Robo Advisors: Achieving Financial (In)security Without Extensive Knowledge

Without thinking, you let a robot suck your apartment, but would you trust it with your savings or the money from selling your grandmother’s apartment? Hm, you might ponder for a minute or two and conclude that no artificial intelligence algorithm is really capable of such a thing, and here you would be wrong at first. Robo advisors are now mainstream in asset management and, if you ask, they are actually doing quite well. Yes, the market is currently such that even those with degrees from Harvard, Stanford, and Columbia are gambling on it, let alone artificial intelligences, but still, such robotic approaches to investing can find the best individualized investment portfolio composition for each person. Especially if you do not wish to be an active investor but rather a passive one who approaches with caution and seeks some balanced solution. In essence, even if you are not, it is preferable that you are conservative.

The basic advantage of robo advisors is that it eliminates the high cost of a real financial advisor’s service, and as the cost of investment services decreases, the profit for the client can only grow. What the robots will invest for you depends exclusively and solely on you, on your needs and preferences. And to choose well and wisely, you must first help it, and how this is done is explained by MyTetka, our financial influencer Sandra Ferenčak, who emphasizes that robo advisors must first collect basic information about you, such as your financial goals, risk tolerance, and investment time horizon.

– Only then can it recommend an investment portfolio using a computer algorithm, provide a platform through which you can invest, most often through a simple transfer like a standing order to buy and sell financial instruments for you, manage your portfolio including periodic rebalancing – it is stated on the MyTetka blog.

There are about a hundred active ones in the world, there is also a significant number in Europe, and in Croatia, at least for now, three robo advisors are available. One is Finax’s, the other is InterCapital’s Genius, and the third is ETFmatic, which is also available in Croatia, but not in the Croatian language.

To start investing with Finax’s robo advisors, it takes only about 15 minutes to open your account and honestly answer the questions because these answers affect the investment risk profile. The robo advisor calculates a strategy based on algorithms tailored to the individual financial situation, knowledge and experience, and attitude towards risk. The advisor is, they say at Finax, without hidden fees, and funds can be withdrawn at any time, without penalties or additional fees. But that’s not all, they add, the unique management fee is one percent per year (+VAT), and the minimum deposit is 20 euros/150 HRK per month.

InterCapital Asset Management (ICAM), as the leading independent asset management company in Croatia, has decided to make a new step after 17 years of experience in managing investment funds and individual portfolios for a large number of institutional and individual investors and 14 prestigious awards, and they have developed their own robo advisor Genius within an in-house development incubator.

Genius is, they emphasize, a revolutionary financial tool based on the advanced algorithm of Nobel laureate Harry Markowitz, it is stated on the advisor’s pages where it also says that its algorithm creates an investment portfolio for the user composed of the best global and domestic investment classes and manages it according to the individual financial plan it creates for each investor.

– The individual financial plan is created based on information about the goals and personal circumstances of each user, taking into account the level of risk acceptable to the user. In their financial plan, the client can set their investment goal and target amount, an acceptable level of risk, investment time horizon, and see the indicative expected return at the end of the period. The user chooses the goal they want to invest in, independently decides whether to make a one-time payment or save monthly. They can also change existing parameters of their financial plan, withdraw part or all of the invested funds at any time – without costs and without fees – they explained at InterCapital.

The algorithm creates and monitors a globally diversified investment portfolio for each investor by selecting investments between the best ICAM funds and the largest global ETFs, seeking the best return for the given level of risk. The algorithm continuously monitors investment performance and optimizes the portfolio as needed. To offer investors the opportunity to invest in quality global investment funds, ICAM has established cooperation with BlackRock, the largest asset manager in the world managing over 9 trillion USD in client assets.

– The Genius mobile application is the future of investing as it allows every investor to plan, invest, and track investment achievements in one place in a simple and free way. Genius contains a smart algorithm that finds the best solution in global financial markets for each investor depending on their desires and risk preferences. We are proud to have brought new trends in the asset management industry from around the world to Croatia with Genius, which truly enables personalized investment advice and service for every individual – said Ivan Kurtović, CEO of InterCapital Asset Management.

ETFmatic operates on a similar principle as these two robo advisors. Regardless of which one you choose, robo advisors are quite good tools for entering the world of investing and managing investments. However, it should be kept in mind that, in relation to them, as well as to people, the most important premise is – honesty.