Who are these Robo Advisors that you keep hearing about?

A new Guest Post about Robo Advisors. The author is a newer face, but has some interesting opinions, well worth reading. All opinions are his.

You may have seen the ads from Wealthsimple. Here’s their youtube channel if you want a refresher. They are Canada’s most famous ‘robo advisor’ as they spend a lot of time and money attempting to reach Canadians. And when you hear about Wealthsimple you’ll often hear the phrase ‘Robo Advisor’.

So what is a Robo Advisor? It’s an investment company that helps you invest with the aid of technology. And because they make the best use of new technologies they can allow you to invest at a fraction of the costs that Canadians will typically pay. And that’s why the Robo’s are here – Canadians pay the highest mutual fund investment fees in the developed world. Those high fees can eat up a significant portion of your investment returns over time – even more than half. Those high fees are destroying the wealth of Canadians. But thankfully, there’s a better way for those that want a managed investment portfolio.

A Robo Advisor can help you invest with fees that are in the range of 50% to 80% cheaper. That can be life changing; potentially it might allow you to retire with a portfolio that is almost twice as generous, or you might be able to retire several years earlier. Those lower fees will usually allow you to better reach any investment goal, even saving for a house, or your child’s education.

And don’t let that word ‘Robo’ scare you. There are no robot advisors. In fact, while popularized, the moniker Robo Advisor is not all that accurate. At all of these investment companies there are many human advisors and customer service representatives ready to help. You can usually communicate by way of online chat or email as well.

As the CEO of Wealthsimple likes to offer …

“Humans when you want them, technology when you don’t.”

These companies simply use technology to manage the investments in an efficient and cost-effective manner. If you seek the ultimate in convenience you can certainly do everything online from your account set up (it might just take a few minutes) to the completion of an online investor questionnaire that will offer you the most appropriate comprehensive investment portfolio designed to help you reach your goals while you invest within your risk comfort level.

But once again, if you ever want that human touch, just pick up the phone.

All of these ‘Digital Wealth Managers’ offer the same style of sensible low fee investment portfolios. You’ll have a well diversified portfolio that includes large baskets of Canadian companies, US and International companies, and bonds are often present to manage the risk of the portfolio. The stock (companies) are there for growth, the bonds are present to reduce the risk or volatility. You’ll be offered a portfolio in line with your risk tolerance level.

And the portfolios are watched and professionally managed on a regular schedule. They are also re-balanced automatically to keep everything ‘in check’. There’s nothing for you to do but sit back and add monies on a regular schedule. You can view your progress online, you can call in to chat if you have questions or concerns.

You can do and get everything you would normally need; you’ll simply do it in a much more cost-effective manner. You will keep considerably more monies in your portfolio pocket.

And all of these investment companies have their unique characteristics and offerings. You can visit my Robo Advisor page for a list of the Canadian companies, and you’ll find reviews on many of these companies (I am still completing that writing process).

They also cover a wide spectrum. Questwealth and Nest Wealth offer the lowest fees; Questwealth for those with smaller to modest portfolios, while Nest Wealth is the most cost-effective for portfolios in the range of $300,000 and above. On any investment portfolio above $150,000 Nest Wealth will charge just $80 per month, capped. The savings on fees can be thousands upon thousands of dollars every year, depending on the size of your investment portfolio.

If you have a more complicated tax situation or are in need of a full financial plan you might consider Justwealth. Once again, that advice is included in the low annual fees.

Please have a look at the list of companies on my site, read some reviews and if you have any questions, please send a note to cutthecrapinvesting@gmail.com. If you are interested in this low fee approach I can direct you to the companies that might best suit your needs.

The key is to not pay those wealth-destroying high fees when you invest. Those monies belong in your pocket.

Dale Roberts is the Chief Disruptor at Cut The Crap Investing. A former advisor on low fee index portfolios, Dale now helps Canadians find the many sensible low fee options available. 

