Selma vs. robo-advisor – Episode #4

In the first episode you read about all the differences between Selma and the average bank. The second episode taught you everything important about DIY investment solutions. In the third match we saw Selma taking on private bankers. And today is the day when Selma enters the rink with your average robo-advisor. Welcome to the final of this mini-series.

Before we start the match, let’s clarify what is meant when talking about a robo-advisor. A typical robo-advisor is a digital platform that provides an automated, algorithm-driven financial and investment management service. Based on data and goals provided by the user, these platforms use sophisticated algorithms to analyse investment options and generate investment portfolio recommendations for each user. The process starts with the user, providing basic personal and financial information, such as age, income, risk tolerance, investment goals, and time horizon. The robo-advisor uses this information to develop an investment portfolio based on the user's preferences and risk tolerance. The portfolio typically consists of a mix of low-cost ETFs (exchange-traded funds) and index funds.

Now, if you already use Selma this might sound all very familiar. You’ve been through all these questions about your financial situation and you received your investment portfolio. So what’s the difference? Let’s get ready to rumble. 🛎

Round #01 - Investment mix

An averaged robo-advisor will give you a standard, bland and basic investment portfolio. In most cases you will get a few suggested portfolios you can choose from or the robo-advisor assigns you automatically to a risk category based on your answers you gave to the initial questions.

So normally, it is up to you to understand how these suggested investments fit and work with your financial situation (e.g. does this work with your savings, loans and other investments?).

Every financial situation is unique, just as every person is unique. Selma knows that and takes a good look at each customer’s financial life and investment goals. After that, every person gets an individual investment plan with a mix of investments that is tailored to suit their lifestyle and financial goals.

So instead of giving you a “1 out of 5” option, Selma suggests you a mix of investments that match with your financial life, goals and the risk you want and can afford to take. 

Round #02 - Investment management

Most average robo-advisors monitor the financial market automatically. Robo-advisors trade and tweak your investment plan (your strategy) with algorithms and little human involvement. They don’t look at your financial big picture. It is up to you to make sure the things you invest in make sense in your financial situations.

Selma keeps your investments balanced between the financial market and your financial life. Like a Robo-advisor, she keeps an eye 24/7 on the market, and similar to a private banker she keeps an eye on your financial life. Whenever markets shift and the value of your investments changes a lot, Selma adjusts the investments to your plan. On a quarterly basis, she also measures valuations of markets and adapts your investments to make sure they are set up well for a long-term return.

Whenever you update Selma about changes concerning your money (new job, mortgage, real estate, etc.) using the investor profile, she'll check your investments for you.

Round #03 - Advice

A Robo-advisor is a tool that can help you manage your investments easier and quicker. Through automation of many processes it can offer its services for a better price than most classical “offline” solutions. But due to automation, human involvement is small. There is usually no one you can reach out to or give you advice.

Selma combines the automation and efficiency of a robo-advisor with the in-depth look and consideration of your financial situation similar to a private banker and becomes a digital financial advisor. Selma is also able to give you personalised advice based on your investment profile (currently only on the mobile app) so you don’t stand alone in this very crazy finance world. And in case you still feel lost and would love to get the help of a human – the Selma crew is only a chat message or mail away. 💌

As usual, it is your choice how and where you want to invest. Finances are an important but also deeply personal topic, and it is totally up to you what you feel most comfortable with. Be it a more personal approach with a private banker or a bank, taking finance matters in your own hand with a DIY solution, checking out one of the many robo-advisors or trying to find a balance between both worlds with Selma – the decision is yours.

Hopefully, this mini-series gave a little, but informative overview of all the possibilities and solutions out there and helps you find your perfect investment solution.  👋