Why a Roboadvisor is Like Getting Financial Advice at a McDonald's Drive Through

Why a Roboadvisor is Like Getting Financial Advice at a McDonald's Drive Through

A Roboadvisor is kind of like getting your investment advice from the McDonald’s drive through window. It’s a website that provides automated financial advice with minimal human intervention. They basically use an algorithm and some basic input from the client to form a set of investment recommendations that your assets are invested into.  

Up until now, the high minimum amounts required for personal investment advice has left the middle class in the cold. Also, these services tend to price out at a rate which you have to be rich to pay. But now here comes McDonald’s. A simple website, a math equation, a low fee - sounds good, right? How do I hand over the keys to the car?

Well, there is one factor that is being overlooked: human emotion. People are emotional about their money. What may seem like a good idea on paper can be seen in a different light when it has a real impact on your real life. 

As an experienced financial advisor, I understand how human beings tend to behave when they see their money vanishing before their eyes.  Let me walk you through how a typical conversation goes every time I bring on a new client.

Me: So Beth, you’ve got a long time horizon until your kids go to college, 20 years. Would you say you’re an aggressive, moderate, or conservative investor?

Beth: Aggressive, for sure. I don’t need this money for a while so I don’t really care what happens to it. Put me in the most aggressive allocation you have.

Me: Are you certain about that?

Beth: Yes! 

Me: Well, you’ve got $100k to start with. Assuming 35% annual standard deviation, which is my most aggressive allocation, you would have had $650k during the market crash of 2008.  How does that sound?

Beth: Oh no, Sara, on second thought, I’m afraid to take that much risk. Put my money into something more conservative. I can’t put my three kids to college on that amount of money.  And, yes, I forgot that my mother is retiring this year so I’ll need to give her $2k per month.  Can you factor that in?  Sorry Sara, I forgot to tell you that before. It just slipped my mind!

See what I mean?  This scenario illustrates how a simple conversation can bring us back in line with what potential outcomes will really mean for our lives.

In summary, although circumstances vary widely from one to another, I would say that roboadvisor platforms are a good way to get financial advice for those who have no emotion attached to their money, a long time horizon, and simple requirements.  

If you do have complicated trust and estate issues, a need for cash flow planning, or simply are not willing to hand over the keys to the car, better to opt for a human financial advisor. Although many require minimum portfolio values of $500k or greater, there are some out there that will take on a smaller one. They are a bit harder to find. 

Indeed, McDonald’s can be a great option, but before you put the pedal to the metal you may want to consult Zagat’s and see what else is out there.

Sara Grillo
Marketing
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In a past life, I worked in finance in a variety of sales and marketing related roles, and hence hold the CFA® designation. With a BA in English from Harvard with honors and ... Click for full bio

China's Push Toward Excellence Delivers a Global Robotics Investment Opportunity

China's Push Toward Excellence Delivers a Global Robotics Investment Opportunity

Written by: Jeremie Capron

China is on a mission to change its reputation from a manufacturer of cheap, mass-produced goods to a world leader in high quality manufacturing. If that surprises you, you’re not the only one.


For decades, China has been synonymous with the word cheap. But times are changing, and much of that change is reliant on the adoption of robotics, automation, and artificial intelligence, or RAAI (pronounced “ray”). For investors, this shift is driving a major opportunity to capture growth and returns rooted in China’s rapidly increasing demand for RAAI technologies.

You may have heard of ‘Made in China 2025,’ the strategy announced in 2015 by the central government aimed at remaking its industrial sector into a global leader in high-technology products and advanced manufacturing techniques. Unlike some public relations announcements, this one is much more than just a marketing tagline. Heavily subsidized by the Chinese government, the program is focused on generating major investments in automated manufacturing processes, also referred to as Industry 4.0 technologies, in an effort to drive a massive transformation across every sector of manufacturing. The program aims to overhaul the infrastructure of China’s manufacturing industry by not only driving down costs, but also—and perhaps most importantly—by improving the quality of everything it manufactures, from textiles to automobiles to electronic components.