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Tech Infiltration, NAFTA/USMCA, WiFi, Tornadoes and #MoneyTalk

A story of tech infiltration broke about how a server manufacturer was compromised by the Chinese security folks (allegedly). The Big Hack: How China Used a Tiny Chip to Infiltrate U.S. Companies, outlines how many US firms use the technology that was compromised. Why am I talking about this here? This is a game changer for technology. Most of your technology is assembled by small companies in the far east, and now that it has been proven that they are compromised, how the manufacturing chain works will have to change.

Who is compromised? Every firm that matters: Apple, Amazon, NASA, Banks, Government Agencies, etc., etc.,. Expect statements soon from all of them, attempting to downplay the scope of this hack (however it is very big).

The current U.S. regime is already xenophobic, there will now be a push to “Buy BUILT in America ONLY”, especially in the tech area (and absolutely on Government contracts).

This leads to the other big news this week the completion of NAFTA USMCA. The new agreement has changes that will screw affect farmers, but it seems to be better than nothing. It did not remedy the “buy America” policy the U.S. governments currently have, thus Canadian firms still cannot easily penetrate the lucrative U.S. government contract world.

The tech infiltration will not help with this lack of access to the U.S. Government contracts. If anything rules will get tighter in this area.

Are you feeling paranoid about your own tech security? You should, since Wired just told us, How Russian Spies Infiltrated Hotel WI-FI to hack victims up close. Remember if you are using any kind of public WiFi, don’t use your banking app, better still, just don’t connect to it. Your phone will tell you it is not secure, believe your phone. If you get a VPN (virtual Private Network) you might be safer, but never completely.

Hell of a Wind

We were lucky that all that happened to our house, during the Ottawa Tornadoes, was we lost power for about 49 hours. This meant all food in all of our freezers and refrigerators had to be thrown out (about $1000 worth is my guess). Given my home insurance deductible, it is not worth claiming. We have friends that were much worse off, and my wife and I actually were in Burlington the weekend (visiting my Grandson).

My daughter got to enjoy Barrhaven in the Dark for the weekend, and did an excellent job taking care of the house. Our City Councillor and Provincial MP did a great job helping folks out as well.

I will be putting together a better power outage plan, as the current one wasn’t very good. A generator is an idea, but would entail a great deal of work on our house wiring too. Maybe Solar or a Tesla house battery system?

My Recent Writings

Keeping with my technology theme here, I did write, FinTech’s Foundations COBOL. I loved COBOL at school, it was so easy to comprehend, and maybe I can retire and get some contracts programming in it? Maybe my skills are a bit too rusty though.

Wonder what kind of Tech Infiltration there is on the COBOL side of things?

Deep Money Thought

“Fortune aids the audacious” -Virgil

“What Fortune has made yours is not your own.” -Seneca

A stoic thought about money, what Fortune gives you, you must be wary of, and plan for when it is not there. Virgil’s comment is the more popularly quoted, but Seneca’s view is important to remember as well.

🎱 For more personal finance stories click here 🎱

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FinTech’s Foundations COBOL

A very interesting article from the Wall Street Journal confirmed to me what I had always suspected, in terms of the technology all banking is still based on, COBOL (at least on the banking side of things).

The world of banking is very risk averse when it comes to technology. There are backups to all systems, multiple power sources every system must live up to “5 9’s” availability. This means the system is up 99.99999 % of the time. As the Canadian Feds found out changing out an old system and replacing it with new code and technology is problematic (aka Phoenix), thus most Banks are reluctant to do whole sale changes just to update technology. Old systems get replaced typically if they are broken, not if they are still working.

At the core of the banking system in terms of technology is a language older than me (and I am old). COBOL (COmmon Business-Oriented Language) was written in 1959 based on the works of Admiral Grace Hopper. I worked in it, at school and on the job as well (at school I used WATBOL), so I have a passing understanding of the language. It does, what it does, well.

FinTech continues to crow about it being new and exciting, and parts of it might be (the user interface is my guess), however the heavy lifting (i.e. account creation, asset moves, etc.,) is all still being done capably by COBOL.

