AI investing: Why more and more people are turning to robot-led investments

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Robo-advisors are automated, algorithm-driven financial planners that require no human supervision. By collecting information about a clients financial situation and future goals, it is able to offer investment advice and automatically allocate the correct funding into investments to achieve these goals.

Simon Lister, Financial Author for Investing Reviews a site dedicated to comparing and review investing products, commented on the new generation of financial planning technology.

“One of the easiest ways to build a passive income through investing, is to utilise ‘Robo advisors’ which have been growing in popularity in the UK over the last few years.

“You initially complete a short survey to determine what your investment strategy and risk profile is, and then the Robo-advisor will start investing in stocks on your behalf whilst you relax.”

For some, this type of platform seems to good to be true, whilst others are still sceptical of trusting their hard earned money to an AI system instead of another human being.

The lack of empathy and ‘human touch’ that many believe is key to good investment decisions is a big critique of this technology.

It’s a stance that is hard to argue with – the lack of ability to pick up the phone and call someone fix a mistake or talk to when an investment tanks is a dealbreaker for many.

However, the low-cost and low-maintenance appeal paired with its current accessibility means it’s quite likely that the next generation of investors will have a preference for the technology.

Many new and young investors are already not in favour of finding professional financial advice, mostly in fear of wasting money that could have been invested or just wanting to have hands-on interaction with their investments.

And the availability of these AI investment products make it easer than ever to trade, invest and sell comfortably from any smart device.

Choosing the right robo-advisor is equally as important as choosing the right financial advisor.

“There are plenty of robo-advisor apps that you can make the most of, but Wealthify, Nutmeg and MoneyFarm are among the best to get a passive income and start making your money work for you,” Mr Lister commented.

The original robo-advisor created in 2008, Betterment, relied on financial theory of Nobel prize winners Robert Shiller and Eugene Fama.

In contrast, although the AI is incredibly attune to the markets and able to analyse client data, it is not yet sufficiently personalised for some.

This is why it is ideal to use for smaller, passive and long-term investments but even then it is important to check in on them.

Mr Lister continued: “Whilst robo-investors are without question the one of best ways of creating a simple passive income, it would be advised to check your investments frequently because ultimately it is your money, and you need to know what is happening with your investments.”

Robo-advisors are also not yet effective when it comes to complex investments such as estate and tax planning, but the possibility of these developments arriving soon is quite high.

Although, one available option which is likely to benefit both the supporters and those against the AI technology: a combination of human touch and technological precision.

It is becoming more and more common for financial advisors to ‘white label’ robo-advisor platforms for their clients, taking the time-consuming tasks off their hands and allowing them more opportunity to evaluate and address their clients needs and concerns.

One important aspect to keep in mind is that regardless of whether it is a human or robot investing your money, research is the key to successful investments.

Understand how recommendations are generated by the robo-advisors in specific sectors of investing is an ideal place to start looking into.
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