Second, you have to care about the fees you pay. Automation enables robotic consultants to manage a small portion of their investment, accounting for commissioned or full-service investment consultants such as mutual fund companies and wealth managers. Therefore, robot users are often frugal middle-income people who do not have huge wealth, which may justify higher fees.
Meanwhile, robot clients may be people who don’t have the time, investment knowledge or tendency to manage their portfolio itself. With the emergence of ETFs, it has become much easier to invest on your own and will always be cheaper. But unlike DIYER, Robo users can indeed “set it up and forget it” and know that someone else (or some algorithm) is taking care of their Nest Egg Day, sleeping here every day.
How does a robot consultant work?
First, you need an account. Almost every robot consultant can set up a robot, starting with an online questionnaire. This helps the bot understand your risk tolerance and what you will use for that account. You may have interviews or text chats with live representatives. After that, these algorithms start working, selecting a portfolio for you to invest in. If you like what you see, transfer the funds to your account and leave. Now, all providers offer an app so you can access your account on your smartphone.
Typically, Robo customers don’t have to worry about transaction fees – any rebalancing or portfolio changes cover portfolio management fees. This fee is complementary to the administrative fee ratio (MER) charged by the ETF itself. Between the fees of a robot and the fees of an ETF, you should not end up paying more than 1% of your investments annually for the management of the investment, which is compared to the average 2% of a mutual fund, unless you choose a robot and account, offer other than ETFs. other investments, which usually come with higher fees.
Now that all national robot consultants have a five-year record, we have added late performance data to the table above for comparison. Since robots are designed to match portfolios with investors, it should be understood that comparisons do not reflect how investments are performed for all clients, and therefore, this is only the starting point for any discussion around relative performance.
If you are considering setting up an account with Robo-Advisor, look up performance data on their website to get the portfolio you expect to set up. If not published, you can request it. You want to know that robots have a history of capturing the rewards they promise and the rewards they need to achieve their goals.
Should you use a robot consultant?
Some experts suggest how much you invest. Dale Roberts, a contributor to Moneysense and investment blogger behind Cutthecrapinvesting.com, believes that robotics consultants still offer some of the best investment solutions for many Canadians who both lack investment knowledge to manage their own. The portfolio and a nest egg large enough to deserve a fee-based consultant. He said flatly: “You need real money (at least $500,000) to get real advice, and most Canadians don’t have real money.”
In his mind, asset allocation ETFs provide a diversified portfolio in terms of single security, not really competition. Choosing the number of funds to buy is a self-guided investment, and few investors can do this. Roberts said most people “need to someone hold their hands”, choose portfolios and answer questions. Robots do this in a cost-effective way.
