Date posted: 07/02/2024 5 min read

How digital investment advice works

Accountants and other professionals can see the value of automation in work processes – saving time and improving accuracy and results. So, it makes sense to bring these advantages into investment advice. Brought to you by InvestSMART.

With the current cost of living, many Australians are looking for ways to cut back and save. Like many services, the cost of financial advice has increased significantly. According to the Adviser Ratings 2023 Australian Financial Advice Landscape Report, the current average fee for advice is A$4250, with some advisers charging as much as A$13,000 annually.

A low-cost alternative is digital investment advice – also known as robo advice. In addition to eliminating human bias through sophisticated technology, digital investment advisers generally invest their clients’ money in a portfolio of exchange traded funds (ETFs) for a low percentage fee of around 0.5 to 0.75%. The service has democratised wealth creation by turning the tables in favour of investors.

Investment advice for everyone

One digital investment adviser on the scene is InvestSMART, which has financial brains including Paul Clitheroe, Effie Zahos and Alan Kohler on its investment committee. InvestSMART offers investors professionally managed diversified exchange traded fund (ETF) portfolios, with fees capped at A$550 per annum, whether someone is investing A$100,000 or A$1 million.*

“Traditional financial planning services are expensive and not suited for the majority of people who have pretty simple investing needs,” says InvestSMART co-founder and chief executive officer Ron Hodge. “Digital investment advice is about automating the investment planning process, using technology to make it simple, accessible, and more affordable for everyone.

“A lot of people go, ‘I want to save for my kids’ education’. But what does that mean? You’ve got to work out how much money you need and when you need it, and then work out how long it’s going to take to get there.

“Digital advice allows you to set and forget: people contribute a little bit of money every month and it gets invested for them and they can see the reporting,” says Hodge.

Ron HodgePictured: Ron Hodge, InvestSMART

How does robo advice help accountants?

Digital investment advice could also be a solution for many accountants, who are often asked to look into investing for their clients. By suggesting a digital investment advice provider, accountants can free up time to run their practices and work on financial planning.

Hodge says the uptake of digital investment advice is growing among all generations of investors.

“Young people like the simplicity; they like the automation and the fact it’s online and they don’t have to talk to anybody,” he says. “A lot of professionals are really, really busy and don’t have time to look at all the different ETFs coming out.

“As for older investors, they like all that as well. But they actually love to compare us to financial advisers and go, ‘Why am I paying my financial adviser A$5,000 a year when I can pay you A$550? That’s A$4,450 left in my account. Compound that over 10, 20, 30 years: That’s a lot of money.”

*Plus the fee the ETF provider charges, which on average is about 0.2% and brokerage to buy each ETF, which is usually about A$4.50 per trade.

Want to find out more about digital investment advice?

InvestSMART is a partner of the CA ANZ Member Benefits Program. Visit https://pages.investsmart.com.au/CAANZ.html for more information on the benefits InvestSMART provides CA ANZ members.