Human-Robot Interaction: When Investors Adjust the Usage of Robo-Advisors in Peer-to-Peer Lending | Semantic Scholar (2024)

FAQs

What are 2 cons negatives to using a robo-advisor? ›

The generic cons of Robo Advisors are that they don't offer many options for investor flexibility. They tend to not follow traditional advisory services, since there is a lack of human interaction.

They are increasingly popular among investors who want to access the markets. Tobo-advisors are low-cost, often have no minimum balance requirements, and tend to follow strategies suited for new and intermediate investors.

Many digital platforms target and attract certain demographics more than others. For robo-advisors, these include Millennial and Generation Z investors who are technology-savvy and still accumulating their investable assets.

They have become popular with novice investors because they have low starting deposits and don't require in-depth market knowledge. For experienced investors, robo-advisors can automate complex time-consuming activities like rebalancing and tax-loss harvesting.

Robo-advisors are believed to appeal more to younger people because this demographic tends to trust robots more and prefers doing everything online. Robo-advisors are also more accessible in terms of cost and the amount you can invest.

Robo advisors fall short of qualified human advisors in several ways. Among most platforms, the main service offered is portfolio management, which is a small part of what a qualified human advisor does. Here are the additional roles that many qualified human advisors take on.

Do robo-advisors outperform the S&P 500? Robo-advisors can outperform the S&P 500 or they can underperform it. It depends on the timing and what they have you invested in. Many robo-advisors will put a percentage of your portfolio in an index fund or a variety of funds intended to track the S&P 500.

2 Cybersecurity threats. Another risk of using robo-advisors is that they may be vulnerable to cyberattacks that compromise your data and assets. Robo-advisors store and process large amounts of sensitive information, such as your identity, bank accounts, portfolio holdings, and transactions.

The answer isn't clear-cut, as it largely depends on an array of factors from market volatility to the investor's specific financial goals and risk tolerance. Over the past decade, robo-advisors have become an increasingly common way for everyday investors to get involved in the financial markets.

That is, trust in chatbots, in algorithms, in autonomous decision-making, in fair and un-biased treatment, in cyber-security, etc. All of these trust issues (or ethical concerns) need to be resolved for robo-advice to be trusted.

Do robo-advisors perform better than humans? ›

While robo-advisors are incredibly efficient at managing investments and can provide general financial advice based on the information you provide, they may not be able to handle all aspects of financial planning.

Robos can “help create a portfolio you are comfortable with.” (To be clear, robo advisors don't protect you from market fluctuations; you can still lose money if the stock or fund you invest in tanks after you buy it, and you choose to sell.

Another risk of using robo-advisors is that they may be vulnerable to cyberattacks that compromise your data and assets. Robo-advisors store and process large amounts of sensitive information, such as your identity, bank accounts, portfolio holdings, and transactions.

In addition to creating an automated portfolio, robo-advisors can also offer their customers the following benefits: Lower fees compared with a traditional financial advisor. Lower capital required to start. The ability to avoid human error and bias.

What are the disadvantages? One of the biggest concerns regarding AI in this sector is based on how having easy access to advanced investment tools may lead some people to overestimate their abilities and take too many financial risks.

Pros of hiring a financial advisor include gaining access to expertise, leveraging time, and sharing responsibility. However, there are also potential downsides to consider, such as costs and fees, quality of service, and the risk of abandonment.