+44 7393 450837
advice@adamfayed.com
Follow on

LU International Robo Advisory Platform review part 1

LU International Robo Advisory Platform review part 1 – that will be the topic of today’s article.

Nothing written here should be considered as financial advice, nor a solicitation to invest. 

For any questions, or if you are looking to invest in better options, you can contact me using this form, or via advice@adamfayed.com 

Introduction

In July 2021, LU International Hong Kong Limited launched its very own Robo-advisory platform. The asset management services are offered with the help of their AI Investment consultant known as “Lucy”.

As most of you might already have assumed, we are going to talk about all the details regarding this AI-backed advisory platform in this article. But before we get to that, let us discuss briefly what Robo-advisory platforms are, and what their pros & cons are.

Rh8xkHos tech concept 0 1
LU International Robo Advisory Platform review part 1 5

Robo Advisors

Usually, financial planning services are provided by humans such as financial advisers, wealth managers, etc. However, with the advancing technology, people can now rely on artificial financial services.

These services require no involvement from human experts and are purely based on computer algorithms.

These algorithms are programmed in such a way that all the data related to your financial goals and your current financial stability will be recorded. Then, all this data shall be used to provide financial advice that suits your needs.

If you choose, investments would be made on behalf automatically according to the data recorded.

Creating an account with Robo-advisors is relatively easier than with most other types of financial firms. Along with that, the financial goal planning services, account-related services, and portfolio management services are also quite impressive.

Other aspects like security, customer support, financial education, etc., are also good. One major advantage of Robo-advisory services is that they offer their services for lower fees.

The low fees are made possible because of the lack of necessity for financial experts (who charge hefty sums for offering their services).

In most cases, the modern portfolio theory is taken as a reference for the enhancement and automation of passive indexing strategies.

Robo advisors are considered to be apt for people who are involved with traditional investments. They might not be a good option for the people who are seeking services related to estate planning.

Most financial experts tend to be negative towards Robo advisors because of their complex nature and lack of empathy.

How Robo-Advisors operate:

im2018100042pd 300dpi
LU International Robo Advisory Platform review part 1 6

As you already know, Robo-advisors are automated financial planning service providers that work on the basis of algorithms and don’t require any sort of human involvement.

First, they gather all the information related to you, and this process happens with the help of an online survey. This information would be used by the Robo-advisors to make an investment on behalf of the client.

Commonly, Robo-advisors make use of passive index investing strategies while investing. And because of this strategy, you will not be able to beat the market performance even if you wanted to.

Just like the case with a traditional financial advisor, you can either gain profits or experience losses on the money you have invested with Robo-advisors. When it comes to losses, it would be mainly because of factors such as fees, rebalancing costs, tax-loss harvesting, etc.

Robo-advisors usually make money from clients by charging a wrap fee as per the assets under management (AUM).

Advantages of Robo Advisors:

Mobile Banking in Luxembourg BankingHub 1
LU International Robo Advisory Platform review part 1 7

Low fees – The first and most important advantage of using Robo advisory services is the low fees they require for providing their services. As we discussed earlier, having no necessity for services from human professionals is the main reason for that.

On average, most of the Robo advisory platforms annually charge a flat fee that is around 0.5% of the overall amount managed. However, most financial professionals charge around 1% to 2% for the same services, which may not be that big a difference.

However, when people opt for online platforms that operate on basis of commission, then the fees can be even higher.

Accessibility – The next advantage is the accessibility of Robo-advisors as you can reach out to them 24/7 and you only need an internet connection for that.

Lower Minimum Amounts – You can acquire the services offered by Robo advisors without having to fund your account with hefty sums of money.

Generally, the average amount required to be deposited to get the financial services from a Robo advisory platform is around $3,000 to $5,000 (which might vary depending on the provider chosen).

Note – However, you should remember that individuals having a higher net worth and are ready to invest more than $100,000 might not be able to benefit from the Robo-advisory financial services.

For such individuals, wealth management services are appropriate as the financial goals and portfolio management services, and financial planning services required by them will vary compared to general clients.

Even though the fees may be a bit higher, wealth management services are proven to be beneficial.

