So everybody is talking about robo-advisors…

As with any new cool technology, there seems to be many questions or misconceptions around it. Robo-advisors are the future, and therefore it is essential to understand what’s real and what’s just a myth before you decide to build one or use a robo-advisor for your investment needs. 

Here are the top seven myths of robo-advisors you need to know.

Myth #1: Robo-advisors are the same


They may have similar characteristics such as lower fees, automated transactions, no or low minimum balances and easy account set-up, but robo-advisors differ greatly in many other ways:

  • Types of available investments – such as ETFs, indexes, stocks, gold 
  • Fees or costs charged on your investments 
  • Access or non-access to investment advisors
  • Minimum required initial investment amount ($1 or in the thousands) 
  • Add-on services such as rebalancing or tax loss harvesting
  • Investment strategy
  • User interface

With regard to investment strategy, each robo-advisor tends to have proprietary algorithms that utilize different portfolio optimization techniques. Most use variants of Modern Portfolio Theory (MPT), bootstrapping, Monte Carlo with some perturbations, Meucci’s or Bayesian techniques, Black-Litterman model and plenty more. 

Figure 1 also shows the distribution of portfolio construction methodologies used by robo-advisors. 

To read more about the algorithms behind various robo-advisors, you can refer here and here

RoboAdvisors and portfolio construction

Figure 1: Robo-advisors and portfolio construction
(Source: Which algorithms do robo-advisors use?

Overall, how a robo-advisor is constructed and its functions boils down to the company’s preferred investment strategy. As such, not all robo-advisors are equal. Taking some effort to find out the nuances behind a robo-advisor’s capabilities will help you understand these apps’ different outcomes. This is important when finding the best fit.    

Myth #2: Robo-advisors only offer one-size-fits-all portfolios 

Definitely wrong!

Robo-advisors tailor portfolios according to the user’s goal or risk assessment. The assessment asks questions on a few factors: the time horizon, risk tolerance and amount invested, which quickly but sufficiently frames the user’s needs and financial goals. A mix of investment instruments from the robo-advisor’s investment universe will be selected as part of the constructed portfolio. A moderate risk investor looking to save for a house in the next five years will likely have a very different asset allocation (i.e, investments mix) compared to a low-risk investor looking to save for retirement in 25 years. 

The level of personalization also would vary according to the number of risk bands that a robo-advisor provides. Similar risk levels and goals may result in similar portfolios. Still, such circumstances are arguably inevitable as too many permutations may hinder automation or make it too complex for a robo-advisor. This is also one advantage that human wealth management advisors have over robo-advisors – the level of understanding and personalization of  a portfolio. 

Other than personalizing  portfolios according to goals and risks, certain robo-advisors also provide themed, sector, or idea portfolios for their customers. This is a different kind of personalization that may appeal to customers who prefer investing in things they are more familiar with, or enjoy spotting global trends or growth opportunities. Examples of themes in themed portfolios include shale gas, global recycling, online gaming, environmental social and corporate governance (ESG) and even, a “fight fat” portfolio (investing in multiple weight loss companies).  

See how financial giants have built their robo-advisors and the kind of portfolios here: 8 Big Players in the World of Digital Wealth

Myth #3: Robo-advisors are only for young people

Not at all!

Robo-advisors are a convenient tool for anyone who wants help growing their money. Whether you’re a Millennial, a baby boomer, or part of Generation X, Y or Z, robo-advisors can help you kickstart your investment journey – at any age.

However, we do not deny that Millennials and the generations after them could be a financial jackpot, especially for Registered Investment Advisors who seek to relate to and engage a new generation of clients. 

Find out why this is so: Millennials: The Financial Jackpot for Financial Advisors

Myth #4: I have to choose between a robo-advisor or a human 


Since both advisors provide different services, they are not mutually exclusive or even exist as competitors. Having one may not and does not need to stop you from engaging another. Consumers should think of both human and robo advisors as tools to achieve the same end goal of discovering their financial needs and to achieve their financial goals. They could also be targeting different segments: robo-advisors appeal to those with a passive investment strategy or with a lower amount of money invested, while human wealth management advisors are preferred by those who invest more aggressively or have a higher amount of money that they want to put in. 

The means to the end may differ – robo-advisors take on more of a passive investment strategy and commonly have lower returns, compared to human advisors. They also cost less than human advisors (human advisors receive 2-3% commissions, compared to less than 1% for robo-advisors). Humans could also be more active in understanding your needs, tailoring your products and monitoring the returns. The higher level of involvement and personalization  is also what drives up cost and requires financial institutions to be more selective with whose portfolios they manage. 