Already, China has become what is arguably the most exciting robotics market in the world. The numbers speak for themselves. In 2016 alone, more than 87,000 robots were sold in the country, representing a year-over-year increase of 27%, according to the International Federation of Robotics. Last month’s World Robot Conference 2017 in Beijing brought together nearly 300 artificial intelligence (AI) specialists and representatives of over 150 robotics enterprises, making it one of the world’s largest robotics-focused conference in the world to date. That’s quite a transition for a country that wasn’t even on the map in the area of robotics only a decade ago.

As impressive as that may be, what’s even more exciting for anyone with an eye on the robotics industry is the fact that this growth represents only a tiny fraction of the potential for robotics penetration across China’s manufacturing facilities—and for investors in the companies that are delivering or are poised to deliver on the promise of RAAI-driven manufacturing advancements.

Despite its commitment to leverage the power of robotics, automation and AI to meet its aggressive ‘Made in China 2025’ goals, at the moment China has only 1 robot in place for every 250 manufacturing workers. Compare that to countries like Germany and Japan, where manufacturers utilize an average of one robot for every 30 human workers. Even if China were simply trying to catch up to other countries’ use of robotics, those numbers would signal immense near-term growth. But China is on a mission to do much more than achieve the status quo. The result? According to a recent report by the International Federation of Robotics (IFR), in 2019 as much as 40% of the worldwide market volume of industrial robots could be sold in China alone.

To understand how the country can support such grand growth, just take a look at where and why robotics is being applied today. While the automotive sector has historically been the largest buyer of robots, China’s strategy reaches far and wide to include a wide variety of future-oriented manufacturing processes and industries.

Related: Smooth Tomorrow's Market Volatility With a Smart Approach to Robotics & AI

Electronics is a key example. In fact, the electrical and electronics industry surpassed the automotive industry as the top buyer of robotics in 2016, with sales up 75% to almost 30,000 units. Assemblers such as Foxconn rely on thousands of workers to assemble today’s new iPhones. Until recently, the assembly of these highly delicate components required a level of human dexterity that robots simply could not match, as well as human vision to help ensure accuracy and quality. But recent advancements in robotics are changing all that. Industrial robots already have the ability to handle many of the miniature components in today’s smart phones. Very soon, these robots are expected to have the skills to bolster the human workforce, significantly increasing manufacturing capacity. Newer, more dexterous industrial robots are expected to significantly reduce human error during the assembly process of even the most fragile components, including the recently announced OLED (organic light-emitting diode) screens that Samsung and Apple introduced on their latest mobile devices including the iPhone X. Advancements in computer vision are transforming how critical quality checks are performed on these and many other electronic devices. All of these innovations are coming together at just the right time for a country that is striving to create the world’s most advanced manufacturing climate.

Clearly, China’s trajectory in the area of RAAI is in hyper drive. For investors who are seeking a tool to leverage this opportunity in an intelligent and perhaps unexpected way, the ROBO Global Robotics & Automation Index may help. The ROBO Index already offers a vast exposure to China’s potential growth due to the depth and breadth of the robotics and automation supply chain. As China continues to improve its manufacturing processes to meet its 2025 initiative, every supplier across China’s far-reaching supply chains will benefit. Wherever they are located, suppliers of RAAI-related components—reduction gears, sensors, linear motion systems, controllers, and so much more—are bracing for spikes in demand as China pushes to turn its dream into a reality.

Today, around 13% of the revenues generated by the ROBO Global Index members are driven by China’s investments in robotics and automation. Tomorrow? It’s hard to say. But one thing is for certain: China’s commitment to improving the quality and cost-efficiency of its manufacturing facilities is showing no signs of slowing down—and its reliance on robotics, automation, and artificial intelligence is vital to its success.

Want all the details? Download the ROBO Global Investment Report - Summer Brings Best ROBO Earnings in Six Years or visit us here.

ROBO Global
Robotics and AI
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ROBO Global LLC is the creator of the ROBO Global® Robotics and Automation Index series, which provides comprehensive, transparent and diversified benchmarks representing the ... Click for full bio