Efficient trading – Robo-advisory platforms are somewhat efficient in terms of executing trades. With financial planners, you would have to get in contact with the professional, tell them about your requirements, and then you would have to wait for the professional to execute the trade.

With Robo-advisory platforms, there won’t be such hassle as you can just execute a trade with the help of your smartphone or laptop in just a few minutes.

Disadvantages of Robo-Advisors:

OF5uHj02 tech concept 1
LU International Robo Advisory Platform review part 1 8

There are quite a handful of disadvantages with Robo-advisors, which are as follows:

Lack of personalization – Yeah, Robo-advisory platforms are programmed for meeting the financial needs of several investors. Individuals can create and edit their financial objectives with the help of effective financial planning software.

Nevertheless, in certain types of situations where an individual is facing problems with his/her financial situation, there is nothing these Robo-advisory platforms can do. In such circumstances, you might be able to benefit from talking to a financial planner and explaining to them about your situation.

Adding to that, if you want a good relationship with your financial advisor, then you should stay away from Robo-advisors.

Robo-advisors only consider that all the financial data (your financial situation and financial goals) obtained from you is accurate and then operate based on that.

Well, as most of you know, the financial situation and goals might vary from time to time, and you will have to make changes to your investment strategy as per that. Anyhow, that’s not possible with Robo-advisors.

Meagre flexibility – When you are trading with the help of a Robo-advisor, you may not be able to sell the call options in your portfolio or buy individual stocks. Robo-advisors can’t help you with efficient investment strategies that require more than just an investing algorithm.

Especially when you are new to investing, then you might require a lot of exposure towards various types of investment assets compared to what a Robo-advisor may offer.

Lack of investment opportunities – You can only invest in stocks with the help of a Robo-advisor, whereas some of the beneficial asset classes such as ETFs and mutual funds may not be available for you.

You might also be disappointed with Robo-advisors you are specifically looking for services such as estate planning, tax management, retirement planning, etc.

Such services are very crucial when a person is looking for services that aren’t just related to a few types of investments.

Uncertainty in times of crisis – Human financial planners can act accordingly in times of extraordinary crises or unanticipated scenarios, whereas Robo-advisors aren’t of any help in such situations.

For example, they are not so advantageous in circumstances such as when you just got out of a job and are searching for one or if you are dealing with an unexpected expense.

Additionally, your funds would be depleted you have opted for automatic withdrawals concerning the fees for services you are getting.

According to research conducted by Investopedia, it has been claimed that people felt more comfortable when they opted for both human and automated financial services compared to those who just relied on Robo-advisory platforms.

Based on that study, more than 40% of the individual investors stated that they would rather go with a human financial planner than a Robo-advisor during times of extreme volatility in the markets.

Lack of moral support – In the beginning, stages of investment most people tend to panic a lot and might sell their investments at a loss or even lose all their investments.

A human financial planner might be familiar with such drops and might tell you not to worry after a significant drop in the markets. They will further explain how these investments work and how you should act for making up for the losses you are experiencing.

You will miss out on such moral support if you choose the services offered by Robo-advisors.

Discover the nuanced approach of Capital International Group in our comprehensive review, exploring their robust robo advisory solutions and investment strategies.

Possibility of getting hacked – As with any other type of software, the account you have with a Robo-advisor is susceptible to getting hacked.

Pained by financial indecision? Want to invest with Adam?

Adam is an internationally recognised author on financial matters, with over 369.5 million answers views on Quora.com and a widely sold book on Amazon

This website is not designed for American resident readers, or for people from any country where buying investments or distributing such information is illegal. This website is not a solicitation to invest, nor tax, legal, financial or investment advice. We only deal with investors who are expats or high-net-worth/self-certified  individuals, on a non-solicitation basis. Not for the retail market.

SUBSCRIBE TO ADAM FAYED JOIN COUNTLESS HIGH NET WORTH SUBSCRIBERS

SUBSCRIBE TO ADAM FAYED JOIN COUNTLESS HIGH NET WORTH SUBSCRIBERS

Gain free access to Adam’s two expat books.

Gain free access to Adam’s two expat books.

Get more strategies every week on how to be more productive with your finances.