Robo-Advisor with Python: A hands-on guide to building and operating your own Robo-advisor

by Aki Ranin

Length: 250 pages
Edition: 1
Language: English
Publisher: Packt Publishing
Publication Date: 2023-02-28
ISBN-10: 1801819696
ISBN-13: 9781801819695
Sales Rank: #198106 (See Top 100 Books)

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Build your own robo-advisor in Python to manage your investments and get up and running in no time

Purchase of the print or Kindle book includes a free PDF eBook

Key Features

Explore the use cases, workflow, and features that make up robo-advisors
Learn how to build core robo-advisor capabilities for goals, risk questions, portfolios, and projections
Discover how to operate the automated processes of a built and deployed robo-advisor

Book Description

Robo-advisors are becoming table stakes for the wealth management industry across all segments, from retail to high-net-worth investors. Robo-advisors enable you to manage your own portfolios and financial institutions to create automated platforms for effective digital wealth management. This book is your hands-on guide to understanding how Robo-advisors work, and how to build one efficiently. The chapters are designed in a way to help you get a comprehensive grasp of what Robo-advisors do and how they are structured with an end-to-end workflow.

You’ll begin by learning about the key decisions that influence the building of a Robo-advisor, along with considerations on building and licensing a platform. As you advance, you’ll find out how to build all the core capabilities of a Robo-advisor using Python, including goals, risk questionnaires, portfolios, and projections. The book also shows you how to create orders, as well as open accounts and perform KYC verification for transacting. Finally, you’ll be able to implement capabilities such as performance reporting and rebalancing for operating a Robo-advisor with ease.

By the end of this book, you’ll have gained a solid understanding of how Robo-advisors work and be well on your way to building one for yourself or your business.

What you will learn

Explore what Robo-advisors do and why they exist
Create a workflow to design and build a Robo-advisor from the bottom up
Build and license Robo-advisors using different approaches
Open and fund accounts, complete KYC verification, and manage orders
Build Robo-advisor features for goals, projections, portfolios, and more
Operate a Robo-advisor with P&L, rebalancing, and fee management

Who this book is for

If you are a finance professional or a data professional working in wealth management and are curious about how robo-advisors work, this book is for you. It will be helpful to have a basic understanding of Python and investing concepts. This is a great handbook for developers interested in building their own robo-advisor to manage personal investments or build a platform for their business to operate, as well as for product managers and business leaders in financial services looking to lease, buy, or build a robo-advisor.

Robo-Advisor with Python
Contributors
About the author
About the reviewers
Preface
    Who this book is for
    What this book covers
    To get the most out of this book
    Download the example code files
    Conventions used
    Get in touch
    Share Your Thoughts
    Download a free PDF copy of this book
Part 1: The Basic Elements of Robo-Advisors
Chapter 1: Introduction to Robo-Advisors
    What is a Robo-advisor?
    How does a Robo-advisor work?
    Origins of the Robo-advisor
    Evolution of the Robo-advisor
        From consumer platforms to B2B
        From America to the rest of the world
        From risk to goal-based investing
        The future of Robo-advisors
    Summary
    Further reading
Chapter 2: What Makes Up a Robo-Advisor?
    Understanding the workflow of a standard Robo-advisor
    Introducing financial planning and Goal-based investing
        Questionnaires for Goals
    Defining risk profiling, portfolios, and projections
        Modern portfolio theory
        Risk questionnaires
        Portfolio construction and allocation
        Projections
        Risk profiling and projections for Goals
    Opening accounts, performing KYC and AML, and funding accounts
        Automated account opening
        Different types of accounts
        Accounting for Goals
        KYC and AML
        Funding your account
    Introducing order management and execution
        Price feed
        Broker
        Compliance
        Order management
        Order execution
        Order allocation
    Learning how to operate a Robo-advisor
        Dividends
        Fee management and billing
        Rebalancing
        Performance reporting
        Statements
        Account and user management
    Summary
    Further reading
Chapter 3: Robo-Advisor Platforms versus Algorithms
    Managing your own investments with Robo-advisor algorithms
    Managing customer investments with Robo-advisor platforms
    Scaling up from algorithms to a full Robo-advisor platform
    Summary
Chapter 4: Leasing, Buying, or Building Your Own Robo-Advisor
    Building or subscribing to a Robo-advisor as a consumer
    Building, buying, or leasing a Robo-advisor platform as  a business
        Leasing a Robo-advisor
        Buying a Robo-advisor
        Building a Robo-advisor
    Summary
Part 2: Building Your Own Robo-Advisor
Chapter 5: Basic Setup and Requirements for Building a Robo-Advisor
    Installing and setting up Python for the hands-on chapters
        Starting Google Colab
        Working with Colab notebooks
    Installing and setting up the required Python modules
    Importing, reading, and visualizing market data
    Summary
Chapter 6: Goal-Based Investing
    Creating your first investment Goal using Python
    Modeling and creating different types of investment Goals
    Creating necessary objects for investment Goals
    Learning different approaches to tying Goals to accounts
    Summary
    Further reading
Chapter 7: Risk Profiling and Scoring
    Key concepts in risk profiling and scoring
    Creating and answering a risk questionnaire
    Calculating a risk score
    Summary
    Further reading
Chapter 8: Model Portfolio Construction
    Learning about the key concepts of modern portfolio theory (MPT)
    Creating your first portfolio
    Analyzing the makeup of your portfolio
    Creating multiple portfolios using risk bands
    Mapping model portfolios to risk scores
    Understanding the differences between self-directed and managed portfolios
    Summary
    Further reading
Chapter 9: Investment Projections
    Learning about key inputs for calculating projections
    Calculating investment projections
    Visualizing investment projections
    Calculating Goal probability
    Summary
Chapter 10: Account Opening and KYC
    Learning about the typical information required to open investment accounts
        Basic information for KYC
        Data validation examples
        Documents for KYC
        Document upload example
        Document data extraction
    Understanding the KYC workflow
        AML checks
        Accounting for Goals
        Special account types
    Summary
Chapter 11: Funding Your Account
    Initiating wire transfers
        Validating wire transfers
    Initiating direct debit transfers
        Validating direct debit transfers
    Summary
    Further reading
Chapter 12: Order Management and Execution
    Technical requirements
    Requirements for creating an order
    Differences between fractional and whole-share orders
    Creating an order
    Advanced order management
        Splitting orders
        Order aggregation
        Order allocation
    Summary
    Further reading
Part 3: Running and Operating Your Own Robo-Advisor
Chapter 13: Performance Reporting
    Calculating P&L for your portfolio
    Comparing portfolio performance to a benchmark
    Summary
Chapter 14: Rebalancing
    Calculating portfolio drift
    Implementing time-based rebalancing
    Implement threshold-based rebalancing
    Summary
Chapter 15: Dividends and Fee Management
    Calculating dividends
    Calculating fees
    Summary
Chapter 16: Regulations for Robo-Advisors
    Regulatory requirements to run your own Robo-advisor
        Guidelines for Robo-advisors in America
        Guidelines for Robo-advisors in Europe
        Guidelines for Robo-advisors in Asia
        Licensing options for Robo-advisors – Investment advice versus portfolio management
        Licensing exemptions for B2B Robo-advisors
    Differences between self-directed and managed portfolios
        Requirements for a Robo-advisor platform with managed portfolios
        Requirements for a Robo-advisor platform with self-directed portfolios
    Summary
    Further reading
Index
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