Improving your Financial (Under)Standing Using Robo-Advice: Investing in Shares (Part 1)

Why Robo Advice?

There is an increasing need for digitally accessible and affordable financial advice. Robo-Advisers are the solution to this. Sound familiar? Robo-advice can also sometimes be referred to as smart tools, personal finance applications, or digital advice. The need for all these terms exists because there are a wide range of services provided through this medium and they do many different things. Digital tools are necessary to break down barriers, providing transparency and education on the financial advice process, while also allowing consumers to take control of the process. We explore Robos that address investing…

As more and more millennials (or Generation Z) are starting to come into adulthood, there is an increasing need for digitally accessible and affordable ways to get help with your finances. Robo-Advisers can really help here; complementing the traditional advice industry while appealing to the more tech-savvy and tech-reliant Generation Z. While many view it as a disruptor to the traditional advice industry, in reality it is helpful to both advisers and consumers to adopt this new wave of technological and financial advisory evolution. And given the nature of our “always on” society, these tools are available 24/7 for whenever needed.

Digital tools are necessary to break down barriers, providing transparency and education on the financial advice process to consumers who may be investing a substantial amount for their advice and want some clarification on what exactly is being done for them. Those who cannot afford or justify hiring a dedicated financial adviser for personalised, tailored advice can access assistance with budgeting, financial advice, investing, superannuation through using various online Robo tools.

Looking At Share Investing Tools

This article is the first of many in the coming weeks working towards breaking down the knowledge gap on Robos and will focus on the Robos that address the area of investing in shares.

Investing is the act of using investment platforms (e.g. stocks, bonds, or mutual funds) with the aim of building and creating wealth over time. The growth of money is important in ensuring that you can fulfil your present and future basic needs in life as well as allowing you to meet your long-term life goals. Needless to say, strategic investing is something that should be done by everyone as early as possible to provide alternative streams of income to support your future.

The hardest part, as always, is getting started. Many could be put off and daunted by the many options out there and the financial jargon that runs rife within most of the documentation and webpages meant to inform you of the intricacies of the investing process. Robos offer some transparency into this confusing world and help to demystify and educate those who are taking their first steps into the investing world. It allows for financial education in easily accessible avenues and works for pretty much any user, whether they wish to be actively or passively involved in the process. It is an ideal stepping stone for those just starting out into the world of investing.

But what are some of the areas of concern when considering an investment smart tool?

• Asset Class: Different investment vehicles have different amounts of risk. What you choose could determine the amount of return you may receive. This is called the risk-return trade off.
• Portfolio Options: This determines the flexibility that you can have in your investments and the amount of diversification of risk that is available in the choices offered.
• Level of Advice: Whether or not something is a DIY Tool or is Targeted mostly relates to how much guidance the tool provides you about investment choices based on answers to questions about your financial situation and level of risk you are willing to take. This also generally helps you understand how passive or active you may be in the investment selection process.
• Fee Structure: The fee structure is most definitely an important issue as it can determine whether or not you earn a sufficient return for your efforts; After all, there is no point in investing your time and efforts into investing only to have to use all your earnings to pay the transaction or subscription fees. A service will generally be either free, for a subscription, transaction fees, performance fees, or fees based on the value of assets invested.
• Free Trial Availability: An important consideration for all the commitment-phobes out there, free trial allows you to try before you buy letting you see if you’re truly getting bang for your buck!

Robos that address this issue include: Raiz (formerly Acorns), AtlasTrend, QuietGrowth, Aleda Capital, Clover, FirstStep, Macrovue, SelfWealth, InvestSMART, brightday, and netwealth.

	Asset Class	Portfolio Options	Level of Advice	Fee Structure	Free Trial Availability	More Info
Raiz	Shares; Exchange Traded Products; Bonds;	6 investment portfolio options	DIY Tool	Subscription Fees Based on Value of Assets	No	Click here!
AtlasTrend	Shares; Exchange Traded Products	4 actively managed funds	DIY Tool	Fees Based on Value of Assets	1 Week	Click here!
QuietGrowth	Exchange Traded Products	5 investment strategies	Targeted Advice	Free Fees Based on Value of Assets	N/A	Click here!
Aleda Capital	Exchange Traded Products; Contracts For Difference	5 investment strategies	Targeted Advice	Fees Based on Value of Assets Commissions Based on Portfolio Performance	No	Click here!
Clover	Exchange Traded Products	5 'standard' portfolios and 5 'ESG' portfolios	Targeted Advice	Subscription Fees Based on Value of Assets	3 Months	Click here!
FirstStep	Shares; Exchange Traded Products; Structured Products	7 investment portfolio options	DIY Tool	Subscription Fees Based on Value of Assets	No	Click here!
Macrovue	Shares; Exchange Traded Products	22 investment portfolio options, individual share trading	DIY Tool	Transaction Fees	30 Days	Click here!
SelfWealth	Shares	N/A	DIY Tool	Transaction Fees Subscription	90 Days	Click here!
InvestSMART	Shares; Exchange Traded Products; Structured Products; Direct Property	9 investment portfolio options	DIY Tool	One-Time Fee Fees Based on Value of Assets Commissions Based on Portfolio Performance	15 Days	Click here!
brightday	Shares; Exchange Traded Products; Bonds	6 investment portfolio options	DIY Tool	Transaction Fees Fees Based on Value of Assets	1 Month	Click here!
netwealth	Shares; Exchange Traded Products; Unlisted Managed Funds	300+ unlisted managed funds; range of ASX listed securities; international shares from 12 overseas exchanges; term deposits; managed models (SMA)	DIY Tool	Transaction Fees Fees Based on Value of Assets	No	Click here!

 More about smart tools:

Adviser Ratings has expanded its platform and now serves as a way for consumers to learn about, find, rate, and review on 36 smart tool solutions (with more to come!) that they can access to help navigate their finances in Australia’s rapidly changing advice landscape. The majority of these tools are directly accessible by the consumer while some are only available through a financial adviser.

Access the 2018 Robo Advice Register here.

 

Article by:

Mai Nguyen

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