Origins of the Robo-advisor

The term Robo-advisor has become quite ubiquitous in the past decade since digital investing has become mainstream. During the COVID-19 pandemic in particular, amid market turmoil, the popularity of investing reached new highs. While most of this newfound attention was directed toward trading tech stocks on platforms such as Robinhood in America, it was also a record period of growth for many Robo-advisors. During the peak frenzy, Robinhood reached a record one million downloads in a single day (Haverstock and Konrad). Robo-advisors may have not yet reached such levels of excitement among retail investors, yet after more than a decade of steady growth globally, Robo-advisors are here to stay.

The term Robo-advisor is both helpful and misleading. There are no robots involved, even if automation of the financial advisor is implied. The exact origin is not known, but the earliest reference comes from a financial journal article in 2001 (Kane). The first platforms we would call by the term only emerged in 2010, in the wake of the financial crisis and riding a new wave of excitement for financial technology (Stein). In many ways, the Robo–advisor was inevitable. Like any other industry, the wealth management industry was due for digital transformation. Any process mainly driven by humans and paper is bound to be disrupted by digital platforms looking to optimize time and cost.

Now, let’s review the path Robo-advisors have taken from the early days, and where they seem to be heading today.