In all frankness, my knowledge of investing is embarrassingly scant.
Heck, my eyes glaze over whenever I so much as attempt to digest investment-related stories or explainer videos. Y’know what they say: Once an Arts student, always an Arts student.
But this is me, going out on a limb and attempting to teach you a thing or two ’bout robo advisors — and whether it’s worth even putting your money in one.
What Are Robo Advisors?
Robo advisors are the modern-day answer to investment managers, and the antithesis to online brokerages.
Rather than have a consultant draw up an investment portfolio based on your financial goals and risk profile, a robo advisor generates recommendations in a matter of minutes — allowing you to immediately plant your money in Exchange-Traded Funds, or ETFs.
Each ETF comprises a basket of stocks across several companies, which essentially offers you access to a diversified range of global ETFs.
The robo advisor’s role, then, is to make guesses on your behalf to (hopefully) generate returns.
This shaves time off the investing process while allowing you to passively invest in low-risk stocks.
The elimination of the middleman — the fund manager — translates to lower annual management fees on your part.
It’s perfect for lazy folk like myself…but a robo advisor is only as good as its algorithm.
As with regular investments, there will be risks attached, plus additional factors consider, such as management fees, investment methodologies and minimum investment amounts.
If you’re a first-time investor, you’ll be happy to learn these robo advisors don’t impose a minimum investment sum.
How Reliable Are Robo Advisors?
For all the praise that’s been doled on robo advisors, how reliable are they, really?
They’re mostly backed by the Monetary Authority of Singapore (MAS), for one. If it serves as further assurance, there’re two licences under which a robo advisor can fall: the Securities and Futures Act (SFA), and the Financial Advisers Act (FAA).
But a robo advisor’s license isn’t a measure of its historical performance — so keep that in mind before jumping into the first one you stumble upon.
This table might clarify some of your doubts. Alternatively, look this way for a yet more detailed breakdown.
|Robo Advisors: Pros||Robo Advisors: Cons|
|Low-cost investing (~0.5% to 1% management fees; fund managers typically charge 2% to 3%)||Certain platforms are web-only (e.g. SquirrelSave, Endowus and DBS digiPortfolio)|
|Diversified investments, or global ETFs |
(A mix of equities and bonds)
|Stagnated returns on some months|
(Overall long-term growth)
|Occasional fee discrepancies (e.g. ETF management fees may be charged separately from platform fees)|
|Convenience (e.g. automated rebalancing for certain platforms)||Advice is limited to algorithm's parameters|
|Option to liquidate investments at any point in time||-|
Another important factor worth weighing in on is this: Would you prefer to have a human advisory be part of the picture?
It may just be me, but I still don’t enjoy the idea of explaining my concerns to a customer support bot. It’s impersonal, often lacking, and doesn’t always serve its purpose. Kristal.AI, for instance, offers both robo and human customer service support.
Which Robo Advisor Should I Invest In?
The Seedly community’s discussed the topic in relatively great detail — but meantime, here’s a round-up of some fees and minimum investment sums to know across all of Singapore’s robo advisors.
|Robo Advisor||Fees||Minimum Investment Amount||Cash, SRS, CPF Support|
|AutoWealth||0.50% p.a. + |
USD$18 p.a. (platform fee)
|CONNECT By Crossbridge Capital||0.75% p.a.||US$1k||Cash|
|DBS digiPortfolio||0.75% p.a.||S$1k or|
0.6% (up to S$200k)
0.25% (more than S$5 Mil)
CPF & SRS:
|$888 promo (now till 28 Feb 2021)|
Will revert back to S$10k
|Cash, SRS, CPF|
|Kristal.AI||0% (up to US$10k)|
0.3% (more than US$10k)
US$1 + taxes per trade for US-listed ETFs
|MoneyOwl||Between 0% p.a. (first S$10,000 till 31 Dec 2021) |
0.6% p.a. (next S$90,000)
0.5% p.a. for ($100k and above)
|$50 (monthly RSP)|
$100 (one off)
|Cash and SRS|
10% of positive returns
|StashAway||0.8% (less than S$25k)|
0.2% (more than S$1 Mil)
|None||Cash and SRS|
|Syfe||0.65% (first S$20k)|
|UOBAM Invest||0.8% p.a. (first S$25,000)|
0.6% p.a. (above S$25,000)
|UTrade Robo||0.88% p.a. (first S$50,000) |
0.5% p.a. (>S$100,000)
How to Set Up Your Robo Advisor Account
If measuring the pros and cons has for some reason whetted your appetite (for risk), you need simply follow these easy steps to set up your robo advisor account.
- Sign up via web or mobile platform
- Indicate goals and risk appetite
- Robo advisor generates recommended investment portfolio options
- Transfer money; begin investing!
Delving into investing is admittedly easier with a robo advisor, since it essentially does the groundwork for you by investing in a diversified portfolio of stocks and bonds.
But it’s important to first understand the nuances of what you’re signing up for, as well as any hidden or unmentioned fees that may be involved — like currency conversion fees, particularly if you’re opting to invest in global ETFs.
From one investment dumnmy to another: spread your wins and losses by putting small amounts in different robo advisors, then measuring your returns over several months to determine which works best for you.
If all else fails, pose your questions in the Seedly community — or peruse our many robo advisor reviews to make a sound decision.