Putting robo advisers to the test

Digital advice is easy to access

Robo advice in South Africa is relatively small, with only a few fund managers, banks and financial advisers offering this kind of advice to invest in unit trusts. However, companies are developing and refining existing offerings to make them more compelling and user-friendly.

Digital robo advice can guide you to appropriate unit trust investments. Picture: 123RF/LANGSTRUP
Digital robo advice can guide you to appropriate unit trust investments. Picture: 123RF/LANGSTRUP

Robo advice in SA is relatively small, with only a few fund managers, banks and financial advisers offering this kind of advice to invest in unit trusts. However, companies are developing and refining existing offerings to make them more compelling and user-friendly.

Sowetan Money tested OUTvest and Nedgroup Investments’ robo advisers to see how easy they were to use to set up an emergency fund.

Nedgroup Investment’s digital adviser, Eva lived up to her claim of making it “extraordinarily easy” to invest. Her questions are easy to answer and she churned out her recommendation in under 10 minutes.

First, she asks you what goal you’re planning for: retirement, education, a personal goal, or just investing.

Eva then asks you how much you need to save to achieve this goal and the goal date you have in mind. You need to know how much you can afford to save on a monthly basis to answer this question accurately. For example, if you know you can afford no more than R500 a month, you need to have worked out how long it will take you to get to your goal. If you say you aren’t sure, Eva will decide for you. If the contribution turns out to be unaffordable, try again with a longer investment term.

After you’ve set your goal date, Eva will present you with a “generic” plan which is then refined depending on the level of investment risk you tell Eva you’re willing to take.

“The market always has ups and downs. Do you think you could delay accessing your money during a temporary drop – say for six months?”

If you answer yes, Eva will ask you when you expect you may need to access the money. “More than five years; three to five years; or less than three years?”

In this test, since the money was for emergencies, we said we needed to be able to access it any time.

Lastly, she’ll ask you how you would feel about ups and downs in your investment value.

Depending on how you answered the risk questions, Eva will recommend a portfolio made up of CoreShares index tracking unit trusts funds. Your exposure to more risky investments like shares will be in line with your ability to take risk.

The plan Eva presents is visually appealing and loaded with important detail behind six key questions: how much will you put in; what can you access and when; where is your money going; what kind of ups and downs [are you in for]; how much will you make; and how much will it cost you.

Click on “How much will you make?” and Eva shows you a graph of expected returns in three possible scenarios: a strong market, the expected market and a weak market.

If you like what you see, you can invest. But if you aren’t quite ready, Eva will email the investment plan to you.

Like Eva, OUTvest asks fewer than 10 easy-to-understand questions and takes less than 10 minutes to generate your plan.  

Start at “general investing” and then choose “invest towards a target”.

Give your goal a name and tell the robo whether you are investing for education, a wedding, a holiday or just investing.

Then fill in how much you can invest and for how long.

The OUTvest robo will check if you are currently contributing to any tax-free savings plans in your name and if not, it will recommend you use one.

You will also be asked if you have any short-term debt and whether you have access to extra cash to cover unexpected expenses.

You need to answer this so that OUTvest’s robo adviser can determine whether debt or an emergency could derail your intention to stick to your investment plan for as long as you say you can. This affects the robo’s choice of fund(s) for you.

The plan is pared down and punchy, showing you the recommended fund(s) along with the range of estimated returns and the potential amounts you will realise with this growth.

The OUTvest robo allows you to override the advice given at your own risk, by simply clicking “change” alongside the recommended portfolio. This takes you through the five funds on offer, showing the risk level and investment time horizon for each.

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