Japan Robo-Advisor THEO

Might have potential, but only as a backup?


So I mentioned new robo-advisor service Theo in my update on March 7th, but much like the fully armed battle station I didn’t realise it was already operational.

I had a quick look at the site, and the system seems fairly simple.
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You apply to open an account, provide your information, fund the account, then they start managing your money according to their algorithm. As seems to be normal now in Japan, registering your My Number is required to open an account.
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The minimum amount to invest is 100,000 yen, and they charge 1% on the first 30 million and 0.5% on any money beyond that.

This seems a touch expensive. If it was 0.5% on the whole lot, or if say the first 5 or 10 million incurred the higher fees it would be more attractive.
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They have a survey tool that creates a portfolio for you, so I tried that. I am an aggressive investor with a long timescale so I was surprised to see how conservative the allocation ended up. Less than 50% equities doesn’t really match my goals.

Perhaps they were going off my low estimated withdrawal rate.

I am guessing that they would allow you to tweak your portfolio manually once you have an account though.

Overall

I might open an account and see what they look like on the inside.

​They don’t seem to have NISA or J401k capabilities, so I think I would probably invest in those accounts first, and then maybe consider using Theo for any additional investments.

Has anyone tried this service? Anything to add? Did I get anything wrong?

14 Responses

  1. 1% in fees is ridiculously high. Compounded over 30 years, it means that 34% of total returns would have gone to Theo.
    Assuming that they are competing against (massively overpriced) mutual funds in Japan, it is still ridiculously expensive even at 0.5%.
    Some examples:
    Sumitomo Mitsui Trust Asset Management’s Nikkei 255 Index Fund has a total expense ratio of 0.2052%
    Nissay Asset Management’s JGB Fund has a total expense ratio of 0.1728%
    DIAM Asset Management’s Developed Markets Stock Index Fund has a total expense ratio of 0.243%
    DIAM Asset Management’s Developed Markets Bond Index Fund has a total expense ratio of 0.2052%
    Just using these funds would have resulted in 9% less fees, which means 9% higher returns over a period of 30 years. The iShares series of ETFs listed on Tokyo Stock Exchange have even lower total expense ratios.
    Personally will stay far away from Theo until its pricing is competitive.

    1. Hi Desmond
      I agree the fee is definitely on the high side. I guess the question then becomes is the automatic rebalancing, etc. worth it? I would like more information as to what exactly they provide.

      1. Indeed that is a very valid question since rebalancing provides some additional returns.
        In fact not only that, we also have to ask whether additional returns squeezed out from tax loss harvesting would be able to at least match the index for the very long term (decades).

      3. Very interesting. I am not even sure they do tax-loss harvesting…
        Something to look into.
        Also heard that Vanguard is planning to enter the robo-advisor space in Japan -look forward to competition!

  2. I don’t remember the exact numbers, but that actually sounds pretty comparable to Betterment on the rates. I remember they do a step down once you have $100,000 I think it was, so 30 million yen would be less investment for the better rates.
    What I’d want to know is, what exactly are they investing you in? Are their equities putting you in an index fund, and if so which index? I’d hope they’d at least have a Japan and world ex-Japan fund.

  3. Probably should’ve looked a little closer… sort of interesting that I don’t see a Japan listing under there. Would think at least some people would allocate a bit to Japan for home country bias.

    1. Hi S3ndug
      I had a look at their suggestion for me, and it was about 50 different ETFs. Almost seems a bit too complicated 😉

  4. It just seems really easy. I was able to sign up and go through the entire process in 10 minutes. The webpage is bare bones basics, no fancy graphics, which means I can run it on the Chrome browser on auto-translate and have the entire experience in English.
    I have not invested anything, ever, before, so this seems like a good first step to get at least some, any, return on the savings we have.
    Less than the fees, I am concerned with stability of the company. I can’t see myself allocating a huge amount of money into a company that only has a bare-bones webpage and no physical outlets… although it really makes sense, it just seems really insecure.

    1. Hi Michael
      Good to hear you have had a positive experience so far! I think that’s the role robo-advisors can play: encouraging inexperienced investors to put their money to work in a safe(r) environment.
      The allocations they gave me were definitely aiming at reducing volatility.
      I think I will open account in the next month or so (need to get the initial 100,000 yen).
      Can you adjust your portfolio manually? Is it possible to add small amounts to your account after it is open?

  6. Hi!
    @RetireJapan… I am wondering how do you view THEO now? I think you must have invested for few months by now. I am planning to use it, would love your feedback.
    Thanks. 🙂