Today | Robo-advisers a low-cost option for small investors!

Figuring out how to save for retirement or your children’s education might seem difficult without an expensive financial adviser or putting money into high-cost unit trusts and annuities. Automated “robo-advisers” have, however, made it easier to get personalised advice at an affordable price and achieve your financial goals.

While inexperienced or busy individuals here have had plenty of options for investing, many of them have indeed been expensive.

Unit trusts or life insurance can cost 3 to 5 per cent initially and there are annual fees of around 1 per cent, for example, while financial advisers often charge 1 to 2 per cent of investors’ assets every year.

These days, there are low-cost options available for investors to get personalised financial advice in the form of “robo-advisers”. These are online investment platforms or mobile applications that use technology and software to identify investors’ preferences, offer customised investment portfolios, and invest money automatically.

Investors start by answering questions in an online questionnaire to provide details about their investment goals and risk tolerance, similar to what a personal financial adviser would ask.

They then receive a proposed investment portfolio from the robo-adviser that can help them achieve their objectives.

Their assets are usually allocated to low-cost exchange traded funds (ETFs) which offer broad portfolios of shares. Moreover, the robo-advisers can adjust investment allocations automatically based on changes in market conditions.

Robo-advisers have already attracted more than US$330 billion (S$430 billion) in assets globally, and their popularity is growing. MyPrivateBanking Research expects, for instance, that robo-advisory firms will manage more than US$4 trillion by the end of 2020.


These robo-advisers offer a multitude of advantages. A key one is cost, with fees for robo-advisers in Singapore being as low as about 0.2 per cent per year.

The minimum required investment is also low, and automation makes it easier to manage a portfolio, since most robo-advisers reallocate investments regularly.

While performance data is limited, given that many robo-advisers are new, indications are that performance can be good. As Deutsche Bank said, “It can be argued that robo-advisers engage in relatively conservative investment practices to manage volatility and to reduce investment risks in general.”

With robo-advisers being so popular, it is no surprise that robo-advisory firms here are starting up and obtaining licences from the Monetary Authority of Singapore (MAS).

AutoWealth, Smartly and Stashaway, for instance, are all Singapore-based robo-advisers designed for the average investor. Customers complete a short questionnaire, and the firms’ algorithms use the answers to recommend investment portfolios.

Stashaway does not have a minimum required balance, Smartly requires just S$50, and AutoWealth needs a minimum of S$3,000.

The returns can be good, too. AutoWealth, for example, said that its Balanced Portfolio outperformed all globally-diversified balanced mutual funds available here via Fundsupermart for the 20 months through December 2017.

While there are other robo-advisers such as Bambu and Connect, they are more often available through banks or to accredited investors with at least S$2 million in assets.


Regardless of which robo-adviser you select, it is important to know that you will usually not be able to talk to a person about your investments.

And while the firms are licensed by MAS and funds are held in a separate custody account, they are relatively new.

Although it might seem that most robo-advisers would be quite similar, investment giant Blackrock observed that “not all digital advice is the same”.

Digital advisers have different investment methods or strategies, and the algorithms delivering digital advice vary.

Investors need to look at their options carefully.

One key area to examine is fees.

Along with fees for services, which range from about 0.2 to 1 per cent, also look at the fees for the ETFs the robo-adviser recommends. You will have to pay both fees, and keeping expenses low can bolster returns.

You also need to understand what robo-advisers can do and what they cannot do.

They can be fine for straightforward goals such as investing for retirement, for example, or for children’s education. If you have more complex needs, a robo-adviser may not be enough. Then, look at the types of investments available. Some have fairly extensive information about the ETFs they use and their expense ratios, while others may provide less information.

Lastly, you should consider the services that the adviser provides.

Even though the ways that firms allocate and rebalance your portfolio are standard features, firms may have different approaches. Some may also offer more services such as seminars or online advice, while others may not.

While beginning or busy investors may have had relatively expensive options for investing in the past, robo-advisers have closed the gap and may offer a good alternative.

If you are still waiting to start investing, check out these digital advisers and see if they may help you begin your investing journey.

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