As such, a person may switch between robo-advisors and human advisors or even have both as part of a holistic investment strategy depending on their financial needs. 

Many investment professionals use robo-advising technology as part of their practice — and it works very well for their clients. Research indicates that many investors prefer a hybrid approach and that most clients expect their advisors to use technology to enhance their offerings. 

Myth #5: Robo-advisors are expensive


Robo-advisors usually charge a platform fee that covers transaction and custody fees. On top of that, the underlying financial products include some management fees that are typically collected by the fund manager, not by the robo-advisor. You would pay these same management fees if you were to invest yourself anyway. However, fees can go lower if assets under management are high. Some robo-advisors even remove any platform fee for some of their portfolios, typically those that are low risk and power-saving to attract assets and work on converting them into fee-bearing investment portfolios.

Typically, robo-advisors charge a platform fee of 0.5 to 1% per annum, which is inexpensive given that it covers all trading and custody costs. If you were to use the services of a traditional advisor, you would be likely to pay at least 1% per annum, unless you belong to the high-net-worth and ultra-high-net-worth segments. 

Myth #6: Robo-advisors are not smart and agile enough to weather market volatility

Outrightly false!

You may read that robo-advisors are not smart or agile enough to handle volatility like a Covid-19 crisis. In reality, it is often the contrary. A well-built robo-advisor buys without emotion when markets go down and trim when it goes up. On the other hand, you and your human advisor may base their trading decisions on emotions and do the opposite. Unless you are a financial genius, research shows that it is best to invest as passively as possible.

Myth 7: Robo-advisors are for those who can invest big

Not really.

As we have noted before, you don’t need a high investment amount to invest in a robo-advisor. Robo-advisors are primarily for those who don’t have enough money or the time to do financial planning and investments. If you have a lot of money, you can get your own human advisor, which will often cost you more but may not provide you with the results you want. If you have more important things to do than to create and manage portfolios, you are better off with a robo-advisor that comes with a portfolio builder that does the job for you. It will work on investing and rebalancing your portfolios against fluctuations of the financial markets. 

Robo-advisors can often do fractional units of mutual funds or fractional shares of ETFs, which allows them to invest very small amounts. Apps like Betterment in the US do not have any account minimum, for instance.

The wealth-as-a-service partners  

If you want to harness the power of robo-advisors for your financial institution and are ready to build your own, we could be the WealthTech partner you need.

At Bambu, we understand the power of technology and how to build it in a way that works for all types of financial institutions. 

Having built white-label robo-advisor solutions for 18 clients (including leading financial institutions like Franklin Templeton, HSBC and Standard Chartered), we are confident of building a robo-advisor solution tailored to your needs. 

Bambu’s founders bring decades of experience in finance and technology. Bambu also has teams in various functions that contribute to building a great robo-advisor: think, UI/UX, AI, R&D and investment, who bring domain knowledge, technical expertise and user-friendly design to all our robo-advisory solutions. As such, Bambu has delivered engaging experiences, and been able to predict financial behaviour and formulate portfolios. 

Speak to us at to find out how we can find the right robo-advisory solution fitted for your business and customer’s needs.

Behind every robo-advisor is a team or a set of investment professionals who will provide and guide the investment methodology. After all, 

“Robots capable of manufacturing robots do not exist. That would be the philosopher’s stone, the squaring of the circle.”

―Ernst Junger, “The Glass Bees”


Investing has long been a human-led experience where people trust financial institutions and their portfolio managers to advise them on potential opportunities. However, this slow-moving approach is quickly becoming a thing of the past with the rise of robo-advisors.

But what is a robo-advisor? Simply put, they are an emerging digital technology that provides people from differing investment backgrounds with an automated advisory service. From investment management and strategic advice to retirement planning, these digital-first tools work towards achieving a client’s specific financial goals. Backed by powerful data-driven technologies like machine learning, robo-advisors streamline the investing process and deliver long-term returns at a low-cost. 

Naturally, if your business is looking to launch a robo-advisor in the near future, it’s best to understand their precise purpose. Here, we outline some of the basics behind how the latest robo-advisors operate.

