Metadata
Sophistication
FinTech
Duty of care
Advice (programming)
Best insight from top research papers
Robo-advisors in finance are digital tools used to manage investment portfolios and provide financial planning services. They utilize automated investment software to cater to retail investors who lack the capital or expertise to hire a personal financial advisor. Robo-advisors evaluate clients' risk tolerance and construct globally diversified portfolios based on Modern Portfolio Theory. These tools have become popular in the financial services industry due to their ability to enhance the ease and speed of catering to consumers. They have also been used in fields such as credit, budgeting, insurance, and investment advice. However, the use of robo-advisors raises concerns regarding the duty of reasonable care, including risks arising from the use of digital technology and the possibility of misunderstandings in interactions with consumers. Despite these challenges, robo-advisors are expected to play a significant role in the future of the financial sector by reducing costs and democratizing access to capital markets .
Related Questions
What are conflicts of interest in the robo advisory relationship?4 answersConflicts of interest in the robo advisory relationship arise from various factors. Institutional Shareholder Services (Daskal) highlights conflicts in the proxy advisory firm industry, where voting recommendations may serve the best interest of the firms rather than shareholders. Robo-advisors (Fein) may not provide personal investment advice, minimize costs, or meet a high fiduciary standard of care. They are not designed for retirement accounts subject to ERISA and should be approached with caution. However, robo-advisors (Clarke) manage the fiduciary duty of care by using modern portfolio theory and providing full disclosure of conflicts of interest. Financial advisers (Edwards) exploit retail customers through conflicts of interest, leading to suboptimal products and greater profits for themselves. Robo-advisers have the potential to disrupt this market, but they also face regulatory risks. Robo-advisors (Brenner, Meyll) offer a valid alternative for seeking investment advice, especially for investors concerned about conflicts of interest in human financial advice.How do robo advisors compare to traditional financial advisors?5 answersRobo advisors have been found to demonstrate superior performance compared to traditional mutual funds and equity indices, as well as providing easy access and cost-effective advice. The use of robo advisors is driven by factors such as perceived usefulness and privacy, with higher perceived usefulness and privacy increasing usage intentions. However, the use of algorithms in robo advisors can render investors passive and uncertain, potentially weakening efforts to promote financial literacy and education. Robo advisors have become a disruptive trend in the wealth management industry, replacing traditional financial services and offering automated investment platforms with quantitative algorithms. They also serve as a valid alternative for seeking investment advice, particularly for investors concerned about potential conflicts of interest in human financial advice.What are some financial bots that give the most reliable crypto advice?3 answersThere are several financial bots that provide reliable crypto advice. One such bot is developed by Kobets and Kozlovskyi, which focuses on personalized financial advice and helps potential investors with capital distribution. Another bot, proposed by Giudici, Pagnottoni, and Polinesi, uses an extension of the traditional Markowitz model combined with Random Matrix Theory and network measures to achieve portfolio weights that enhance risk-return profiles. Additionally, Torrey, Fussell, and Kiesler suggest that robots can effectively give advice by using hedges or discourse markers in their speech, which can mitigate the commanding tone and make the robot more considerate and likeable. These bots offer different approaches to providing crypto advice and have been developed using various methodologies and technologies.What are some examples of AI applications in finance?4 answersAI has numerous applications in finance. It is being used in investment management, risk assessment, fraud detection, and customer service. AI can help financial institutions make more accurate investment decisions through pattern recognition and predictive analytics. It can analyze large amounts of data to identify patterns that could lead to loan defaults or credit risk. AI chatbots and virtual assistants are changing the way customer service is done, providing 24/7 service and improving the customer experience. In supply chain finance, AI is used in risk management, fraud detection, working capital management, and supply chain optimization. It can identify potential risks, prevent fraud, optimize cash flow, and improve supply chain efficiency. In the banking industry, AI is used in areas such as risk assessment, credit approval, investment management, fraud detection, personalized financial advisory, and automated customer support. AI has the potential to transform the way banks operate and serve their customers.What is the role of Robo-Advisors in financial decision making?5 answersRobo-advisors play a significant role in financial decision making by providing automated investment software and financial planning services. They use machine learning and self-identification to determine investment decisions. Robo-advisors evaluate clients' risk tolerance and construct globally diversified portfolios using Modern Portfolio Theory. They aim to democratize access to life insurance and empower clients to make fully informed decisions. However, the effectiveness of feature-based explanations provided by robo-advisors in improving decision-making is questionable. The adoption of robo-advisors is influenced by factors such as performance expectations, effort expectancy, social influences, and facilitating conditions. Financial literacy is also identified as a crucial criterion in determining financial investment decisions. Overall, robo-advisors leverage technology to provide accessible and efficient financial advisory services, but their impact on decision-making may vary depending on various factors.Can you provide the references in artificial intelligence in finance?5 answersArtificial intelligence (AI) and machine learning (ML) have found practical applications in the finance industry, including investment banking, personalized finance, credit management, asset management, fraud detection, and regulation compliance. AI in finance has the potential to generate insights on customer spending, obtain informed underwriting risk outcomes, detect anomalous fiscal transactions, and interact with customers using natural language. Explainable AI (XAI) is of great importance in highly-regulated domains like finance, ensuring transparency and traceability of decisions. Researchers have implemented both transparent models and post-hoc explainability methods in various finance areas, such as risk management, portfolio optimization, and applications around the stock market. However, the frontiers of AI/ML applications in finance and their ability to address pressing challenges, particularly in terms of transparency, are still uncertain.
