Should I Use a Robo-Advisor?

Robo-advisors have taken the financial world by storm since the crash of 2008. During the pandemic, they have continued to draw the attention of the public by offering accessible, low-cost investment management to anyRobo-advisors have taken the financial world by storm since the crash of 2008. During the pandemic, they have continued to draw the attention of the public by offering accessible, low-cost investment management to anyone with a desire to invest – no matter how deep or shallow your pockets are. According to Finextra, the global robo-advisory industry is predicted to have a growth rate of 53.54% between 2020 to 2025, further fuelled by government initiatives to encourage the digitalization of services. It is no wonder that more and more people are asking the question: “should I be using a robo-advisor?”. 

What is a robo-advisor?

Robo-advisors are a form of financial advisor that offers optimal advice and investment management services with little to no human participation. Their financial guidance is based on mathematical rules and algorithms, and they allocate your assets based on your risk preferences and desired target return. While they can allocate assets into a variety of different investment vehicles (including stocks, futures, bonds, and real estate), the popular choice is ETF Robo-advisors are a form of financial advisor that offers optimal advice and investment management services with little to no human participation. Their financial guidance is based on mathematical rules and algorithms, allocating your assets based on your risk preferences and desired target return. They can also allocate assets into a variety of different investment vehicles, including stocks, ETF portfolios, futures, index funds, bonds, and real estate. 

Why are robo-advisors significant?

Robo-advisors have soared to popularity for many reasons, but one of the most significant reasons is that they are accessible. While traditional wealth managers provide quality services to a smaller section of society, they aren’t always accessible or affordable for the vast majority of people.  

However, financial technology (fintech) and the use of robo-advisors has helped bridge this financial divide and encouraged the democratization of the financial industry, by bringing these services to a broader audience, with lower costs and greater opportunity for diversified investment.  

Why you should use a robo-advisor

Every robo-advisor has its own unique set of advantages and disadvantages – it’s not the case of ‘one-size-fits-all’, so it’s important to understand your personal financial goals before selecting one. That said, there are many fine Every robo-advisor has its own unique set of advantages and disadvantages – it’s not the case of ‘one-size-fits-all’, so it’s important to understand your personal financial goals before selecting one. That said, there are many fine features of robo-advisors worth considering if you’re looking for a way to optimise your investments: 

Low fees

Robo-advisors are able to charge less than traditional management firms, who have a more expensive overhead due to the use of human advisors over algorithms when managing and maintaining client portfolios. With human wealth managers, you don’t always experience a full disclosure of pricing. Robo-advisors have changed this paradigm significantly – in fact, a typical robo-advisor will charge around a quarter of the average brokerage fee.  

The use of passive funds is another fee-related factor. Despite the fact that the investment industry believes asset allocation to be the most important long-term driver of returns, most wealth managers still push the idea of outperforming the market. However, according to S&P research, this isn’t always the way to achieve optimum returns. Passive investment is often less expensive, less complex, and produces better after-tax results over medium to long time horizons than actively managed portfolios. Using passive funds, particularly exchange-traded funds (ETFs), is an effective strategy for generating long-term returns. 


Robo-Advisors can help create an optimally diversified portfolio at a low cost; helping investors experience the benefits of diversification, including reduced risk. Many robo-advisors employ a popular technique known as modern portfolio theory, or MPT, which tracks funds such as the S&P 500 and emphasizes diversification to mitigate risk and volatility. These robo-advisors typically use low-cost mutual funds or ETFs to distribute your investments across multiple assets. 

Diversification supports risk management and minimises the volatility of an asset’s price changes. However, you must remember that no matter how well diversified your portfolio is, risk can never be totally avoided. Overall, market risks influence practically every stock. Still, diversification across asset classes and finding the right balance between risk and reward can be made much smoother when using a robo-advisor.

Ease of use

The beautiful thing about robo-advisors is that their technology is user friendly, and you can sit back and relax knowing that their sophisticated algorithm is looking after your money. The majority of robo-advisors offer complete guidance from the start of your investment journey to the end – from advising on how much to invest to determining where to allocate your money. Furthermore, most robo-advisors will allow you to choose from one of their recommended portfolios or customise your portfolio depending on your risk tolerance, goals, and financial situation.  

