Robo-advisors represent a promising innovation for individual investors, but concerns remain, concludes a new report from the European Federation of Investors and Financial Services Users, also known as Better Finance,

Released on Tuesday, the report finds that robo-investing "can lead to significant benefits" for retail clients. Robos are "creating better value" by offering low pricing and using low-cost index funds that have outperformed most active funds over the long-term, the report says.

"Even more recent innovations in this emerging business are also very exciting for savers and individual investors," it says, "such as pricing based on performance instead of assets as well as making direct individual equity investments easy and tailor-made to responsibility/sustainability criteria."

However, robos have weaknesses, the report says, observing their services are less customized than traditional advisors, and clients need to be "relatively financially literate to really understand the value of their offers." Additionally, as many of these services are startups means their future remains uncertain.

The report cautions that traditional financial firms are getting into the business, too, which may erode the value for investors.

"In this sense a real threat to the sector exists and established players could very well partially or totally strip it of the key benefits it currently provides," the report says.