As if managing your investments was not complex enough, another option has become available. Whereas it was limited to going it alone or employing a financial adviser, developments in fintech have seen the emergence of robo advisers cutting out the human middleman.
The term robo investor describes online investment management sites but can be something of a misnomer. These sites offer to manage investments through unique algorithms, but some industry experts describe them as more akin to a fund-of-funds or a mutual fund company.
The City watchdog, the Financial Conduct Authority, has warned against using robo advisers having expressed concerns about fees and the advice being offered.
Apart from the issue of fees, the report from the FCA expressed concern that the offering of robo advisers is not personal financial advice that considers an individual’s financial circumstances.
The alternative option for investors is to look for advice from a company which is using financial advice software found online at sites such as Intelliflo can help with financial adviser software. The revolution in fintech means that most companies in the industry are using or looking at employing financial adviser software.
Although investors may be tempted by the fees offered by companies operating in the robo investor market and the size of the minimum investment, independent advisers will make clear the costs of managing your investment and be open to negotiating a minimum investment pot.
One area where online advisers may win is convenience. You can contact them easily and will not have to book an appointment or visit an office. However, most investors like to sit down and discuss their finances, and independent advisers will be available to chat or skype online if you are not able to visit their premises in person.
Human contact also allows for a level of accountability, and regular contact with your adviser allows you to examine the gains and losses which your investments may be making. Your chosen investment may not always be based on an algorithm, indeed you may have ethical markets you are interested in as part of a mixed portfolio. These circumstances point to you favouring a human adviser, especially one using financial adviser software.
No independent financial adviser is going to guarantee they can out-perform a robo investor but they may be better placed to understand your investment needs.