Wondering if someone has good or bad experience using robo advisors from Switzerland to implement a passive investment strategy with re-balancing.
here is my robo-advisor that advises me where to put my monthly savings such that my depot approaches my desired portfolio
make yourself a copy, check out your portfolio tickers at googlefinance and go investing!
my experience: almost flawless 
it costs zero, makes sure i stick to my asset allocation and is adoptable if I ever want to modify it. fully passive.
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Why would you pay someone 0.5+% p.a of your wealth for a few minutes of work each month? Who might not even do the job properly
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obviously 0.5+% is too much
there could be a āVanguard of robo advisorsā, i.e. flat fee fund of fund with re-balancing and re-investment of dividends.
But 0.5-1% and up is the swiss appetite for this kind of service
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Just a reminder of how powerful compounding is on these things, if you ask yourself, how much is 0.5% over 30 years:
cost = 100% - (100% - 0.5%) ^ 30 = 14%
So if they grow your 100ā000 to 1ā000ā000 over these 30 years, it will cost you 140ā000. The actual fee will be 55ā000, but the lost potential earnings will be 85ā000.
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Thereās an easier approximate formula 0.5% x 30 = 15%, so considering compounding it actually slightly reduces the cost in the end
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I started using True Wealth in November 2015 and I am really satisfied so far.
If you open a trial account, you get the investor profile and asset allocation they would recommend to you. Personally I chose to do some modification to the recommended allocation, which was easily done in my online profile.
My goal with True Wealth was also to take advantage of the dollar cost averaging and so I have set up a standing order to transfer money from my current account to my TW account every month. Then the portfolio is automatically rebalanced regularly (at least once a month from what I have seen). If you want to have a completely automated investment system it can be a solution.
The only disadvantage I see is that you have to pay the 0.5% management fee. The average TER I have for the ETFs in my portfolio is 0.16%. So the total fees amount to 0.66%. If you use the referral program with someone who is already a client, both get a 50% discount on the management fee (i.e. 0.25% instead of 0.50%) for one year. Even though I am satisfied with the service I will probably stop using it in the next couple of years. As some people already pointed out 0.5% adds up pretty quickly over the years, particularly as your assets under management increase.
Some additional info:
- You get a tax statement at the end of the year, which helps you fill out your tax returns
- Your assets are deposited at Saxo Bank and you get a āview onlyā e-banking access to your account which allow you to see all transactions, which you can export in Excel (all transactions also appear in your TW account so it is not necessary to use the Saxo Bank e-banking if you donāt want to)
Your formula is good for low percentage and duration. Iām not sure if it reduces the cost, because you need to apply these 15% to the final portfolio value, not the initial. In my example, the actual fees will only be 55ā000, but if this fee was reinvested, it could yield an extra 85ā000. This is what I meant by compounding.
These are both just simple approximations. Iām just saying your formula which considers compounding effects makes the cost look a bit less - 14% vs 15%
I closed my Truewealt account at the beginning of this year to ādefragmentā my investments.
It definitely has some nice features such as the āfreeā transactions an the tax statements (turns out that stuff is way easier to do myself that I thought).
I think it is definitely better than not investing but the .5% and product limitations still hurt a lot.
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I am the founder of Simplewealth so I am a bit biased here
We are thinking about āthe Vanguard of Robosā @MustangMustache , i.e. a service to just use our platform for rebalancing.
Above CHF 1m of trading per month across all the accounts we managed, we have 25% lower trading costs (and 37% over CHF 10m). See at https://www.interactivebrokers.com/en/index.php?f=1590&p=stocks2
Basically:
- Input = an email with an excel sheet with your ETF allocation + monthly or quarterly (or whenever) cash wires
- Output = automated and regular rebalancing + reduced trading bill due to scale effects
If you are already at IB, you would just need to transfer into our Financial Advisor (no buy and sell to avoid stamp duty). If you are at another broker, IB takes care of transferring the assets for free (still no buy and sell).
Would that be of interest to anyone here?
PS: What products limitations are you referring to @chestwood96 ?
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I mean that you are locked into specific products and can not just pick the ones you want yourself. However the abstract method they are using is probably better suited to their target audience.
Sounds like an interesting service, but with 1% fees I find it way too expensive. Truewealth.ch charges 0.5% and they pick the ETFs for you (which is probably a negative for most people on this forum, but weāre not really their target audience).
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Precisely, as you would provide us with your asset allocation, my offer would be: no advisory fee, like 0%, only passing you the IB trading fees you would pay anyway.
Except that those trading fees will be lower and lower as more and more people join the ride.
We would not make money with Mustachians but reduce the trading costs for all as we get more volumeā¦ hence we could reduce our prices for our ānon mustachiansā clients needing a bit more handholding.
Just thinking out loud in the forum. Does this make sense?
Well, they are already extremely low, I paid like $2-3 for a $100k transaction a few months ago. And a couple of bucks more for FX conversion at a fair markup-free market rate. The trick is trade on US exchanges, not on ultraexpensive european ones. Helps to save bigly on taxes too. Not sure how much more lower than that you can go! And even if possible Iād probably not really want it due to all the extra complexity.
IB doesnāt charge swiss stamp duty. Only swiss-domiciled brokers are obliged to
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Forgive the digression, but Iām interested, how exactly does it help to save on taxes? Also, I own the CHF listed Vanguard ETFs, VUSA.SW and VEUR.SW. Their prices line up nicely with their USD equivalents, when multiplied by exchange rate. I donāt think Iām hit by exchange rates in any way? (just checking). My understanding was that my main cost of having a Swiss broker is stamp duty. Taxes and exchange rates should not be an issue with the things I bought. (correct me if Iām wrong)
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Swiss stamp duty, withholding tax which can not be reimbursed, TER,
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Whatās the catch? (Sorry I get kind of suspicious when someone offers free stuff)
Other than that, I would say that I am kind of interested.
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We discussed this numerous times already: itās fund level withholding taxes, which are especially extreme in the case of US companies: 15% non reclaimable US withholding tax (or 30% if fund is in a bad country) x say 2% dividend yield results in 0.30% annual additional cost to you - on top of TER, which is also much higher for European funds, as if ginormous trading fees werenāt enough
In case of US funds, thereās no withholding at the fund level for US equities,. The tax is still withheld, but directly from a dividend distribution to you, which you can get fully reimbursed or at least offset against your swiss taxes with DA-1. So holding a US-domiciled fund is tax optimal if your index is largely US dominant. For non-US equities, thereās some withholding at fund level, but difference between US and IE funds in this regard is probably minimal
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