Are robo-advisors regulated?

Robo-advisors have to be approved and regulated by the Financial Conduct Authority (FCA). This means, like banks, investment firms and other financial advisors have to follow rules on treating customers fairly, keeping client money safe and running a prudent business.

Which robo-advisor has the best returns?

Returns vary across providers. Most will have a statistics page where you can track the performance of the various portfolios on offer from a robo-advisor. You can usually see how portfolios have performed over 1 or 5 years or even by individual time periods. It can be hard to compare providers directly against each other as their risk rated portfolios may have different assets but it is useful to contrast how they all perform in different markets to spot the best robo-advisors. Past performance isn't a guarantee of future returns but it does give you a sense of what could happen with your money.

Is a robo-advisor better than an index fund?

An index fund follows the performance of an index such as the FTSE 100 or S&P 500 . It is made up of companies in the index it is tracking and will closely replicate their performance. This means if an index goes up, so will the tracker fund. But it also works the other way and a dip in an index will also be reflected in the performance of a tracker. In contrast, a robo-advisor builds a diversified portfolio of different ETFs, some of which may be index funds, based on an individual's attitude and appetite for risk.

Is using a robo-advisor the same as financial advice?

Robo-advisors are still regulated in the UK but they provide a different type of support than financial advisors. They offer a simplified form of advice geared towards recommending funds based on your response to a risk questionnaire. That is different to a financial advisor, which is regulated and qualified to advise on a range of issues and may be able to recommend a wider range of products.

Is all robo advice automated?

The robo element of robo advice refers to the algorithms behind the risk questionnaires and the technology that helps users contribute to and monitor their portfolio online. There is still plenty of human interaction behind the scenes at a robo platform such as building and rebalancing portfolios and setting investment strategies based on their economic and political outlook.

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Marc Shoffman

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Marc is an award-winning freelance journalist specialising in business and personal finance. His work has appeared in print and online publications ranging from FT Business to The Times, Mail on Sunday and Business Insider. He also co-presents the In For A Penny financial planning podcast.

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What Is a Robo-Advisor and How Does It Work?

How robo-advisors work and how to compare your options.

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