Anybody using robo advisors?

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 ‘view only’ 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 don’t want to)

Your formula is good for low percentage and duration. I’m 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 55’000, but if this fee was reinvested, it could yield an extra 85’000. This is what I meant by compounding.

These are both just simple approximations. I’m 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 “defragment” my investments.

It definitely has some nice features such as the “free” 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 :wink:

We are thinking about “the Vanguard of Robos” @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 we’re 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 volume… hence we could reduce our prices for our “non mustachians” 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 I’d probably not really want it due to all the extra complexity.

IB doesn’t charge swiss stamp duty. Only swiss-domiciled brokers are obliged to

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Forgive the digression, but I’m 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 don’t think I’m 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 I’m wrong)

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Swiss stamp duty, withholding tax which can not be reimbursed, TER,

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What’s 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: it’s 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 weren’t enough

In case of US funds, there’s 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, there’s some withholding at fund level, but difference between US and IE funds in this regard is probably minimal

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I checked and my dividends are being paid in full. Also, the prices of the VOO and VUSA seem to stay in sync. Are you saying that the withholding tax is hidden in operating costs of Vanguard Ireland? If so, then why don’t the prices diverge? I haven’t properly calculated the thing, with all dividends, and I cannot seem to find the website that would compare the total return of european and american ETFs.

Compare their prices and dividend yields intraday when both markets open. There should be 15% difference.

There’s little reason for prices to diverge, it’s same basket of stocks. And taxation rules vary by country, in Switzerland VOO is tax optimal - you’d pay max(15%, your swiss tax rate) with it. In some other country it could be VUSA, especially if country doesn’t tax worldwide income and US withholding rate is 30% - then you piggyback on the Irish tax treaty with VUSA

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I also read the “The $60’000 cap for US investments” thread, quite interesting. I checked the Bloomberg sites that you provided and they state the annual return from the last 5 years:

  • VOO :us: 14.10%
  • VUSD :uk: 13.62%
  • VT :us: 10.62%
  • VWRD :uk: 10.16%

These are pretty dramatic differences.How could this be? It cannot be explained by just the TER and WTAX. Could this data be wrong?

They have different portfolios. VOO, VUSA, VUSD are US-only, VT, VWRD are world

Of course I meant VOO vs VUSD and VT vs VWRD. Btw, I checked on JustETF and they say

  • VUSD had a 5Y total return of 90.83%, which gives a CAGR of 13.80%
  • VUSD had a 5Y total return of 63.16%, which gives a CAGR of 10.29%

That’s still 0.3% worse than their US equivalents. 15% tax * 2% dividend gives 0.3%, so I guess it makes sense.

Question: My european ETFs don’t levy any explicit WTAX on the Swiss side (only hidden on the ETF side). How is it with the american ETFs? After USA takes 15%, does Switzerland also levy a WTAX? Or is it just 15% US side, and then you do this DA-1 form and you pay less income taxes for that year?

If you bank with a swiss broker, they’ll take another 15% cut locally (zusätzlicher Steuerrückbehalt USA) for a total of 30%. Reclaimable with DA-1 too. Or just avoid swiss. With IB you should only see the american withholding, 15%. It’s direct tax to you so thanks to double taxation treaty you should only have to pay eventually only the maximum of US (15%) and Swiss taxes on it. Technically as it’s implemented is that you get reimbursed for the US withholding taxes by the Swiss after filing DA-1

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@chestwood96 there is no catch: if we want to reduce our trading costs with Interactive Brokers at Simplewealth, we need to have more volume.

As we automated the rebalancing with IB API, taking care of one additional ETF portfolio has very little / no impact on our operating costs.

But taking in more assets reduces our trading costs with Interactive Brokers… and hence everyone benefits. We can offer to our delegator clients lower fees per year (yes, 1% is too much) and Mustachians get automated rebalancing for cheaper (vs. alone with IB).

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