Even a complete newbie can begin investing without getting caught up in complicated figures, jargon, and paperwork. They are always operating behind the scenes – maintaining and rebalancing your portfolio, reinvesting dividends and tax loss harvesting on a regular basis without your involvement.  

You can rest easy knowing that your money is invested in a secure, well-researched portfolio. 

Award winning technology and investment models

According to Investopedia, the aim of the ‘best practices investing theory’ is to develop investment portfolios that provide the best return for the least amount of risk. Robo-advisors leverage advanced investment portfolio theory to drive their products, which has seen many Nobel Laureates and award-winning technological advances as a result.  

A Robo’s software will automatically update your portfolio (known as rebalancing) when market conditions change or as you invest additional money to stay in line with your goals.  

You also might find that, nowadays, as the technology advances, many human financial advisors will be using some kind of robo-advisor themselves in order to help you design and manage your portfolio. 

Responsive customer service

Though robo-advisors are based on the idea of ‘no human supervision’, some of them do provide access to real financial advisors if you need one at any point on your investing journey. It’s not simply about minimal costs and high-efficiency portfolios – great customer service and a human touch still matter to many customers. For example, here at arty, our behind-the-scenes investment team loves to hear from the customers who trust us with their investment decisions, and are always happy to help.

No emotional decisions

Volatile markets cause investors to react in a variety of ways. Some people take a more conservative approach to investing, while others are naturally more adventurous. Some people seek financial advice, some panic, and others do nothing. 

Emotions are a defining characteristic of humans, and therefore have a lot of power and influence when we make decisions. This is especially true for financial decisions. No matter how impartial we try to be, we are particularly emotional when it comes to our money. This is where robo-advisers come in. As algorithms, their only job is to optimize our investment portfolio. Because robo-advisors’ investing decisions are more disciplined and less reliant on human emotion, they minimise human errors and can help investors navigate market volatility with greater confidence. 

Are there any drawbacks of using a robo-advisor?


One of the most common criticisms of robo-advisors is the lack of personalization, and risk-profiling based on One of the most common criticisms of robo-advisors might be their current lack of personalization. They are not 100% customized yet, and their risk-profiling is sometimes based on insufficient information. We are humans, with real-life factors that affect our short-term and long-term investing goals. While many robo-advisors now allow you to define and revise your goals using their financial planning software, you may have money-related concerns that would benefit from a conversation with a live person.  

Face-to-face communication

Following on from the last point, if you desire personal interaction with your financial advisor, robo-advisors may not be right for you. In this case, a more traditional financial advisory model will provide you with this level of human touch. 

You can’t choose your investments

When you invest with an online platform or robo-advisor, you don’t always get to pick your investments; instead, investing experts decide where your money is allocated, so you don’t receive a bespoke strategy. That isn’t to suggest you never have a say – for instance, some robo-advisors might offer you the choice of an ‘ethical’ or ‘sustainable’ portfolio, if that is the investing route you wish to follow. 

So, should I use a robo-advisor?

Consider both the benefits and drawbacks of robo-advising when deciding on the best plan for achieving your long and short-term financial goals. For instance, if the fact that human financial advisors can provide a more personal touch to financial advice is very important to you, a robo-advisor may not be the right fit for you. Likewise, if market volatility is one of your top investment concerns, employing a robo-advisor’s automated trading decisions is definitely worth exploring. Robo-advisors will also use the expertise of professional portfolio managers to help you avoid emotional traps that might occur during volatile trading periods, so they are a great option for reducing risk. This makes them ideal for long-term investors. 

Through robo-advisors, new investors in particular are enabled to make better financial decisions, as they give advice based on real-time data and the current economic climate. You also don’t need much money, time or knowledge to get started. Some of the finest features of robo-advisors include their accessibility to wider audiences, the ease of use when it comes to account creation and goal planning, their inexpensive fees, and diversification benefits – and are some of the many reasons why robo-advisors have soared to stardom. In an industry where once only a small portion of society could thrive, democratization through advanced technology like robo-advisors has been a game-changer.  

If you are ready to explore the possibilities and the power of a robo-advisor, arty could be a great choice for you. arty offers you 5 custom portfolios to choose from based on your chosen level of risk and desired target return, and unlike other robo-advisors, does not take custody of your money.  

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