Skip to main content

What to consider when picking a Robo-advisor

Robo-advisors have been around for some time however, they are relatively new to making their mark in the Aussie market. (Robo-investors fall under the collective title of Robo-advisors)

Robo-investing, also known by the less catchy name of automated investment management, takes away the need to have face to face interaction that comes with traditional investment. Unlike the conventional way of investing, Robo investors can take advantage of lower-cost service provision without foregoing accuracy and sophistication.

Benefits of Robo-investing in Australia

What are the perks of Robo-investing and how complicated is it to get started? Glad you asked.

To get started with Robo-investing you will generally be asked to fill out an online questionnaire. The information in this questionnaire may be used to assess your personal situation and among other things, your tolerance of risk. Once you provide all the relevant information, the Robo-advisor may recommend a portfolio, a portfolio that may include exchange-traded funds (ETFs) to invest in, in Australia.

Being able to invest in this way provides a multitude of benefits:

  • Lower fees as they take away the face to face interaction and associated costs of talking to someone
  • Utilisation of dollar-cost averaging to help for example, build a dream retirement portfolio
  • Market-leading algorithms that can provide real-time recommendations on the top ETFs in Australia
  • Customisable solutions based on your investment targets
  • Easy entry – usually there is no minimum balance required

With all these benefits, Robo-advisors provide an economic investment opportunity, especially for those just starting out.

Keep in mind, though, you’ll only be able to reap the benefits of Robo-investing if you put time into the research. Read on to find out about what we believe are the five must-haves when choosing a Robo-advisor.

Proven investment experience

Before you start putting money down, especially if you’re investing in ETFs in Australia for the first time, it’s essential to familiarise yourself with the people behind the Robo-advisor.

For instance, you may want to check:

  • The values of the company
  • Credentials and background of individual team members
  • Level of investment experience and in managing securities
  • Online reviews of the platform

Transparent fees and charges

As with any provider, a promise of low fees needs to be treated with caution. It’s essential to check what the fees entail. Is it 1% after all fees and charges are taken out, or is it 1% to start the investment? You may end up paying more in fees than you anticipated if the fee structure isn’t clear.

There are a few ways you can get close and personal with the fees and charges of a Robo-advisor:

  • If they have a fees and charges section on their website, read it carefully
  • Their PDS should explain fees and charges in detail
  • Send an enquiry to clarify anything you don’t completely understand
  • For more complex fee structures, give them a call to talk you through it

Reliable investment performance

Robo-advisors are still relatively new, especially in Australia, and you may not have the luxury of asking for an extensive investment performance history. You should , however, be able to check the current performance of the Robo-advisor and review recent returns alongside the promises being made.

This information is usually obtained directly from the Robo-advisor, if not already on their website. You can also do your own research and read up on reviews to get a gauge on what others are saying about the investment performance of the Robo-advisor. Just remember to read any fine print and compare like with like.

And of course, past performance is not always an indicator of future performance.

Timely communication

Like any service, you want to ensure the Robo-advisor you engage is going to be reasonably responsive. A quick way to do this is to trial their communication methods. If they have a phone number, give them a call or if there is an email, drop them an enquiry.

The last thing you want is for those holding your money to take forever to respond. One of the key advantages of using Robo-advisors is that they enable you to make investments in real-time, so if you do experience delays, those can really cost you.

Suited to your purpose

Robo-advisors are generally an excellent option for those looking for a low-cost, low-hassle investment mechanism. For instance, if you are looking for estate planning, you may find Robo-advisors are not suited to your purpose. However, suppose you are looking for the best ETFs to invest in – Robo-advisors should be able to provide you with fast and reliable information.

Find your Robo-advisor

Investing with Robo-advisors is becoming increasingly popular. Having new opportunities to invest and make returns is always attractive and doing it in the comfort of your PJs from home is just a nice bonus.

At Unhedged, we pride ourselves on accessibility to all. We are here to ensure you can take advantage of the latest in potentially lucrative investment opportunities.

Signup below to get the updates of interesting, informative blogs that will help your financial growth. If you are based in Australia you can also get started with a free Unhedged demo account and harness the power of our automatic investing.

Products issued by Melbourne Securities Corporation (MSC). Please consider the PDS and TMD available on our website before applying. All investments carry risks and you may lose your money. Past performance is not indicative of future performance. The information in this report has been compiled from sources we believe are reliable and we make no warranty in respect of its accuracy.