Investment platform Itransact has launched an online robo-advice offering, ItransactGO, which helps South African investors tailor their investments to their financial goals. There’s no financial advisor telling investors where to put their money and taking a fee off the top, and what’s more Itransact don’t charge more than 1.14% per annum for the service, including VAT. There’s also a free retirement annuity option where investors only pay for the investment solution.
Typical fees associated with actively managed unit trusts can range from 3-6%, depending on the investment house you approach. Then of course, you also have to consider your advisor’s fee, which can also eat into your savings.
“With 1% you are losing 17% of your savings to fees, with 2% you are losing 31% of your returns to fees and with 3% you are losing 42% of your savings to fees,” points out Lance Solms, head of Itransact.
Itransact boast that they are independent and specialise in the provision of ETF (exchanged traded fund) solutions. ETFs are a form of collective investment that can be bought and sold like shares. They are also referred to as ‘passive investments’ as there’s no asset manager making the investment decisions as they typically just track the performance of an index.
But not having an active manager managing your savings may be an advantage. According to results published by Profile Date (FE Analytics) and ratings agency Morningstar, around 70% of fund managers who invest in equities underperformed the market over 1,3,5 and 10 years, which means that you could lose out on achieving your investment goals.
Robo-advisors, however, use algorithms to calculate what you need and how to achieve your investment goals. There’s no emotion involved as the ‘machine’ makes all the decisions for you. “ItransactGo is 100% independent. Once it understands your profile, it will look across all asset classes like cash, bonds, property, domestic and offshore equities, comprising over fifty low cost ETFs for the most efficient mix and then combine them in such a way to form a portfolio that will best suit an investor’s investment goal. It will not favour one asset manager or fund over another, it will only pick the best funds for investors,” says Solms.
Should there be any drastic shifts in the markets it will take that into account. “It will automatically rebalance your portfolio so that you never have to worry about the mix of assets you have chosen. It will allow you to switch between different risk profiles as your lifestyle changes.”
While everything can be done online, there are call centre agents available to help too. “And where one needs to speak to a human, one can call a highly trained contact centre. Investing in the market has never been simpler,” says Solms.
Solms added: “We are confident that investors will be satisfied with our modern investment products with low fees, combined with a full suite of investor services such as state of the art technology, a full function contact centre, an online account with a performance analysis tool, the ability to view and download investment and annual tax statements, view transaction histories and even reset passwords in a secure online environment.”
This is not the first time robo-advisors have been launched in South Africa. However, many businesses offering this service have found it difficult to survive on their own as they struggle to attain profits. This is not because the concept itself is a bad one, but because robo-advisors are expensive to build and maintain and require rare technology, skilled people and a host of financial licences in order to operate.