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May 18, 2023

Robo-Advisor in Wealth Management: Benefits & Features to Develop

May 18, 2023
Read 9 min

Robo-advisor is an automated digital platform that offers investment opportunities and financial planning to customers based on their risk profile and investment goals, and time horizon.

Robo-advisors embody the service wealth managers would dream of providing to their clients: fully-personalized data-driven management of an investor’s portfolio of assets – anything from monthly household spending to complex stock movements. In this regard, digital advisors outperform the best human advisors, as they are capable of searching, analyzing, and processing large volumes of structured and unstructured data 24/7 due to using computer algorithms and mathematical models.

At its core, a robo financial advisor provides automated, algorithm-based financial planning services with little to no human supervision. This way, robo wealth management advisors can do the following:

  • translate client data into investment logic, such as risk appetite or liquidity factors;
  • propose adequate investment opportunities out of thousands of possibilities;
  • create portfolios based on individual preferences.

Why has robo-advisory become so important in wealth management, which relies heavily on trust and human touch? Because the target audience, their habits, and preferences are changing. According to a Credit Karma survey, over 60% of Americans find finances too complicated. People prefer robo-investing and the personal finance management software market, which features on-demand advice powered by chatbots, gamification mechanisms, and other tools that engage and educate users with different levels of financial literacy. Adding robo-investing functionality leads to augmenting a customer base, effectively handling the most daunting aspects of consumers’ financial lives, and promoting a more personalized experience in wealth management.

As a major consequence of the above-mentioned trends, analytics expect that robo-advisors will be managing $4.5 trillion by 2027. Wealth managers fear that part of their business is at risk to new entrants. Meanwhile, fintech startups and progressive wealth advisory firms expand their presence on the market.

To stay competitive in the wealth management business, attract new customers, and retain the existing ones, established wealth management companies incrementally cooperate with Fintech and robo advisor software developers to ensure the implementation of their own robo-advisors and transform their business. This article addresses the following two questions:

  • What is a robo advisor and what immediate benefits your business can get from it?
  • What are the core features that make a good robo-advisor?

What Benefits Does Robo-advisory Bring to Wealth Managers?

1. Addressing investors’ growing demands

The wave of digitalization has changed market expectations regarding asset and wealth management. As customers expect more streamlined asset management, wealth managers need to adapt to this new reality.

It’s easier for customers to get started with an automated investment advisor.  They answer questions about financial goals, income, and risk tolerance. Then the robo-advisor’s algorithms create a personalized asset allocation model and pick out different securities to diversify a client’s portfolio and decrease its volatility. Users don’t need to monitor the market themselves and figure out where to invest their money. On top of that, robo-advisors are available 24/7 on any device.

2. Targeting new client segments

Robo-advisors make investment accessible for new types of clients, attracting new audiences to the product. 

First, robo-advisors are a low-cost alternative to traditional wealth managers. Human financial planners generally charge a 1-2% rate with the potential to add on a commission-based fee or apply their hourly or daily rates for consultation services. Robo advisory services cost is significantly lower or even free of charge.

Second, robo advisor investing attracts customers with lower investment amounts. Some digital advisors, like Wealthsimple, have no account minimum at all: a user can get started with as little as $1.

Third, a financial robo advisor is an effective tool for private investors with profound knowledge of investments and financial market trends. They allow investors to manage their accounts, and pick and choose investments without the need to interact with an advisor.

3. Automation of financial advisory processes

Robo-investing advisors automate time-consuming, repetitive tasks. They collect data, assign portfolios, and adjust them according to the changes in market forces or client profiles. This way, wealth management companies can optimize their back office processes, save their financial and human resources, and increase their own capacity and productivity, focusing on more complicated tasks.

4. Enhanced investor experience

Wealth advisory firms can combine the strengths of human advisors with robo-advisory capabilities. This hybrid approach allows for expanding service offerings, from automated self-service platforms to personalized advice from human advisors. It caters to diverse client needs and preferences, providing a comprehensive wealth management experience.

Robo-Advisory Technologies: Now & in the Future

Robo-advisors predominantly use rule-based automation and apply preset algorithms. With their help, advisors figure out an optimal asset allocation, set up an investment portfolio, and offer automatic rebalancing services, which means that the platform will execute the buys and sells to get the account to a target asset allocation at a set time interval, such as once per month, quarter, or year.

Modern digital advisors are also increasingly using ML and AI to improve investment strategies and deliver more personalized recommendations. Personalization enables robo-advisors to meet investors’ specific needs, goals, and limitations. They also bring flexibility and provide investors with better control over their portfolios. For example, they can choose between offered asset classes or strategies.

