‘Robo-advisors’ are computer-generated financial models which offer portfolio recommendations using low-cost funds, based on simple risk questionnaires with clients.
I believe they have their role in basic portfolio management but we need to be aware of their limitations. Expatriates may like to consider the following points:
1. Does a computer-generated model understand your financial circumstances and lifestyle objectives with the required level of intimacy as per the traditional client- adviser relationship? Health, tax, reporting, inheritance…?
2. Can this robot truly challenge you about your objectives and recommend a more appropriate risk/reward strategy based on your age and investment horizon?
3. Will this robot proactively reassure you during a period of volatility and suggest that you maintain or change strategy? What about the qualitative, political and currency risk factors which cannot be distilled into the financial model?
4. Does the robot have the metal balls required to take a risk? E.g. buying into certain sectors at present e.g. energy and emerging market equities – and managing the client’s expectations accordingly
5. Has Mr. Robot experienced an expat lifestyle with ‘Fembot’ and the Robo-kids? If so, maybe he can provide holistic international tax advice and discuss repatriation.
6. For high net worth investors, will Mr. Robot considering alternatives like private equity and hedge funds?
In summary, robots sometimes have a role to play within the wider context of financial and tax planning.
On that note, I’m off to see my Robo-doctor…