“robo-advisers,” as they are sometimes derisively known, aren’t for everyone — source.

AI financial advisers

  • Story? Sachin Rekhi, who is 30 years old and lives in Menlo Park, Calif., was wined and dined by advisers from Wall Street banks after selling his software company. But he concluded he could get what he wanted from Wealthfront, the largest of the online startups in terms of assets.
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“I wasn’t getting access to anything special from the traditional wealth advisers, and they were going to invest my money the same way,” says Mr. Rekhi, who opened an account with the Palo Alto, Calif.-based firm in 2012.
  • Who are they? Wealthfront, Betterment, Personal Capital, FutureAdvisor, SigFig Wealth Management and Motif Investing etc.
  • How big are they? Together the online advisers, which manage $4 billion in assets, represent a tiny fraction of the estimated $17 trillion wealth-management market.
  • Who are their founders? Most online advisers were formed by veterans of large tech firms (see below 2 examples from Microsoft and Amazon).
  • Initial investments? Not really. Bo Lu, a former Microsoft engineer who co-founded FutureAdvisor, got the idea for his website from fellow engineers who had money to invest but not enough to attract the attention of traditional advisers. “They all wanted accounts of a million or a half-million [dollars] and we had, like, $8,000 to invest. We decided to build it ourselves.”
  • Customers? The firms can appeal to a younger tech-savvy generation. Adam Nash, Wealthfront’s chief executive, says 60% of the firm’s clients are under 35, and 90% are under 50.
  • How do they work? 1) Wealthfront greets visitors to its website with a questionnaire aimed at gauging their appetite for risk, while Betterment asks them to state their investment goals. FutureAdvisor, based in San Francisco, asks whether investors consider themselves conservative, moderate or aggressive. 2) “Long-term investing isn’t supposed to be fancy,” says Mike Sha, a former Amazon.com executive who founded SigFig in San Francisco three years ago.
  • How do they use AI exactly? Not clear.
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