In January, I brought on a new client who fits the target market of all the Robo-advisors popping up across the country. Read part one here to see how and why he came to us in the first place.
It's been 3 months since we started this experiment, so let's take a look at the scorecard for quarter 1.
As with all clients, we need to assess how much risk you are willing to take on. For that, we look to the world of behavioural finance. We use a tool that dives deeper into your money personality and helps to explain WHY you do the things you do with money.
Our robot friends, however, use a simplified, 6 questions survey to determine how risky you are. For simplicity, they have 3 portfolios, conservative, balanced and growth. After the simple questionnaire, they determined our client was in the balanced category. Here's the thing, he's a professional poker player. He thrives on risk. He loves the rush of going all in (he says he's only done it once but it felt amazing). After we administered our behavioural focused risk questionnaire, it came back as growth - aggressive (shocker!)
Robot 0 - Human 1
As his income is sporadic and from many sources (online income, sponsorship, gambling winnings) it goes without saying that his taxes might be a little more complicated than the rest of us. We worked our connections and set him with an accountant that has experience in this field.
Robot 0 - Human 2
The (misplaced) portfolio from our robot had a 3-month negative return of -1.97%. If we add in the fee of 0.5% (which, yes, is super low) his loss is extended to -2.57%. Our (properly placed) portfolio saw the same ups and downs as the rest of the overall market, but because of the nature of our allocation, we returned 0.12%. Oh, and that INCLUDES our fee. Not fantastic, but not negative either. For all of those concerned, here are the disclaimers that I am required to post after the mention of returns.
Robot 0 - Human 3
So if we look at the judge's scorecards, we see that after round 1, the human advisor is in firm control of the match. This doesn't even take into account the budget work we have done or the travel insurance put in place for a trip to New Zealand next month.
The combatants are now in their corners and awaiting the second round bell. I'll let you know in July how that went, sports fans.
Kenneth Coombs CFP CHS RRC
Ken has 13 years experience in the financial services industry, is a Registered Retirement Consultant and a Certified Financial Planner. Ken has written financial planning columns and has been a guest on financial radio and podcast programs.