Niko is an experienced project manager and a senior consultant. He his core competencies are pre-studies, enterprise architecture, requirement analysis, system specifications, procurements and deployments. Niko’s domains are insurance, banking and public sector and his largest projects has dealt with systems for financial administration, HR and bank treasury. Besides technical duties Niko has worked as a supervisor for a large help desk. Niko has also several positions of responsibility both in corporations and organizations.
My reminiscences about investing start from the early 1980’s. Those days my father checked yesterday’s stock prices from Helsingin Sanomat newspaper. If there was some significant new information he might made a call to Helsingin Osakepankki’s branch office and gave an assignment.
Thirty years have totally changed access to information and markets. But one thing has not changed. Private bankers are still making the same old questions. What is your investing period? How much can you bear risk? And the main question: how much you are going to give us and how soon? Well, back in 1980s there was no questions demanded by the authorities (like: “are you taxable in US?”). But those don’t create much value added indeed.
Times are changing however. At last I’d like to say. For this blog entry I explored one of the first robo-advisory services in Finland.
Results for my profile? ETF (Exchange-Traded Fund)-portfolio where allocation is 18 % fixed income (bonds) and 82 % common stocks. In common stocks biggest single investment would go to European large companies and next to large US value companies. I think portfolio is all right. Just now I would be even more reluctant to bonds. But in a long term they are of course part of all portfolios.
And the cost for building up and maintaining (re-balancing) this kind portfolio? 0,95 % per year in the beginning and 0,45 % per year when portfolio has grown up to 100 000 EUR or more. There is a mention that ETF’s have a cost and it is included for their daily price calculation. Exact figures are not mentioned but as a devoted index-investor I know that ETF-cost are somewhere between 0,05 % to 0,50 % per year. So the total costs will be somewhere between 0,50 % – 1,45 % per year. Not bad at all.
Only weakness is that minimum amount needed to start is 5 000 EUR. Of course this is much less than what traditional private bankers are asking. But basically if everything is automated could this be even less? From this point of view I happen to know that there are some fees that authorities encash per customer based. So the cost structure is not fully flexible.
To make a real test I asked help from a person with no background in IT or finance. She got an ETF-portfolio where allocation is 53 % fixed income and 47 % common stocks. And a clear recommendation to select higher level of risk when her investment period is 20 years. User experience is quite nice she taught. Only odd thing for her was a request to take a photograph of some ID (eg. drivers licence) and upload it. This was first time she got that kind of request and was a little bit doubtful to do that.
But regarding to substance she made two fundamental questions. “I can see that there are 12 different ETFs where my money would go. But what is ETF and why just those ETFs are selected”. Yes, there is a FAQ, but she really wanted to have more information before she would make a money transfer. Her other question was: “what if one should not invest at all?” If one has plenty of consumer credits or some other reason why there is no excess at all to invest. Is there a threat that this will not be noticed if there is not any personal conversation? This second trial showed that there is still some demand for personal service. Not in a traditional way but as a supplementary service.
But how about those private bankers? Do they have any future?
My answer is: not in the same form as they used to have. Automated portfolio management is one clear example how digitalization destroys old professions but also creates different kinds of new ones.