Automated investments services – commonly called ‘Roboadvice‘ are a hot topic at the moment. Even ASIC is getting in on the act with the release of a consultation paper and a draft Regulatory Guide on regulating digital financial product advice.
“ASIC is keen to see a healthy and vibrant digital advice sector,” ASIC Commissioner John Price said at the time of the paper’s release in March.
“We see digital advice as having the potential to offer Australian consumers access to good quality, low cost, financial advice.”
Many others also see this potential, with several larger players to recently releasing their own roboadvice models. Ahead of the game, though, is Stockspot, which enables investors to build an investment profile and select an investment strategy easily and intuitively online.
Canstar spoke with Stockspot Founder and CEO, Chris Brycki, about the value proposition of the model.
Q: A number of institutions are rolling out their versions of roboadvice at the moment. What is Stockspot’s competitive advantage?
A: In addition to the new ‘Stockspot Themes’ feature, there are four areas where we differ from the other automated investment services – transparency, independence from product providers, personal advice and track record.
Transparency – We have always believed in keeping our fees simple, clear and transparent. That’s why our management fee covers our entire investment service, such as portfolio management, all brokerage on buying and rebalancing, administration fees, detailed tax reporting and an annual audit. There are no hidden costs in the background. That’s how we think investing should be. Other automated investment products we’ve seen have a low headline management fee but then there are a list of other costs that are hidden away in the small print.
Personal advice – Stockspot was the first service in Australia to offer personal investment advice online. This means that we consider each client’s personal financial circumstances when making our investment recommendations. Other services don’t typically offer personal advice. Instead they only provide a product menu where it’s the client’s job to pick a product from the choice of options. This means that the online provider takes no responsibility if clients choose the wrong strategy and it’s the client’s job to continually check that the strategy they chose is suitable for their changing investment timeframe and goals.
Independence from product manufacturers – As highlighted by the recent financial planning scandals, some advice businesses are biased towards their own financial products and investment platforms. We haven’t seen this happen in the robo-advice space in Australia yet but in 2015 Schwab launched a robo-advice service in the US that mainly contains its own products and is therefore full of conflicts of interest. We think it’s only a matter of time before a product manufacturer launches something similar here. We strongly believe that businesses offering financial advice should not be allowed to receive payment from the end products.
Expertise and track record – automated investing is a marriage between technology and investment expertise. Which is why we spend as much time researching the investment universe, optimising our portfolio strategies and analysing the relationship between assets as we do on building our technology. Each month we release an update on the Exchange Traded Fund (ETF) landscape including notable changes and we publish the Stockspot ETF Report annually. Despite being a volatile 2 years in markets, we’re proud that all of the Stockspot Model Portfolios have outperformed the Australian share market since we launched, while demonstrating significantly lower risk.
Launching Stockspot themes
In March, Stockspot announced the launch of Stockspot Themes, allowing qualifying clients to personalise their portfolio with a range of investment themes like property, dividend shares or socially responsible shares.
‘theme’ is an area of the market which clients can choose to have a greater focus on in their portfolio. For example, a geographic region (such as Japan or the U.S.), asset class (global property or bonds), or a range of other factors (small or large companies, dividend shares or socially responsible shares).
Clients are able to mix and match different themes according to their investment strategy and personal preferences.
Q: Themed portfolios combined with roboadvice algorithms sounds like the perfect combination. What was the process involved in getting the themes from idea stage to implementation?
A: Launching Stockspot Themes was a huge project for us. It took at least 6 months of research, planning, design and testing. It also involved upgrading our investment algorithms to allow for the 14 different themes and 1,000 different portfolio combinations that we now offer.
Q: It’s very early days, but are there particular themes that are particularly popular?
A: The most popular themes so far have been US shares and Australian dividend shares. That hasn’t surprised us. Dividend shares have risen in popularity as interest rates have fallen in Australia, and US shares have had an extraordinary run of performance over the past 5 years.