I have just come to know about Robo Advisors. Would like to ask if Robo Advisors or Financial Advisors would be a better choice? - Seedly
 

Robo-Advisors

AMA The Fifth Person

Investments

Asked by Anonymous

Asked on 18 Feb 2019

I have just come to know about Robo Advisors. Would like to ask if Robo Advisors or Financial Advisors would be a better choice?

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Answers (7)

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I'm an FA that can also distribute robo advisor options but also have his own managed portfolio service. Ultimately, it depends if you prefer passive or active management, plus if you'd like human advice on your investments instead of just a computer screen.

I would think that human advisors do better at explaining why you need to be invested even in an economic downturn and in fact top up your portfolios, while robo advisors would not be able to calm you down during negative performances.

Your investments are just one part of your entire financial plan as well, and having an FA handle that can also provide a more holistic view of your entire end goal.

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Charmaine Lim Xiaomei
Charmaine Lim Xiaomei

18 Feb 2019

"robo advisors would not be able to calm you down during negative performances" - very true!
Leonard Tan
Leonard Tan
Level 6. Master
Updated on 07 Jun 2019

Here's my personal thoughts if you are looking to invest- go with Robo Advisors. If you are looking for entire portfolio mgt advice, perhaps FAs might suit you better.

First off understanding todays context, Robo Advisors has entered only within the past few years and been picking up traction recently, undercutting not just FAs but traditional fund managers and fundhouses in terms of attractiveness of charges. In fact, FMs and FHs and now scaling back their margins to simply stay relevant.

Essentially, the business models of Robo Advisors has been designed to minimise the inefficiencies of existing traditional structures- going through FAs-FA's company-Investment product's company-before reaching the Fund Management Team(all of whom take a cut along the process). Of course there is the question of whether Robo Advisors perform as well as Traditional Fund Management Teams, but I believe a little researching would reveal Robo Advisors are not much worse off, if at all, to justify the hefty charges of Traditional FMTs, much less transacting bottom up through FAs.

That being said, there is still due diligence to be done on the consumers end. There are now plenty of credible Robo Advisors in Singapore- eg. Autowealth, Smartly, Stashaway. In fact, Banks such as OCBC are catching on with RoboAdvisors of their own. My advice- look not just on their charges but beyond that, eg. the teams credibility with managing funds, whether they publish their existing portfolio track record, i.e indicators that show how their algorithms and strategies have been performing against index benchmarks. If such information is not readily available online, set up a meeting with their company team and request for these. Clarify as many queries as you have. As an potential investor, you deserve to know as much there is to know.

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Luke Ho
Luke Ho

22 Feb 2019

Your context is wrong, they've been undercutting since the popularization of ETFs post 2008 (even though ETFs have been around since 1993). It's true that Robos run a different structure, but your little research hasto justify whether you can back up your statement as to whether Robos are worse off or not. Here's what preliminary research will tell you - First of all, no Robo has or can outperform the SNP500 alone, despite the fact that there are thousands of traditional funds that can do that. This is obvious since Robos require a mix based on your risk profile, but the most aggressive risk profile has yet to put people in 100% equities. Secondly, there is no 'research' to be done, especially in local contexts. There is no existing track record for Robos in Singapore outside of one year returns, and no investor worth his salt will take the 1 year track record into account. Worse, that 1 year track record - from 2017 to mid 2018 - was not even particularly impressive compared to both market and fund results from that year. What constitutes credible? If credible means MAS approval, every traditional investment has far more credibility. If credible means track record, its certainly not the case. If credible means performance, its also not the case. So while your intention seems good, you''ve made a lot of statements you can't factually back up.
Zann Chua
Zann Chua
Level 6. Master
Updated on 07 Jun 2019

Firstly, you can look at the fees charged by both. Traditional investment advisors typically charge anywhere from 1% to 3% of the value of your portfolio, while robo advisors charge less than 1%. You are essentially paying more for more personalised services.

Next, if you are someone that likes personal contact with your investment, financial advisors would be a better choice. If you are contended with not having personal contact, Robo Advisors would be a better choice.

If you are willing to let someone else do your investment, then a robo advisor would work. When you invest in a robo investing platform, the site will handle all of your investment activities for you.

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Luke Ho
Luke Ho

22 Feb 2019

Firstly, you're wrong. A traditional investment advisor can charge you as low as zero and way higher than 3%. And then in what context? A higher sales charge often results in a lower recurring fee and vice versa. So I could charge a 5% sales charge and then absolutely no recurring fee, which would make far more than a robo who's charging 0.8% a year as a recurring fee over 10 - 12 years. What's the basis for assuming its a better choice? Robos have no history, they're woefully limited on selection - everything is subject to US ETFs and you have to deal with currency risk, dividend taxes. So you're going to have to justify a lot more than this half baked answer.
Kenneth Chan
Kenneth Chan

22 Feb 2019

Not true, if you like hands off approach you can choose mutual funds too.
Cedric Jamie Soh
Cedric Jamie Soh, Director at Seniorcare.com.sg
Level 8. Wizard
Answered on 03 Jun 2019

Robo advisors.

No emotions, stick to a crafted plan, only concern is to provide mathematically scripted returns without thinking of making commissions or window dressing.

Robo for the win.

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Victor Chng
Victor Chng, Co-Founder at Fifth Person Pte Ltd
Level 6. Master
Answered on 21 Feb 2019

Hi,

I think there pro and con on both advisors. If you are someone who like personal touch then an actual financial advisors will be better.

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Isaac Chan
Isaac Chan
Level 8. Wizard
Updated on 22 Feb 2019

Apart from what the others have mentioned, try to mine as much information as you can regarding their track records. Look for past trends and records of the funds / roboadvisors, as well as as many reviews as you can online. Also, pay attention to what kind of asset classes you prefer, as well as what kind of risks and returns you are comfortable with.

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Jonathan Chia Guangrong
Jonathan Chia Guangrong, Fund Manager at JCG Fund
Level 8. Wizard
Updated on 07 Jun 2019

I'd think robo advisors will be a better choice. Not just fees wise, as Zann mentioned is lower (which will eat significantly less into account value over time), but also through the experience of the professional investment team behind each robo advisory. How many financial advisors out there know each and every mutual fund they market in depth and can choose the ones that fit your needs?

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Jonathan Chia Guangrong
Jonathan Chia Guangrong

21 Feb 2019

Luke, autowealth did post their one year record. Which admittedly is too short to tell for future comparison.. Let's see what time throws at us yeah
Luke Ho
Luke Ho

21 Feb 2019

I mean thats the thing, a one year record is nothing. You and I both know that. People have slammed the track records for traditional investments, saying that what performs well in the past may not in the future. The robos barely even have a track record, and they basically charge you more for ETFs you can get outside. And then people in this polarized environment keep touting them. It's quite silly.