I have come across this question a few times. Below is my response.
The ultimate goal of an automated investment management service or robo advisor is to provide the best long-term, risk-optimised returns to the client net-of-fees. This goal aligns with what a typical client wants — “What is the return I might enjoy in the long term for the portfolio risk I am advised to take?”
Everything else, such as an intuitive user interface, great customer support, informative educational guides, sleek mobile app, etc., is secondary.
Our firm QuietGrowth believes that investing in a highly diversified, low-cost portfolio for the long term in the most suitable financial instruments, (typically, index or smart-beta funds unless there is a specific case that a particular individual stock is mis-priced over an extended period) gives superlative returns. We notice that investment returns with this approach are almost always in the top 10% of the risk-optimised portfolio performers in the investing universe. This tenet or investment methodology drives our portfolio construction, and this is our main value proposition.
Value of robo advice to different segments
Robo advice provides considerable value to the following four client segments:
- Those who are delegators and not do-it-yourself (DIY) investors;
- Those who prefer automated discretionary investment management from a robo adviser for a lower price compared to a traditional wealth manager;
- Those who don’t need face-to-face comprehensive financial advice from a traditional financial advisor because their life situation is not complex; and
- Those who can’t afford a high-quality traditional financial adviser.
Related information
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