What is Robo-Advice?
Robo-advice is currently the fastest growing area of the wealth management industry. So what is it exactly?
In short robo-advice uses a state of the art digital platform to both build and administer your investment portfolio. The service is fully automated and driven by computer algorithms created by experienced advisors.
The process involves the client being asked a set of questions so that the robo advisor has an understanding of their financial situation, risk tolerance and time horizon. The algorithm will then create an appropriate investment portfolio typically made up of low-cost Exchange Traded Funds (ETFs) which is automatically re-balanced to ensure the portfolio remains in line with the clients investment objectives and risk tolerance.
What are some of the benefits?
An account is easy to set up and can be completed from the comfort of your own home in a matter of minutes. Once opened you can login and access your account and track portfolio movements 24/7. Minimum amounts needed to open an account also tend to be low.
One of the main benefits is the low cost compared to seeing a full service investment advisor. This is important as management fees detract from the net return of your portfolio. A mere 1% difference in fees can make a huge difference to the return of your portfolio over the longer term.
Takes the emotion out of investing
Investing can be an emotional experience even for the most experienced person. The temptation to chase the latest hot stock or perhaps panic and sell at the worst possible time when the market is merely going through a healthy correction. Robo-investing avoids these pitfalls by taking the emotion out of investing. At Collins House Online we take a longer term approach with your portfolio and re-balance based on your risk tolerance and overall market movements rather than the latest bitcoin type fad.
Looking forward technology is going to play an increasing role in the provision of financial advice and should be embraced rather than feared. The benefits to investors are numerous; cost, control, accessibility, performance etc. At a time when the vast majority of Australian’s don’t access any financial advice, technology is likely to play a major role in helping to bridge this gap.
Find out how Collins House Online can help you grow your portfolio with our simple to use, low-cost investment platform.