Customized Robo-Advisor: analysis of the inclusion of cash assets

Purpose A Robo Advisor (RA) is a fully automated investment advisory service. Its development in recent years has been very relevant within the financial industry. Although most RAs comply with most investment principles (diversification, cost efficiency, personalization and contextualization of investment opportunities to the current environment), their need for standardization reduces their ability to find portfolios that fit the investors’ constraints or needs. The main objective of this paper is to analyze the possibility of eliminating this shortcoming of the RA by including new types of financial instruments or generating different investment portfolios. Design/methodology/approach This study performs a bottleneck analysis of all activities related to the management of financial instruments to detect the most affected activities when incorporating new types of instruments. This study also presents a case study on including fixed-income bonds to increase RA personalization and proposes two types of investment portfolios to promote personalization. Findings The bottleneck analysis has allowed us to identify that “instrument data validation” and “order management” are the most affected activities if new types of instruments are incorporated. In addition, the liquidity level of financial instruments is a critical variable that must be integrated into an RA. Originality/value The results indicate the possibility of designing a new RA with a higher level of personalization. This study helps to understand the difficulties and opportunities when customizing an RA.