors work?

Robo-advisors use computer algorithms and advanced computer software to manage and build investor portfolios. Depending on the robo-advisor you choose, there are additional features such as automatic account rebalancing, and educational content that can also be included. 

While most robo-advisors operate without much human intervention, some robo-advisors offer professional human financial advisors if investors or traders have any questions. 

What makes robo-advisors a great option is that they offer low account minimums and generally have low fee structures. The low costs mean that you don’t need much to start investing, and building your profile is seamless and quick. 

Robo-Advisor services

Generally, no matter which robo-advisor you choose, there are a few features that are shared across the board. 

  • Investment Portfolio Rebalancing: This is a common feature that robo-advisors offer. Robo-advisors can rebalance your investment account or portfolios at regular intervals. This is done based on the climate of the market exchange, and your financial situation and goals. 
  • Financial Planning Tools: Robo-advisors feature financial planning tools to best achieve your financial goals. An example of this is a retirement calculator. 
  • Tax-loss harvesting: If you have a taxable account, the robo-advisor should offer services like tax-loss harvesting and other tax strategies. It is something you should check out.  

The Pros and Cons of Robo-Advisors


  • Does not require clients to have prior investment knowledge. This makes robo-advisors a great option for beginners who are starting in investments and don’t have the know-how to make informed investment decisions.  
  • Not time-consuming. Robo-advisors are a great option for working professionals and individuals with hectic schedules. With a robo-advisor, you won’t need to spend hours managing your investment portfolio. 
  • Simple investment strategies. This makes it easier for beginners to understand the investment decisions being made. This method also makes it easy to assess the performance of your portfolio.


  • Lack of human-to-human interaction. While some robo-advisors offer live assistance, this is not a common feature. Live assistance features can also come with additional costs. The lack of human interaction comes with the benefit of lower fees and 24/7 investment opportunities. 
  • Limits your investment options. If your goal is to build a diverse investment portfolio then robo-advisors might not be for you. Robo-advisors offer general investment options. A downside of this is that you might not have an active say in the decision-making concerning your investments. 
  • Forces clients to open multiple accounts. This varies depending on which robo-advisor you choose. It also depends on the financial assets you want to invest in. 

Should you choose a Robo-Advisor?

Here are a few key considerations before deciding to trade with a robo-advisor. 

Type of Account

There are so many robo-advisors and investment apps to choose from. Before making a decision you should have clear financial goals in mind. We also advise that you consider your financial situation and the amount of money you are willing to invest. 

Depending on your goals, you might want to go with a retirement account or a personal trust. Robo-advisors generally offer both retirement accounts and taxable accounts. A select few might also offer trust accounts or aid in managing your 401(k). 

Minimum investment requirements

Before choosing a robo-advisor we recommend that you check out their fee structure. Familiarizing yourself with the fee structure is a great way to ensure that you won’t be blindsided by pesky hidden fees. 

You should also make sure to check out whether the robo-advisor you choose has any account minimums. Account minimums can range from $5,000 to $500 depending on the robo-advisor you choose. 

Recommendations for your portfolio

Generally, once you’ve signed up with a robo-advisor, you’ll be required to complete a survey. This is designed to get a general idea of your financial situation and goals. It is also designed to assess your financial risk tolerance and investing preferences. 

After you complete this survey, the robo-advisor will recommend a portfolio that best suits your goals, needs, and financial situation. 

If you’re unhappy with the portfolio recommended, the robo-advisor should allow you to switch to a different option. 

Investment selection available 

The investment selection offered by robo-advisors can be limited. Robo-advisors generally offer portfolios consisting of low-cost ETFs and index funds. 

If you want to have more control over what you invest in and when you might want to rethink robo-advisor services. Especially so if you’re looking to diversify your portfolio. 

In Conclusion

While robo-advisors do not offer live human interaction, the upside is that they do offer low costs and management fees.

Robo-advisors also offer services such as account rebalancing, financial planning tools, and portfolio management. In rare cases, and often for an additional fee, robo-advisors sometimes offer live human financial advisors if you have additional questions. 

What makes robo-advisors a great option is that you don’t need any prior knowledge about investments or market exchanges to get started. This makes it a great option for beginners.

About the author

Ziga Breznik is the owner and head of research at PublicFinanceInternational.org – he is an active investor in the forex, crypto and stock markets – he has seen trading platforms disappear along with his investments – especially during the “crypto boom”. Ziga learned the hard way that finding a reputable and trustworthy online brokerage is key to long-term success in the financial markets. He founded PublicFinanceInternational.org as a platform where he shares his research with one goal in mind: to provide unbiased and trustworthy online brokers reviews.