What is the difference between a financial advisor and Robo Advisor?

Hi Anon,

I think that the main difference between a financial advisor and a robo-advisor is that a robo-advisor would require users to complete a questionnair and based on the responses, the users are categorised into one of a few risk levels. Subsequently, the robo-advisor will recommend a few portfolios based on the assigned risk level for you.

On the other hand, a financial advisor goes through a series of questions to better capture you as a potential investor. The questions that they ask may vary from person to person, depending on the responses. This is mainly because each individual will have unique circumstance that the financial advisor would require more information in certain areas over the others. Furthermore, financial advisors can also ask you more specific questions that are based in your context and include more "emotions" during their question process.

It is also interesting to note that there is a rise of robo-advisors that are not completely detached from the human touch (https://solutions.kristal.ai/seedlypost) where humans are still able to intervene in the process to guide you along. Robo-advisors are an increasingly new concept and becoming more popular as they are a form of passive investment that investor can go towards. The biggest benefit is perhaps the auto-reallocation of portfolios according to a designated goal and this might be a more efficient method than the traditional financial advisor where frequent meetings might be required to adjust/consult on new objectives. That is not to say that one option is better than the other. However, should you be deciding on one option, you should be looking at the needs of you choosing between a human or a robo-advisor.

All the best!

Thank you, Anonymous, for the question. Essentially both have the same objective of helping clients in discovering their financial needs and providing suitable recommendation so as to achieve their financial goals. The difference is the medium to which you get the advice.

The traditional way of getting financial advice is via a human adviser. That is understandable because it has always been the case, until recently with the emergence of robo-advisors. Because money is so personal and involves emotions, aspirations and life decisions, we like to talk to a human adviser who we can relate to. One issue with human adviser is the uncomfortable sales process whereby we might feel the pressure to buy something.

Then comes robo-advisers, that essentially have the ability handle complex algorithm to provide advice that is accurate, fast and at your own time. The main issue with robo is that it lacks empathy and human wisdom which is often needed when we talk about money, dreams and trade-offs. Moreover, most of the robos out there are basically investment only, hence not comprehensive in planning approach.

There is actually now a third category - Bionic Financial Adviser.

Instead of having to choose between a human adviser or a robo-adviser, you can have the best of both worlds with a bionic financial adviser. MoneyOwl is Singapore's first bionic financial adviser. By bionic, it means we combine the precision of tech with the wisdom of human advisers to give you the advice you need. What that means is that you can browse our insurance, investment and will-writing robos for your planning needs and if you to speak with an adviser, our client advisers are there to journey with you at every stage of your financial life. You can read more about MoneyOwl at www.moneyowl.com.sg.