Explaining the AI in your robo-advisor

When a customer invests using a robo-advisor, the software works to achieve their objectives based on machine learning and optimised indexing strategies. But before the software can determine a suitable approach, the customer must complete a detailed questionnaire that assesses their ultimate financial goals, risk tolerance, timeframe, budget and tax liabilities.  

Once this information is established, the robo-advisor proposes and executes investment strategies that reflect the client’s unique goals. Meanwhile, the AI constantly monitors the probability of achieving the desired outcome and adjusts its approach accordingly. Throughout this process, there’s typically no direct human contact between the financial institution and the client. 

However, it’s important to realise that every financial institution’s robo-advisor will have subtle differences. With these AIs created using different investment and financial market data, an individual will have to research which robo-advisor is best suited to their needs. 

Are robo-advisors performing well in the market?

Although robo-advisors have only been publicly available since 2008, today you’ll find that most of the world’s largest financial institutions are heavily involved in the development of these investment tools. In fact, the U.S. robo-advisor market topped $1 trillion in 2020 – a figure that is growing approximately 40% year-on-year. Meanwhile, other financial hubs are starting to take notice, with a 2020 study finding that 38% of adult internet users in China are currently using robo-advisers.

As digitalization becomes a top priority for global financial institutions, the development of robo-advisors will be central to this ongoing shift. Currently, 70% of banks consider digital financial advisory services of major strategic importance, while 95% view the future of financial advice as a combination of face-to-face and digital services. Therefore, developing a winning robo-advisor is likely going to be hugely beneficial. 

Considering that 147 million investors around the globe are expected to utilize robo-advisors by 2023 – representing an 11-fold increase since 2017 – entering this digital marketplace now will position your company for a bright future.

Why launch a robo-advisor?

With access to robo-advisors rapidly increasing the world over, there are numerous reasons why your financial institution should also get on-board. One advantage that shouldn’t be underestimated is how your wealth managers can spend more time building relationships with clients to boost the uptake of value-added services. 

With data analysis and reporting aspects of an investment portfolio handled automatically by a robo-advisor, account managers will still have a critical, yet more customer-orientated role when offering financial advice. This means they can spend more time focused on complex or nuanced investment strategies requiring extensive experience, rather than bogged down in rudimentary facts and figures.

With these hybrid investment models combining the strengths of both humans and algorithms, a robo-advisor makes perfect sense for modern customers. Fortunately, this approach also serves evolving consumer expectations, as more people now prefer predominately automated solutions that only involve human contact when necessary.

Quick tips to consider before choosing a robo-advisor

If your financial organization is looking to enter the robo-advisor market, there are dozens of questions to answer before you’re ready to launch. But to give you a quick head start, here are a few simple tips to consider when planning your automated investment advisor. 

1. Understand your customer base

It doesn’t matter whether your business is looking to purchase a white-label robo-advisor or develop its own, having a truly in-depth understanding of your customer base is critical to success. By considering a wide range of demographics, including age, gender, salary, investment preferences and pain points, you can create a solution that makes sense for your customers.

2. Design a digital-first solution

In response to your customer’s demographics, the design of your robo-advisor could change dramatically. With many robo-advisors aimed at inexperienced investors looking to enter the market for the first time, implementing a range of tools that guide them through the basics is essential. Alternatively, experienced clientele will likely prefer comprehensive statistics and analytics at their fingertips.

3. Create an easy-to-use app

Knowing your customer demographics and psychographics is not enough until you create an app that they are willing to use, especially when they may be new to investing. This boils down to ease of use manifested in simplistic design of user interfaces and navigation, onboarding processes, and even readability of dashboards, portfolios and fee models. Providing the user comfort during the investment experience is instrumental to the success of any robo-advisor app.

Partner with Singapore’s Best

Now that you have a basic understanding about what is a robo-advisor, consider how Bambu’s world-class solutions will help your financial institution engage its customers. Having developed robust automated investment advisors for 18 high-end clients, including Franklin Templeton, HSBC and Standard Chartered, we have the expertise to build a powerful solution for your company too.

Backed by years of experience in the finance and technology sectors, Bambu’s specialist team can guide every stage of your robo-advisors’ development, ranging from customer research and UX design to tailored AI-driven algorithms. Contact us at to learn how our elegantly designed robo-advisory solutions can service your customer base and achieve your business goals.

What makes each generation unique? From the slang we use to the choices we make, the nature and significance of intergenerational differences has been subject to tireless debate. But as Millennials emerge as the world’s biggest spenders, one crucial difference – their relationship with money – is having a global impact.

