Robo–advisor is a class of financial adviser that provides financial advice or Investment management online with moderate to minimal human intervention while Digital Advisors corporate business strategy to technologies which enable and promote business needs.
Difference Between a Robo-Advisor and a Digital Advisor
A robo-advisor is an online financial advisor that uses algorithms and model portfolios based on certain information that has been obtained from the client. While robo-advisors are attractive based on their low costs and convenience, there is minimal human interaction. The focus is on investment allocation, not financial planning. No one is there to hold your hand while you’re making life’s big financial decisions like how to pay off college loans, having questions about buying that next house, or the deciding on the best savings plan to reach retirement goals.
A digital advisor is a hybrid of a robo-advisor and a traditional financial planner. Offering the online ease and convenience of a robo-advisor, a digital advisor adds in the human element by making a personal advisor accessible to every client via chat or phone. Digital advisors offer more than investment advice. Because users have access to an actual financial planner, they can speak with someone directly about their unique set of circumstances and work together to create a financial plan based on their specific situation.
Types of robo-advisors
The algorithmic asset management offers various benefits. Which features individual private investors profit from depends on which type of robo-advisor they use. A distinction is made between full-service, half-service, and self-service systems.
The full-service robo-advisor takes cares of all aspects of the financial investment. It suggests an investment strategy to the investor, takes over the complete asset management, and independently takes care of the rebalancing to restore the original investment structure, if necessary. Serious full-service robo-advisors are generally registered as investment advisors with state securities authorities or federally with the SEC, and are required to adhere to all of the same security laws levied on all registered advisors. This allows the robo-advisor to manage your assets in much the same way as a human advisor would.
As the name suggests, this robo-advisor offers limited service. It acts as a broker for its customers, procuring investment products as part of an investment strategy, but as soon as the investment structure has to be adjusted (rebalancing) it requires the approval of the customer. So if you use a half-service robo-advisor, you’re not entirely giving up the management of your investments.
The self-service robo-advisor can be regarded as a kind of guide. It only gives the investor tips on the topic of financial investment. The investor has to do all of the asset management (opening securities accounts, purchases, sales, rebalancing) on their own.
Digital Advisors Skills
Provide investment guidance and portfolio management
Many offer access to human advisors when you have questions
Good when starting out or if your situation is not complex
Offer hourly rates to help you create a financial plan, or give financial advice when a major life event is on the horizon.