True financial advice can’t be produced by a computer algorithm. Robo-advice is a cleverly coined term, but a holistic financial planner does a lot more than “portfolio management”. There is great value in getting quality advice that is tailored to your situation and in all honesty, the fee should pay for itself many times over.
Robo-advice is automated portfolio management and consolidated portfolio reporting. Typically it involves the use of low cost exchange-traded funds (ETFs) diversified in a manner that suits your “risk tolerance”. ETFs are purchased through the stock market, so technically you don’t need to use robo-advice to invest in them. You can go straight to a stock broker or on-line broker which obviously leads to brokerage fees.
The added benefit of robo-advice is that the portfolios are automatically re-balanced to your chosen asset allocation which is based on your risk profile. Furthermore there is great value in the consolidated reporting, it just makes life so much easier.
I’ve checked out a few Robo-advice platforms and to me the fees aren’t significantly cheaper than the traditional WRAP providers. In fact, some were more expensive! I was expecting it to be much cheaper but I guess they need to recoup their investment outlay and make a profit.
Robo-advice has a place and it will grow over time but call a spade a spade. It’s not proper, holistic financial advice. It’s automated portfolio management using ETFs.
My word of warning is to make a fully informed decision before using robo-advice. If you know little about portfolio management, asset allocation, ETFs in general (i.e. pros and cons!), fixed income versus growth assets, then you’d better learn about these things first before managing your own portfolio via robo-advice. It’s automated, but you need to have some understanding of what’s going on, don’t you?
At Access FP Pty Ltd, we are able to provide holistic, tailored advice that suits your personal needs and objectives. To find out more about the services we offer, head to Our Specialisations.
Contact us on 08 9381 6811 for a complimentary consultation. Ray is a CERTIFIED FINANCIAL PLANNER® and LIFE RISK SPECIALIST® and has a Bachelor’s of Commerce in Financial Planning (with distinction). He is a member of The Financial Planning Association of Australia. We are based in Perth, Western Australia and specialise in retirement planning, wealth accumulation and wealth protection (life and disability insurance).
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