For wealth managers, understanding this relationship is key to unlocking a new crop of budding investors. Millennials don’t just want to have more money: they want to find out what this money can help them achieve.

The largest consumer population aren’t investing

Investing can help those who may not have a strong financial security work towards building one for themselves. 

That’s why you’ll be hard pressed to find that Millenials, who are currently the biggest spenders globally, aren’t investing enough for their future.

Insight into Millennial financial behaviour

To better provide financial aid to the world’s largest consumer demographic, service providers would do well to understand their needs and goals.

1. Millennials rely on word-of-mouth

Millennials grew up as social media boomed, and connecting with peers has become a driving force in their buying decisions. A global market research study found 82% of Millennials rely on word-of-mouth, social media and mobile influences to make purchases, compared to 52% of Boomers. In contrast, just 19% of Millennials claim to be influenced by what they see in print media.

If attracting Millennials to invest is your goal, reaching them where they are most found is a first pivotal step.

2. Environmentally conscious

Beyond good products, Millennials prefer brands that commit to the society they serve. In other words, they are more socially aware and conscious of the companies they choose to support. With 81% preferring brands to make public their commitment to good corporate citizenship, investment firms need to do more than just delivering their core services. 

Millennials express their beliefs for causes through their purchasing power. These potential investors are more willing to invest in a company if their money is being channelled to providing more jobs in communities or reducing their carbon footprint.

3. Millennials demand digital automation

Millenials are the most digitally savvy investor group with a preference for technology-based interactions over human interaction.

They are actually open to learning more about investing, but expect financial services to incorporate the most cutting edge technology to make investing as simple and seamless as possible. Being able to check trends and data on the go and seek advice in just a few taps appeals to them, which traditional modes of investing are unable to provide for.

4. Common concerns with investing

Many Millennials understand the urgency and pragmatism into putting your money into places that will grow your wealth; however, the term “investing” has long been an elusive buzzword to many outside the financial sphere.

To the financially uninitiated, investing can seem intimidating and complex. The unwillingness to take risks is underpinned by the lack of and inefficient access to knowledge and advice.

Making investment the norm after saving

Merely saving for the future and having a retirement fund may not be enough of a financial safety net. Factoring inflation rates and possible economic downturns, Millennials who are not actively growing their money may be at high risk of financial insolvency much sooner than later.

This is why it is imperative that financial services do more to make investing an essential practice as saving.

How financial providers can achieve this

1. Reframe the perception of investing

Firstly, service providers need to quell common misconceptions that investments are complex and inaccessible.

Many Millennials believe that a certain degree of wealth or expert knowledge is required before they can start their investment journey and this is simply not true.

It’s a tough journey ahead, but service providers have to prioritize educating and advocating financial literacy to the public. By incorporating digital tutorials and targeted educational content in their customer service models, service providers can make the idea of investing digestible to this customer segment.

The aim is to transition their belief to seeing investment as not only important and essential, but also available to the everyday person. Providing Millennials with an intuitive, affordable digital platform gives providers the chance to shift perceptions and begin associating investing with their customers’ lifestyle, making it as accessible as a streaming subscription or gym membership.

2. Offer tailored hybrid solutions

Millennials may have a penchant for technology-based interactions but they also have a deep need for self-governance. They are more willing to explore new investment strategies and digital advisory platforms as long as they are personalized and offer a sense of “self-investing”.

This makes them the ideal demographic for personalized robo-advisory solutions, which are digital investment portfolios driven by algorithms to assist investors in making the right decisions with little to no human intervention. This is why two of three investors who opt for robo-advisory are Millennials.

However, despite their preference for a digital-based platform, Millennials still require the human touch and advice a human advisor can offer. As Millennials age, life events become increasingly complex: whether it’s marriage, a new business, or more financial commitments, the investing scenario becomes more nuanced.

This is where a hybrid solution comes to play: combining the speed, low cost and mobility of robo-advisory together with the experience of a seasoned wealth advisor should provide them with the best of both worlds.

Advisors ignore the new generation at their peril

Advisors who understand the needs and goals of Millennials and are able to adapt early to tailor to their personal preferences will be positioned to onboard a large share of this market segment. As emerging investors, this new generation offers exponential value to service providers and represents a new crop of potential lifelong customers. A proactive response to their needs could help advisors establish their client base for years to come, while those who fail to adapt their service offering may find themselves left behind.