Non-US robo-advisors
This article contains details specific to non-US investors. It does not apply to United States (US) investors, or to US citizens and US permanent residents (green card holders) living outside the US.A robo-advisor is an online "wealth management" service that provides automated, algorithm-based portfolio management advice. They usually do not get involved in more personal aspects of wealth management, such as tax planning, retirement planning or estate planning.
Robo-advisors have now become a part of the financial and investment retail world as more and more new companies spring up across Europe and elsewhere.[note 1]
Overview
Robo advice[1] in itself is the digital customer interface for identifying the most suitable risk profile for an investor. A web- and/or app-based input template gathers customer data, investment horizon, risk preference and other legally required investor information and the risk profile is determined using an if-then logic.
The robo advice digitizes the local jurisdiction classification and the MiFID II suitability and appropriateness assessment normally carried out by the client advisor in a traditional advisory meeting. The robo-advisors then uses the given risk profile to translate this into a strategic asset allocation, and implements this by selecting specific investment products.
Robo-advisor and investment services have some clear parallels with Bogleheads® investment philosophy, including:
- Generally passively managed funds;
- Index funds are used;
- Risk assessment follows widely accepted norms;
- Low costs, although these can be higher than a do-it-yourself (DIY) Boglehead portfolio but lower than a traditional advisor-led portfolio;
- Diversified;
- Buy and hold formula;
- Rebalance automatically.
Costs
Each individual company has its own pricing structure, and it is important to check for hidden fees and anomalies when comparing providers. With a robo-advisor, you pay a service fee and you pay the expenses of the investments used.
Therefore the customer should look to compare the total expense ratio for each platform. Some providers ladder their fees on a descending scale for higher principal amounts.
Each robo-advisor should have a reasonable service fee that may be structured as a fixed monthly fee or as a percentage of assets.
Fixed fees
Where robo-advisors charge a fixed monthly fee the range depends upon portfolio size.
Percentage fees
With a percentage of assets structure, you will see fees in the range of about 0.15% to 0.50% of your account size per year.
Other costs
You also pay any expenses associated with the investments used by the robo-advisors. For example, exchange-traded funds have expense ratios, and other costs such as spreads. Those type of costs are taken out of the assets of the fund before any returns are allocated to investors.
Rationale for using a robo-advisor
Pros
- It takes out all the research, stress, vigilance and emotions that come with picking funds and / or stocks and maintaining an investment portfolio yourself. Customer interfaces are usually very user friendly.
- Offers low cost ETFs (overall costs should be lower than a traditional adviser). Generally minimum investment amounts are low.
- Simplicity, including matching risk appetite with standard index products.
- Provides passive indexing setup.
- Provides "packages" of funds to matching the investor's responses to the risk assessment software, (takes the emotion out of risk assessment).
- Automatic rebalancing and reports.
Cons
- Costs are higher than DIY solutions (but generally lower than traditional adviser).
- Complexity of an individual investors background including pensions, other benefits and alternative assets are not taken into consideration.
- Limited or no discretion for investor with regards to choice of funds and resultant fund costs.
- If the platform uses active investment approach this may lead to divergence from the market outcome.