FinTech COBOL
A COBOL Punched Card

Fear and Loathing

Is it time to fear FinTech? You should be skeptical of all the claims, but if the system works (for you), that is the major decision point. If someone tells you how it is the future of banking, ask them about how they interface to the banking COBOL interface (see if they have an answer for you).

I am glad to see that old technology still keeps the world humming. Also, the finance world is so Risk Averse they won’t change to new technologies quickly either.

Some say COBOL programmers are like cicadas, they come back every 20 years or so.


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Can I Get a Deal from a Chatbot ?

Given the push by most service companies to replace their customer service folks with AI (i.e. a Chatbot), will we still get up-sold services? Will we be able to get better deals if we say we’d like to talk to the Customer Retention Bot? With storefronts disappearing will we never interact with humans again?

What is a chatbot? Current definition:

a computer program designed to simulate conversation with human users, especially over the Internet.

This is another weird part of FinTech as well, where you won’t talk to a human, you will interact with a ChatBot. Who gets the commissions if the ChatBot convinces you to buy their Balanced Mutual Funds? An old broken down programmer like me could program something fairly simple that could shepherd customers into the “Balanced Fund Paddock”.

When I speak to a credit card chatbot about how I missed a payment accidentally will it cut me some slack, and rescind the interest rate if I promise to pay off my bill completely? Surprisingly, that could be built into the AI for the system, but will it? The excuse, “sorry, the machine is programmed that way” is an easy cop-out for most firms.

A possible chatbot conversation
A possible conversation with a Chatbot

What Does the Future Hold?

I have said previously the answer is always no, unless you ask, however if you ask a machine will you get help?

I can envision a future where folks will share cheat phrases to use with ChatBots to get better deals, or better services. All technology has cheats in them somewhere, you just need to know where to look.

Do folks even enjoy talking to Chatbots?

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Fintech is it the Answer ?

What was the Question ?

If Fintech is the answer, are we sure we know what is the question? Fintech started off being about changes to the banking and investing back ends, but not any more. Fintech is now being used to describe new On-line banking and Investing systems, as well as, automated investing systems.  For arguments sake, let us view Fintech, as any new technology in the Banking and Investing world.

Fintech
Fintech, Welcome to the Machine

Savings Passed On ?

With these new technology changes, the main thing will be, will savings realized by financial firms passed on? Some of the savings for financial firms are:

  1. Less employee overhead, which should mean significant savings. If there is less need for tellers, investment advisors, insurance advisors, etc., that will save these firms big money. Less salaries, less benefits to pay, no pensions, these savings could be the biggest Fintech improvement, but will I see savings?.
  2. Less Mortar & Brick locations, this is a follow on to all the on-line services. If Fintech means more services on-line, it could mean less need for as many “regional offices” and the like.
  3. Easier and cheaper transfers between banks and investing firms. These “costs” are hokum any how, but now even harder for the big banks to hide. All of this is comms between computers, no humans involved. Why does it cost $3 to make an Interac Transfer?
  4. Lower Fees for services like costs per trade and such. With on-line trading and banks this was a big promise, that has never really come to fruition (yet).
  5. Faster and better portfolio decisions sound like something that should happen, but that depends on how it is implemented, and faster is a relative statement (same day transactions can be faster than 2 or 3 days lead time, but are worse that within 5 minute trades).
  6. Consolidation of firms might happen in the U.S., but less likely in Canada. Canadians continue are at the mercy of the Big Banks, but maybe Fintech will cause small on-line banks to break through? We can only hope on that one.

Fintech For Everyone ?

Will I be able to take advantage of these great new technologies, or will this simply end up being something that benefits big investors and financial firms? I suspect there will be some advertised Fintech features offered, but my assumption is this will end up being a big money, people and time saver for the big financial firms, but not so much for John Q. Public.

Can I Create a Fintech Edge ?

Can I, as a relatively tech savvy investor, find my own Fintech edge? Not likely is my opinion. That would mean large financial firms would open up their systems to me and other programmers. This will not happen, security concerns would be the biggest issue.

All I can think of is Pink Floyd’s lyrics from Wish You Were Here,

“Welcome my son, welcome to the machine”

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