What is a Robo-Advisor? (12/14)

Robo-advisors are a new class of financial advisory service that provides strategic indexing portfolios at an ultra-low cost.

See ETF PM’s robo-advisory service at InvestableBenchmarks.com, and consider the following factors:

1) Who designed the portfolio asset allocation, and is it transparent?

ETF PM’s investable benchmarks are fully transparent portfolios, that are based on the ETF prescription from Yale’s CIO, David Swensen. In our view, Swensen is the best architect available for a core benchmark portfolio.

2)  How does the portfolio performance compare to other leading solutions?

Over the trailing 10.9 year period, all three of our efficient, no-advisory fee, investable benchmark portfolios have delivered more than 8% annually, using just two to six leading ETFs from Vanguard and iShares.

See how we compete against other leading asset allocation portfolios in our quarterly blog, “The Best ETFs for Growth.”

3) What additional services are available?

In addition to strategic index investing, ETF PM specializes in liquid absolute return strategies. Our research concludes that ETF Trend Following is the best strategy to combine with indexing.

In fact, our active management delivered gains in the crash of 2008, proving our ability to protect investors from extreme stock market volatility.

See our presentation: ETF Trend Following.



Robo-advisors are a class of financial advisor that provides portfolio management online with minimal human intervention. While their recommendations may vary, they are all based on algorithms that originally served the traditional advisory community, which has relied on algorithmic templates to conduct portfolio management since at least 2005.

Other designations for this class of advisor include automated investment advisor, online investment advisor and digital investment advisor. While such advisors are most common in the United States, where they must be a registered investment advisor, they are also present in Europe.

Legally, the term “advisor” here applies to any entity giving advice about securities. But robo-advisors generally limit themselves to providing portfolio management (i.e. allocating investments among asset classes) without addressing larger issues of tax, estate and retirement planning, which are also the domain of financial planning.

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