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

✍ Scribed by Aki Ranin

• Publisher: Packt Publishing
• Year: 2023
• Tongue: English
• Leaves: 227
• Category: Library

✦ Synopsis

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.

Table of Contents

1. Introduction to Robo-Advisors
2. What Makes Up a Robo-Advisor?
3. Robo-Advisor Platforms versus Algorithms
4. Leasing, Buying, or Building Your Own Robo-Advisor?
5. Basic Setup and Requirements for Building a Robo-Advisor
6. Goal-Based Investing
7. Risk Profiling and Scoring
8. Model Portfolio Construction
9. Investment Projections
10. Account Opening and KYC
11. Funding Your Account
12. Order Management and Execution
13. Performance Reporting
14. Rebalancing
15. Dividends and Fee Management
16. Regulations for Robo-Advisors

✦ Table of Contents

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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