Glossary · UK
What is Robo-Adviser?
An online investment service that builds and manages a portfolio for a client automatically, based on their answers to a risk questionnaire, usually for a lower fee than a human financial adviser.
Full Definition
A robo-adviser is a digital investment platform that provides automated, algorithm-driven portfolio management with little or no direct involvement from a human adviser. A new customer typically completes an online questionnaire covering their investment goals, time horizon and attitude to risk, and the platform then allocates their money across a pre-built portfolio of funds (often low-cost index-tracking funds or exchange-traded funds) matched to their risk profile, automatically rebalancing the portfolio over time to keep it in line with the target allocation. Robo-advisers are regulated by the Financial Conduct Authority in the same way as traditional financial advice firms when they give personalised recommendations, but their reliance on automation and standardised portfolios generally lets them charge lower ongoing fees than a traditional face-to-face independent financial adviser, making them popular for straightforward goals such as building a Stocks and Shares ISA or general investment account without a large amount of money or complex circumstances. They are generally less suitable for people needing holistic advice spanning pensions, inheritance tax planning or complex tax situations, where a human adviser's judgement and ability to consider the whole picture still tends to add more value than a standardised algorithm.