The term “Robo Advisor” has sprung up to describe a new breed of investment management solutions. Although there is not an official definition of what a robo advisor is and is not, there are a few key characteristics that robo advising solutions have in common.

Robo advising platforms leverage technology in the client management and investment selection process with a focus on automation. Typically, the investment selection process is automated and algorithm-based. The investment management concepts and advice is then communicated to the client on a digital platform.

Here’s a high-level example of how the investment process is typically handled to help you understand what a robo advisor is. Client onboarding and account opening is typically an automated process where an investor will start by filling out a digital questionnaire. The robo advisor takes the answers given in the onboarding process and uses an algorithm to propose a risk tolerance for the investor. That risk tolerance is then used to automatically select an appropriate mix of assets in which to invest. After initial opening, the account is usually automatically rebalanced, or may also be subject to other algorithm-based automated adjustments.

In the end, the term robo advising can describe a variety of different solutions. These solutions can range from a fully automated and algorithm-based experience where client interaction and investment selection has little to no interaction from live advisors or managers, to a tool that includes more traditional person-to-person advice.