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WorksheetsChapter 4: Robo-advisory Service
Total questions: 31
Worksheet time: 18mins
Robo-advisory service is also known as?
Automated investment service
Automated investment management service
Automated Investment Algorithm Trading
What are the elements consisting in the business model of Robo-advisory?
No physical presence
Online customer access
Physical presence
Youtube investment gurus' guidance
little human interaction
What kind of individual investment preferences that a customer must disclose upon registering for an online account with the Robo-advisory service company?
Unrealistic return requirement
Risk
Desired return
Investment amounts
How is algorithm used in Robo-advisory services?
To identify the investment choices depending on the risk appetite disclosed by the customers
To generate proper investment allocations based on weightings to each type of investment securities
To enhance the speed of delivery in assessing, investing and reporting on the clients' goals
To eliminate customers' risk preferences and comply with the company to achieve customers' goals
What type of investment strategy that Robo-advisory adapt in its choices of investment selection for its customers?
Passive investment strategy
Active investment strategy
Robo-advisors were born within the FinTech ecosystem to ______ or __________ and ___________
enhance, manage private wealth, destroy traditional wealth managers
advise, manage private wealth, disintermediate traditional wealth managers
advise, eliminate private wealth, traditional wealth managers
enhance, manage private wealth, disintermediate traditional wealth managers
How does Robo-advisory service companies different from one another?
Degree of passive investment
Depth of investment automation
self-assessment mechanisms
targeted customers
Degree of active management
Presentation of investment proposal
On-boarding new customers
Investment advise
Rebalancing
Reporting
Disclosing risk appetite/risk tolerance
On-boarding new customers
investment advice
account aggregation
Reporting
Self-directed robo-advisory
On-boarding new customers
investment advice
account aggregation
Reporting
Performance and communication
On-boarding new customers
investment advice
Execution
Reporting
Autopilot...
On-boarding new customers
investment advice
Execution
Rebalancing
Avoid myopic trading
On-boarding new customers
investment advice
Execution
Rebalancing
Simpler investment opportunities
On-boarding new customers
investment advice
Execution
Rebalancing
What consists in the first feature/facet of robo-advisors?
Lower the barrier of entry to automate the investment process
Generational shifts from baby boomers to millennials and younger gens.
Minimize the operating costs
In a highly digital/ connected society
Passive investment aims to achieve above market returns whilst active investment tracks an index or benchmarks in the financial market
True
False
Robo-advisors promoted _____ and _____ as key features of their offering.
indexing, tax evasion
indexing, tax optimization
active investment, high return
information asymmetry, scarcity
Why do Robo-advisors invest in ETFs as compared to mutual funds?
Lower investment cost
Can be traded throughout the day to facilitate rebalancing and tax minimization
Allow robo-advisors to cherry-pick whichever ETFs that they like
Higher investment opportunity
Robo-advisors used ETFs to construct short-term taxable portfolios.
True
False
In Robo-advisors, ETFs is replaced by automated portfolio indexing using ________.
Distributed computing power
Algorithm trading mechanisms
Artificial intelligence robots
Web designing mechanisms
What is the main purpose of using automated portfolio indexing instead of ETFs?
To replicate how ETF indices work
To trading on the underlying stocks directly
To eliminate the need to actively manage the portfolio
To manage the individual stocks altogether
Rebalancing is to eliminate risk completely by using asset allocation
True
False
When the market movements caused the invested portfolios to deviate, how do Robo-advisors revert the portfolios back toward the desired long-term equilibrium?
Run new mathematical optimization rules strictly on the algorithm models
Instruct the algorithm to design a new index and replicate the process continuously
Run several existing algorithms on the portfolios and find out the discrepancies of the deviation to make correction from there.
Explain how Robo-advisors differentiate itself from traditional wealth management in the fourth facet of Robo-advisor
Shape the process of enrolment using digital technology to personalize decision-making from the beginning
Determine the best customers to enrol into the Robo-advisory service and eliminate the ones that are not qualified
Design the process of investment selection by using customers' myopic trading strategy to invest
What is the main assumption that Robo-advisors uphold when on-boarding their customers and managing their investment portfolios?
Investors are rational and risk-averse
investors are only risk-taking if expecting to be compensated with a higher return
investors are irrational
investors are risk-taking whenever there is any speculation opportunities
The main idea in the fifth facet of Robo-advisors is to allow efficient ____ to reduce attrition rate during ______ and minimise the percentage of customers dropping out before sign up their commitment to invest.
reporting, communication of performance to the customers
enrolling mechanisms, the steps of self-assessment
the steps of self-assessment, enrolling mechanisms
rebalancing, account aggregation
Select the correct features of the Robo-advisors 2.0:
Transform into full-fledged digital family offices adding specialized services of wealth optimization beyond financial investments
Expanding business models from investment solutions to saving and payment platforms
Using gamification to align the customers' investment behaviour to long-term money management, solving educational burden
Develop a e-commerce marketplace within the Robo-advisors to gain insights of the customers' spending behaviour
What are the weaknesses of Robo-advisors 1.0?
Budget restriction to access further technology advancements
Model portfolios are not truly tailored
investment decisions lack of emotional considerations
relying on passive management is the limit to service broader and wealthier customers
How do Robo-advisors position themselves as investment platforms compared to the traditional intermediaries in the wealth management industry?
Robo-advisors allow both the traditional intermediaries and final investors to trade securities within the organized and transparent frameworks that may be looking for yield and financial advice
Robo-advisors allow the final investors to directly bypass the traditional intermediaries to eliminate the investment costs paid to the intermediaries and transparency in the decision-making process
Direct investments are straight claims on a financial, corporate, or government entity such as bonds and equities. Indirect investments are indirect claims on a financial, corporate, or government such as shares of investment funds.
True
False
How many ways do the financial intermediaries make money in the traditional financial market?
1
2
3
4
