Implied in the moniker is the distinction that this newer method of money management is automated, is impersonal, and most of all, is simply not human.
While it's unclear who exactly coined the term (it first appeared in 2002), "robo-advisor" has become a handy way to refer to the variety of online investment platforms. Most often, it's used to reference a company like Wealthfront, which directly manages client assets through an online interface, using an algorithm.
Wealthfront president and CEO Adam Nash isn't a fan. "It's a pretty silly term," he says. "As far as I can tell, it's not used by any consumers. After all, when I use Expedia, it's not a 'robo-travel agent.' Is OpenTable a 'robo-concierge?'"
He doesn't think the term is meant to be malicious, but Nash is aware of the implications behind how it's often used. "It has been adopted by the financial advisor community in large part because they seem threatened by new entrants like us," he explains. "We find this strange because we largely serve the clients they typically won't take: young people who don't meet their high minimums."
"Unfortunately," he continues, "I think when consumers hear the term, they picture calling a phone number and hearing a computer talking back to them. Of course, nothing could be farther from the truth."
Nash says his company hires a "world-class team of PhDs and CFAs" led by economist Burt Malkiel to research investments, and then uses that insight with custom-built software. "We believe that in the next five to 10 years, everyone will be using some form of automated investment service."
"I've been with Wealthfront almost two years," he quips, "and in all my time at the company I have not yet found a single robot on the premises. 100% of our employees are human."