Are you worried about your job getting taken over by a robot in the future? Are you angry that all those bankers that caused the 2008 crash got away with it? Well, it turns out that the future is already here for some of those bankers. Their jobs have already started being taken over by Robo-Advisors.
Robo-Advisors
Robo-Advisors are becoming more and more popular by the day and for good reason too. They use algorithms instead of people to provide you with investment advice and management. Furthermore, they do this for a fraction of the price of a traditional human money manager. There are already quite a few available in the UK. Where as money managers often charge around 2%, Robo-Advisors are usually much cheaper. For example, Money Farm, Nutmeg and Netwealth all charge less than 1%.
As well as being cheap, most Robo Advisors allow you to start investing with only a little money. Traditional money managers, on the other hand, often require tens of thousands of pounds before they’d like to offer their services. They come with intuitive online platforms that makes it really simple to get going. Basically, you just provide your Robo-Advisor with a little bit of information about your identity and preferences. You can then just sit back and relax as your personal Robo-Advisor recommends, designs and manages a portfolio of investments for you.
In reality these robots probably aren’t doing anything a DIY investor couldn’t do. They’ll probably just invest in a few funds and rebalance when required. However, for those who don’t have the time or confidence to mess around managing their own portfolio Robo-advisors are a great hassle free low cost option. In fact, there is an argument that they may be a wise choice for most other investors too. This is because the DIY approach has one big drawback. It relies on investors behaving in a sensible way and unfortunately most investors don’t do that.
Investor Behaviour
When Fidelity, one of the biggest investment companies in the world, did an investigation into which of their client’s investments did the best they found something very interesting. The best investors were either dead or inactive. The inactive ones had forgotten they even had an account. It goes without saying that these guys didn’t mess around with their portfolios.
However strong we think we are, it is so easy to get influenced by the world around us. In the bad times when the markets fall many investors sell all their shares when they are cheap and then buy them all back when they’ve become expensive. Even in the good times there’s a constant stream of financial information advising us what to do based on recent past performance or some future event. “US stocks are over valued you better sell,” or “Brexit means UK stocks are cheap you better buy!” Investors need to be really strong to ignore all this and that’s where Mr & Mrs Robo comes in. They just stick to the plan through the good times and the bad.
Unless you are confident that you are next Warren Buffett it is better to just stick with a globally diversified portfolio containing different asset classes and rebalance when required. Robo-advisors enable you to do this. All you need to do is add money at regular intervals, sit back and let the robot do the rest.
Expats
The bad news is, a lot of these Robo-Advisors don’t accept expats. Having said that, many of the ones I contacted said this may change in the future. Consequently, if this is something your are interested in, it is definitely worth contacting a few as they may have already begun accepting expats. The good news is Moneyfarm is open to expats in Italy and both Nutmeg and Netwealth accept British expats from all over the place. Nutmeg accepts clients from about 33 countries listed on their website and Netwealth say they can definitely accept expat clients. You need a minimum £50k to invest in Netwealth but they may accept clients from countries that Nutmeg doesn’t.