Why roboadvisors might be worth the fees

It’s probably contrary to popular belief – but if you’re like me and you want things to work seamlessly, easily and effortlessly, then sometimes paying a premium for a product or service that delivers just that – might be worth paying a little more for.

Think of it like… using an Apple product.

Apple products are a beast and I absolutely love their integrated ecosystem – connected notes, calendars and contacts; technology like AirDrop and Handoff and seamless AirPods pairing.

Apple charges a premium for their products, yet people would still pay for it. They deliver high quality products, a peace of mind and killer productivity that work, so you don’t have to worry.

When it comes to roboadvisors, I used to think why would anyone pay robos a wrapper fee when you could just do-it-yourself and save the 80 to 100 basis points of annual fees. When compounded, that annual fee could have saved you thousands of dollars over many years.

Of course, when you’re looking purely from the cost perspective, they don’t make any financial sense to a savvy investor.

But humans are irrational and driven by emotions. As we focus on costs alone, we tend to ignore the other benefits that a roboadvisor might bring – risk management algorithms, portfolio monitoring, automated rebalancing or even removing the emotions of timing the market or panic selling.

Would you buy into an equity ETF at an all-time high? Perhaps you might wait till the price comes down further for an entry point. But what if it doesn’t?

Would you regularly rebalance your portfolio to the right asset allocation tied to your risk appetite?

Would you automatically reinvest your dividends?

You see – a roboadvisor doesn’t care and takes the thinking out of the way. It’s not driven by emotions, but by logic and algorithms to ensure you stick to the right set of actions, every time.

You get to put every dollar into work in a diversified portfolio.

You get to make sure your risk is proactively managed so that you can grow your wealth in good times and bad times.

Try doing it yourself, and you might find the time and effort to monitor your investment portfolio might not be that worth it after all.

If you’re a savvy investor, and you like customising your investment portfolios to the detail, tweaking and optimising every bit of expense ratio savings you can squeeze – you’re probably like an Android user – someone who might love deep personalisation, flexibility and the best performance on paper.

An Android user tends to love control and customisability – and robos are a little too hands off for this level of personalisation.

I see the robo vs DIY debate sort of like the Apple vs Android debate – there are no winners and losers.

Just more choices for consumers.

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  1. Another reason I can think of for a local robo – if your other half or family are not financially savvy, having a single robo platform might be simpler for them to takeover when you pass away. No ibkr, fsm, scb etc.

    Still awaiting your review of Syfe btw.

      1. The thing about E is 2 things imo:

        1. Tracking error or should i say underperformance of the DFA fund. Value has not been doing well for >10 years. Its like a gamble.

        2. Fee for cash portfolio is slightly too high. If only they cap it at 0.4% like for SRS which has the exact constituents.

        1. I’d say DIY 3-fund bogleheads portfolios with Ireland domiciled ETFs are the best for most investors net of all considerations. For E, agree that it would be a gamble on value, size and profitability tilts when using DFA funds – the underperformance should normalise over the long term. I actually like their SGD-hedged bond portfolio which is institutional best practice 🙂

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