Important Information:
Fee comparison data was obtained from moneysmart.gov.au. Financial advisor ongoing fees was calculated at 0.75% of the initial investment amount and fixed fee’s were calculated from the Moneysmart recommendations. Hedge Fund management fee was calculated at 1% of initial investment and a performance fee of 15%. Jaaims fees were calculated using our Professional subscription on an annual basis and does not include broker fees. Fees shown are indicative amounts only and will vary. Fees are also likely to be higher if you need a broader scope of advice.
Costs are important when you invest as they will impact what returns end up in your pocket. It is also important to consider the different features of personal advice or investment products to make sure you get what you pay for. We have considered this in our resources article ‘The Cost of Investing, what are the options for getting help with my investments?’, you can view it below.
What are the options for getting help with my investments?
We all want our money to work hard for us. It may be you are thinking about retirement, buying a house in the future, your dream holiday or how to pay for school fees in the future. Getting the best value for your investment is therefore critical.
It’s always best to think about value rather than simply what something costs. And the same product or service can have a different value for each of us. Think of buying a car. If you are really just wanting to get yourself from A to B, you probably don’t want anything fancy or too big, so a small car may be the way to go. Then again, for a family with children, a small car would represent poor value because it wouldn’t get the job done that they need.
Investing is the same. There are lots of ways to go, but it is about finding the way that has all the features you need but where you don’t pay for those that won’t add value. At the same time, get too few features and you may not get the best outcome. Let’s consider a few of the options out there.
Financial Adviser
If you know nothing about finance and don’t want to spend hours doing research, a financial adviser could be good value. The idea is that advice is tailored to you. Some of the benefits are:
- The adviser will ask a lot of questions to get to know your individual circumstances and goals;
- You will get detailed written advice;
- Your adviser will consider how to meet your goals with strategic as well as investment advice and also consider asset allocation (i.e. what they think is the best mix between cash, shares and property);
- They will offer you an ongoing review service if you need it to try and make sure you stay on track.
Like everything is life though, there are also some trade-offs:
- This is likely to be the most expensive way to get advice as it takes a lot of time to get to know your circumstances and formulate a plan just for you;
- Many advisers use administration services which add another cost to the mix. This may be as much to help them provide you with a service as to help you;
- Advice might not be as timely as possible. Most advice businesses buy research externally, then have it reviewed by an internal committee and eventually it ends up with your adviser.
Managed Fund or Exchange Traded Fund (ETF)
Many investors like to use managed funds. In particular, exchange traded funds, or ETFs, have become quite popular in recent years. That is because they are easy to buy and sell as well as often being based on an index strategy, so the management fees can be quite low. The benefits are:
- Simple to buy and sell and often low cost;
- No large upfront cost like with a financial adviser.
Of course low cost means there some things you miss out on:
- You are responsible for choosing the right fund that suits your goals;
- Index style funds will always be fully invested, so you need to make the call yourself if it is a good time to be fully invested and how much risk to take.
Jaaims – The AI Investing App
One of the most exciting areas of technology is artificial intelligence. And it’s no wonder, as Jaaims can analyse a stock in just 73 seconds when the same job might take a human analyst weeks. Technology also allows for scale so advice can not only be very timely, but very cost effective. Subscriptions are fixed fee, unlike other options which are often a percentage of your investment, and there is even a free version to try.
So what are the benefits of having an AI adviser?
- Your AI adviser is working 24/7 with no breaks. It updates recommendations every 15 minutes;
- You get the ultimate control over your share portfolio. Don’t like coal stocks? No problem, with a few clicks you can exclude them;
- You can allow the app to automatically execute recommendations, so whilst you have control, it doesn’t mean you need to constantly watch markets;
- Smart Portfolio with a Professional Subscription allows you to access every stock that Jaaims analyses across share markets in Australia, the US, UK and Germany;
- Active management of market timing risk. If the AI doesn’t see any opportunities it will keep funds safely in cash. As soon as it sees new opportunities the cash is once again deployed to work hard for you;
- The ability to diversify across asset classes like bonds and property with access to low cost ETFs as part of your asset allocation strategy.
Whilst we think there are some pretty amazing benefits, there are some things to consider as well:
- Being in control also means there are some decisions you need to make to set your strategy up. We can only provide general advice. Of course you could see a financial adviser to get help with this if needed.
- Our Smart Portfolio is a fixed cost which may not suit small investment amounts. Since we want everyone to be able to access the best technology we have a Freemium subscription though with a more limited feature set that could be a great way to get started.
So at the end of the day ‘good value’ is different for everyone. At Jaaims we have worked really hard to try to bring institutional technology to the everyday investor and our different subscriptions mean there is something for everyone. We think everyone deserves the chance to invest like a pro!