Whereas most robo advisors are passive investors (investing in funds and holding them for the long term) and most financial advisors are active investors (trying to time the market and actively buying and selling individual securities), we’re a mix of active and passive. We actively select individual companies with the help of our technology and design portfolios using that pool of companies for our clients. However, once the portfolio is developed, we turn passive and rarely buy and sell new companies.
Since more people are shifting to passive investments (e.g. index funds), active investors that do research are getting less funding because the demand for actively manage portfolios is decreasing. The problem is that the markets, and therefore passive investments, rely on this research to be efficient. As more and more people shift to passive investments and research declines, the lack of knowledge could hurt the market and therefore passive investment funds. Since we actively construct portfolios, we are protected against this possibility while still benefiting from a passive investing approach.