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What actually is a robo-advisor?

Category : Investment

Publication date : 31/07/2019

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In a nutshell, robo-advisors are an innovative alternative to the services ordinarily provided by financial advisors. Like financial advisors, their robo-counterpart offer investment choices adapted to your objectives (why you’re investing) and your budget. Whereas traditional investment planning is reserved for scheduled discussions in your local bank, robo-advisors provide easily accessible online tools to support you. At Birdee, these tools include clear, simple, visual presentations of your investment’s progress, this helps you track and adapt so that you can achieve your goals as easily as possible.

How do robo-advisors work (technically)?

Think of it like ordering your morning coffee. Say, for example, you choose a small soya latte macchiato with extra caramel. You go through a process of selection, choosing: the size (small), the milk (soya), the type of coffee (latte macchiato), any extras (yes extra caramel please).  The coffee, in this case, is an ‘investment portfolio’ meaning a packet made up of how much and what you invest in. Robo-advisors, based on your choices, produce a customised product that best fits your needs, as if your name were written on the cup. Instead of coffee though, the robo-advisor analyses your answers to questions about your relationship with money and from there builds you a portfolio.

Despite the name, a robo-advisor has little to do with the robots we think of from the movies (C3P0, The Terminator and so on) unfortunately (because that would be cool).  Rather, robo-advisors are a system composed of highly attuned algorithms. This intricate attunement does, however, maximise your profit or return on your investment making your investment tailor-made to your personality and goals. From there, we at Birdee take care of the day-to-day management, which you can follow easily in visual representations displaying your investment’s progress (almost, but not quite as cool as R2-D2).

How do I use Birdee (practically)?

To get started with Birdee, just register online. It’s free and only takes a few minutes. As described, we’ll ask you a few questions. After this you can then select one or more portfolios and invest however much you would like starting from 1000 €.

Why use robo-advisors?

Simply put, robo-advisors are an efficient use of your money. They don’t waste money on large fees or commission for the ‘middle-man’.  As a result, more of us can try investing as the entrance payment is lower. Beyond this, our robo-advisors at Birdee are clear, visual and thanks to our friendly kind developers, easy-to-use. Imagine a bank open 24 hours a day 7 days a week, this flexibility is available with Birdee. There is also a flexibility in the amount you invest, you can withdraw and change your investment as you’d like at a touch of a button. Sounds too good to be true? Well, there’s more, robo-advisors provide unbiased advice and are ideal for beginner investors who’d like to dip their toes in.

Are robo-advisors for me?

As with almost everything, one size does not fit all. When it comes to financial advice, depending on your situation, traditional financial advisors can be a better option, and it can certainly feel odd to trust algorithm before human interaction. It may be for more complex portfolios that you’d prefer a financial advisor. And yet, we may be surprised how much is already automated by algorithms/robo-advisors in our daily lives from the highly complex to the seemingly banal (booking a train ticket, using an ATM, website searches). It’s safe to say we’ve witnessed a technological revolution in recent years. ‘Things aren’t like they used to be’ is a phrase that could be applied to many aspects of modern life. Traditional human financial advisors are no exception and no longer dominate the plain. At Birdee, you can benefit from the brilliance of algorithms and the reassurance that our portfolios are managed by the same sweet (albeit slightly nerdy) Birdee experts who created them.