You will compare two robo-advisors' portfolios at a similar risk level on holdings, costs and features.
Arjun has narrowed his choice to two robo-advisors. Both have clean apps, both promise low fees, and friends have recommended each. Reading their websites side by side has only made him less sure, because each one leads with whichever number flatters it. This exercise lines them up on the same terms so the differences are plain.
You will compare two providers at a similar risk level on holdings, all-in cost, rebalancing, minimum investment and withdrawal terms. The worked example uses two providers called A and B, with every figure made up for the example.
Start with the licence. Search each provider's company name in the MAS Financial Institutions Directory, as in lesson 4.1, From questionnaire to portfolio, and note the licence type. If either is missing, replace it before going further.
Then pick one portfolio from each that holds a similar share in equities. Providers name their risk levels differently, so the mix is what you match on. Arjun's questionnaire put him in a high-risk model at both providers, but Provider A's version holds 60% in equity funds and Provider B's holds 80%, too far apart for a fair test. One level down, Provider B has a model with 60% in equities, so he compares that with Provider A's.
From each portfolio page, list every fund with its weight and expense ratio, as you did in lesson 4.2, The funds inside a robo portfolio and how it rebalances. Note what kind of fund each one is: an ETF, or a unit trust share class.
Then work out the all-in yearly cost, as in lesson 4.3, What a robo-advisor really costs: the advisory fee plus the weighted expense ratio of the funds.
Provider A uses four index ETFs. Advisory fee 0.5%, weighted fund costs 0.20%, all-in 0.70%. On S$20,000, that is S$140 a year.
Provider B uses institutional share classes of actively managed unit trusts. Advisory fee 0.8%, weighted fund costs 0.30%, all-in 1.10%. On S$20,000, that is S$220 a year.
The gap is S$80 a year on S$20,000, and it grows with the balance. Provider B's case is that its active funds will earn more than the index after costs. Module 6 looks at how often that kind of claim has held up.
Cost is one row of the sheet, and the rest describe how the service would work for you day to day.
Rebalancing method: calendar, threshold, cash-flow, or a mix. Provider A rebalances with deposits first, then when any weight drifts five points from target. Provider B rebalances every quarter.
Minimum investment: to start, and for each top-up. Provider A has no minimum. Provider B needs S$1,000 to start.
Withdrawal terms: how long a withdrawal takes to reach your bank, whether partial withdrawals are allowed, and any charge. Provider A says about five business days. Provider B says up to seven.
CPF and SRS: whether the provider can hold money from the CPF Investment Scheme or the Supplementary Retirement Scheme, if you plan to use either. Not every robo-advisor accepts both, and the rules for what CPF money can buy are set by CPF Board. Check the provider's own page and the CPF Board website. Arjun is investing cash only, so he notes this row and moves on.
Write down where each figure came from and the date you read it: the portfolio page, the fee page, the terms, the FAQ. Fees and models change. When you come back to this comparison in a year, you want to recheck each number at its source, not rely on memory or on a review article that was out of date when you read it.
Arjun's sheet is one table with two columns, A and B, and rows for licence, equity share, funds and weights, advisory fee, weighted fund costs, all-in cost in percent and in dollars on S$20,000, rebalancing method, minimums, withdrawal time, CPF and SRS eligibility, and a source for every cell.
Reading down the columns, he finds most rows close, with two exceptions. Provider A costs S$80 a year less on his money, and Provider B relies on active funds where A uses index funds. Those two rows, he decides, matter more to him than the minimum or a two-day difference in withdrawals.
In the activity below you will complete the comparison for two providers of your own choosing and write the two differences that would matter most to you.
Complete the robo comparison sheet for two providers and write the two differences that would matter most to you.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).