Access to robo-advisors
The spread of robo-advisors has led to the proliferation of providers across different jurisdictions. The lists below resulting from internet searches (as of August 2019) provide a reference point for a non-US retail investor. The individual investor should carefully carry out their own specific due diligence on any provider to review what is available in their particular location as and when the information is available. No reliance should be made on the suitability of these references for investment or other financial purposes. The investor should carefully review the available providers, check the suitability of their products, check the statutory and financial position of the company and seek advice before committing to any purchase.[2]
Robo-advisors in the EU
| Robo-advisor | Contact info | Locations covered |
|---|---|---|
| etfMatic[4] | link | Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom |
| moneyfarm | link | UK and Italy |
| nutmeg | link | UK |
| cashboard | link | Germany |
| FeelCapital | link | Spain |
| quiron | link | Germany and Switzerland |
| wealthify | link | UK |
| fiveraday | link | UK |
| TrueWealth | link | Switzerland |
| GINMON | link | Germany |
| EASYVEST | link | Belgium |
| Wealthhorizon | link | UK |
| growney | link | Germany |
| swanest | link | EU |
| vaamo | link | Germany |
| indexacapital | link | Spain |
| scalable | link | UK, Germany, Austria and Switzerland |
| whitebox | link | Germany |
| FundShop | link | France |
| easyfolio | link | Germany |
| YOMONI | link | France |
| Portu | link | Czech Republic |
| Finax | link | Slovakia |
Robo-advisors in Australia
| Robo-advisor | Contact info | Locations covered |
|---|---|---|
| Stockspot | link | Australia |
| investSmart | link | Australia |
| Ignition Wealth | link | Australia, Ireland |
| Quiet Growth | link | Australia |
| RAIZ | link | Australia |
| Clover | link | Australia |
| Plenty | link | Australia |
| Six Park | link | Australia |
| Cashwerkz | link | Australia |
| Fincast (non retail) | link | Australia |
Robo-advisors in Canada
| Robo-adviser | Contact info | Locations covered |
|---|---|---|
| Wealthsimple | link | Canada |
| Nest Wealth | link | Canada |
| WealthBar | link | Canada |
| Justwealth | link | Canada |
| ModernAdvisor | link | Canada |
| BMO Smartfolio | link | Canada |
| Invisor | link | Canada |
| Questwealth | link | Canada |
Robo-advisors in Hongkong
| Robo-advisor | Contact info | Locations covered |
|---|---|---|
| Chloe by 8 Securities | link | Hong Kong |
| Kristal.Ai | link | Singapore, Hong Kong, India, U.A.E. |
| Aqumon | link | Hong Kong |
Robo-advisors in India
| Robo-advisor | Contact info | Locations covered |
|---|---|---|
| ScripBox | link | India |
| 5paisa | link | India |
| Angle Broking | link | India |
| GoalWise | link | India |
| Upwardly | link | India |
Robo-advisors in Singapore
| Robo-advisor | Contact info | Locations covered |
|---|---|---|
| Kristal.Ai | link | Singapore, Hong Kong, India, U.A.E. |
| Smartly | link | Singapore |
| AutoWealth | link | Singapore |
| OCBC RoboInvest | link | Singapore |
| UTrade Robo | link | Singapore |
| MoneyOwl | link | Singapore |
| EndowUs | link | Singapore |
| Kristal.Ai | link | Singapore |
Notes
- ↑ "One-third of new DIY investors are opting for automated online investment apps — so-called “robo-advisors” — instead of fund supermarkets such as Hargreaves Lansdown, as demand for low-cost investment services grows." FT article
See also
- Robo-adviser, for US investors
- Robo-advisor, for Canadian investors
References
- ↑ "Robo-advisor". Wikipedia. https://en.wikipedia.org/wiki/Robo-advisor.
- ↑ Bogleheads® forum topic: What we know about robo-advisors, jbolden1517. July 9, 2019.
- ↑ "Robo-advisors EU". https://robo-advisors.eu/.
- ↑ "Transparent, peer-reviewed Digital Wealth Management". etfMatic. https://etfmatic.com/whitepaper/. White Paper describing the background to etfMatic's approach.
- ↑ "Australia share-trading". https://mozo.com.au/share-trading/search.
- ↑ "Best robo-advisors in Canada". MoneySense. https://www.moneysense.ca/save/investing/best-robo-advisors-in-canada/.
- ↑ "Robo-advisor compare". https://www.planto.hk/en/blog/robo-advisor-compare-recommend.
- ↑ "Robo-advisor". Wealthpedia. https://www.wealthpedia.in/robo-advisor/.
- ↑ "Singapore robo-advisors". MoneySmart. https://blog.moneysmart.sg/invest/robo-advisors-singapore/.
External links
- Robo-advisors EU
- Mozo
- MoneySmart
- What Is a Robo Advisor and How Do They Work?, Investopedia, July 31, 2019.
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