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Solactive robo-adviser research finds big differences between US and German advisers


European index provider Solactive has published its report on robo-advisers, ‘Robo-Advisory: A closer look at the engine room’, which looks at some of the questions associated with the growing robo-advisory trend, mainly related to transparency, historical performance, and asset allocation by studying robo-advisers in the US and Germany.

In the first part, the report introduces the story of three investors with different risk profiles – Mr Bart S, Mrs Lisa S, and Mr Abraham S – and compares the asset allocations assigned by the sampled robo-advisers, seeing whether there are any differences between US and German providers.

In the second part, the report presents a simulated model that can serve to benchmark the portfolios recommended by other robo-advisers. Considering the relatively short history of robo-advisers, the sample model provides an overview of results across asset classes over a longer period of time and in different market environments.

Some of the key findings include the fact that robo-advisers rely on different optimisation approaches to determine the recommended portfolios; there are important differences between US and German robo-advisers regarding portfolio allocation and expenses and finally that robo-advisers are not wizard tools, as losses can still occur even for conservative investment strategies.

Timo Pfeiffer (pictured), Head of Research & Business Development at Solactive AG concludes that despite posing a challenge to traditional players, robo-advisers can’t and won’t be the only approach to investing.

He writes: “However, they for sure are a good, complementary service to traditional offerings. Think about it this way: even about 20 years after the first parcel being shipped by Amazon, there are still book shops on the streets – I guess better ones by now. To the same extent, there will still be personal banking and investment services in 20 years’ time. Banks can implement hybrid models, especially around individual investment goals, such as retirement planning, or dynamics around life events. This is an aspect for which pure online profiling faces limitations as of today.”

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