Robo-Advisors: The Amazon of Investing

What is Robo-Advising?  And why would I call this article “The Amazon of Investing?”


Last week saw the news of Amazon bidding for Whole Foods Market in an attempt to combine the earth-shattering capabilities of online with something as everyday as food shopping. In last week’s edition, I mentioned that there are far-reaching implications for a tech company bidding for a grocer.  One of these implications involves technology having moved full-force into the world of investing…and beyond.

Technology and investing have been married for decades with the advent of computer-model driven trading (and futures trading) dating back to before the 1987 stock market crash.  Technology and investing have yielded such amazing advances as program-trading on Wall Street trading desks, lower stock- and bond-trading commission costs, instantaneous online trading (as in the TV ads with the baby in the crib making E-Trades), and a recent phenomenon called Robo-Advising.

Robo-Advising is a game-changer and a technological disrupter, while also emphasizing that a human adviser will arguably always be needed at some point in the life of an investor.  Here are a few things that define Robo-Advising and why it could be seen as the “Amazon” of investing:

  • Robo-Advising is an entry point for both the most UNsophisticated (or care-free) investor, while providing the services that even the most sophisticated investor needs.
  • Robo-Advising drastically reduces the cost of getting started with an investment plan.  Costs do increase proportionately for increased advice and services.
  • Robo-Advising involves using an online platform to create a personal profile.  The new, potential investor is asked to answer a list of online questions about how much he/she makes, spends, and wants/needs to save.  Also asked are: your age; what kind of home you live in; if you are single, married, divorced or widowed; most important, what your GOALS are; etc., etc.
  • Then, long story short, after the potential investor answers these truly critical questions, a computer algorithm produces a list of investments that suit the person or couple/family answering the questions.
  • The person then takes the next steps and sets up accounts and a way to send money to the Robo-Adviser firm, and “an investor” is born!

The above description may over-simplify the process mildly but those are the principal steps.  Robo-Advising gives the never-before investor a vehicle to get started for a price that is not back-breaking.  However, the next steps in the Robo-Advising model — and arguably the most important steps for long-term investing success — involve the involvement of a human-being adviser within the Robo- framework and a higher cost.

Robo-Advising has earned the respect of newer and experienced financial advisers alike (including yours truly) and left behind will be the naive advisers who disrespect the Robo- phenomenon.  What remains to be seen — as with the Amazon bid for Whole Foods Market — is where the “rubber meets the road” in terms of the new investor (equate with the online shopper) who has accumulated savings and success who then needs to manage hers or his savings (or, hand-pick more sophisticated ingredients) and then manage the emotions that come along with accumulating, preserving and growing real wealth over a lifetime.  More to come on this topic.

Please see my new Blog at for archives of former issues and more.


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