Gamification and education are other trends that are currently gaining momentum. These can include reward points for performing specific actions (e.g., reaching a saving goal), challenges, as well as educational content, quizzes, etc. With their help, wealth management platforms improve client engagement, make robo investing more interactive, and help clients – especially young ones – develop their financial literacy.

As for robo-advisors of the future, they are expected to take the form of personal full-service financial advisors. Its implementation will be driven by the advent of cognitive science-based technologies and Machine Learning (ML). 

Any questions? Drop us a line.


Robo-advisor in Wealth Management: Core Features

Self-registration and risk tolerance assessment 

Must have

Robo-advisors collect key information such as personal data and investment goals via a detailed questionnaire. 

Basic robo-advisors analyze the customer’s current life stage, interests, and portfolio goals. The implemented profiling process will evaluate the investor’s ability and willingness to take risks, determine her or his risk aversion profile, and recommend the most relevant securities.

Nice to have

A more advanced version of the robo-advisor is capable of more complicated and data-rich operations:

  • Gathering data from different external sources, such as bank and broker accounts, for additional information and more accurate risk profile assessment;
  • Gauging the customer’s investment style in addition to the standard aggressive, conservative, or balanced boxes. For example, it can be a choice between six, eight, or more investing styles;
  • Performing AML and KYC checks in the background by pulling data from both internal and external sources, if a robo-advisor goes beyond mere consulting services and is authorized to make financial transactions.

Another way for robo advisor companies to distinguish their services from the competition is to add new features to their interfaces, like gamification, investment education manuals, or dynamic questionnaires.

Analytics for investment advice and customization options

Must have

In the case of a simple version of the robo-advisor, the system applies for predefined rule-based algorithms and works within a limited scope of prescriptions and personalization that an organization can deliver to end clients. 

At its core, the robo investor decides how to allocate clients’ contributions in portfolios without involving them in choosing investments.

Nice to have

But what to do if a wealth management company is willing to offer a more personalized approach to clients of different types and with a different income?

More advanced robo-advisors tailor digital banking functionality, user interfaces, marketing, next-best actions, and calls to action to different audience segments in order to achieve a positive user experience. The functionality behind it is based on collecting data attributes per user and pairing it with AI technologies. 

Such robo-advisors can:

  • perform behavior-based customer segmentation;
  • allocate portfolios and provide investment advice based on different data sources besides a single questionnaire, for example, payment card and credit data; and so on.


Must have

Robo-advisors automate periodic reporting for the client – quarterly, yearly, or as often as needed. These digital solutions record each interaction, both for regulatory purposes and to enhance future interactions. They showcase transaction history and performance benchmarking, provide quick access to the necessary metrics in the form of charts or dashboards, and offer a clear view of the investment goal progress.

Nice to have

Top robo stock advisors file much more solid and data-rich reports of trades and transactions.

  • They consolidate external accounts and assets at other financial institutions. The generated holding and portfolio report help a user investing in different investment products (stocks, ULIPs, ETFs, and so on), known as holdings, get a clear picture of his/her overall net worth and overall performance.
  • They provide tax reports. This tool helps a user identify in advance the amount of taxes he/she will pay on their investments at the end of the year.
  • They contain built-in tools, like AI-based tools, that help interpret a performance report or explain the relevant market trends.

Bonus: NLP Processing

The recent advances in AI technologies, namely NLP, allow robo-advisors to gather information from news feeds, analyze public filings, and evaluate news and social media content, which provides new opportunities for asset management solutions. Robo-advisors equipped with such tools find out the information which can influence an investor, assemble the most relevant sentences into a contextual report, and display it for him/her.


One thing is clear – robo-advisors are not going anywhere. Nor can they stay unremarked by wealth managers. As customers are getting increasingly tech-savvy, they will be more and more attracted by the easily accessible, interactive, and efficient services of digital advisors.

Robo-advisors will continue to mature and evolve in order to better connect physical and digital experiences powering personalized and effective interactions with customers. Implementing them into their offering is becoming essential for wealth management and investment companies if they want to survive in a market that is quickly turning digital.

At Itexus, we specialize in developing financial software that makes an impact. Our team has worked on a number of wealth management projects, helping companies improve their services and client experience, automate processes, and benefit from the opportunities offered by modern technologies.

Need a reliable and experienced tech partner with deep financial industry knowledge? Contact us to discuss collaboration.

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