Robo-Advisors


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Robo-Advisors

Summary

Robo-advisors are a good investment option for people who don’t understand investing and are not interested in learning about it. They are one of the easiest options, but you will pay a fee in exchange for the convenience.

Detail

Robo-advisors are companies that use software to manage your investments for you. This allows them to charge less and take on less wealthy clients*.

Robo-advisors are perfect for people who:

  • Don’t want to manage their own investments
  • Want instant access to their investments
  • Want to invest small amounts
  • Want to invest simply and quickly
  • Are not US citizens or Green Card holders**

​For many people, investing in tax-advantaged accounts like NISA or J401k will be more profitable. For people who are willing to read some books and learn about investing it should be possible to get similar results to the robo-advisors without having to pay the fees by managing your own diversified portfolio.

However, if you don’t have the desire, confidence, knowledge, or funds to invest on your own, a robo-advisor might be a good way to get started investing.

Recently several robo-advisors have started operating in Japan. They all offer a similar service, and have broadly similar minimum investment amounts and yearly fees.

WealthNavi has a minimum investment of 1m yen, and a yearly fee of 1%.
THEO has a minimum investment of 100,000 yen, and a yearly fee of 1%.
Raku Wrap has a minimum investment of 100,000 yen, and a yearly fee of 1%.
8 Now! has a minimum investment of $88, and a yearly fee of 0.88%.

Despite the lower minimum and fee, I do not recommend 8 Now! at this time because they do not currently provide a tax statement nor MSV Life, as their sign-up procedure and website are not as streamlined as the best in class (currently THEO).

Fees for robo-advisors in Japan are too high right now, but hopefully they will come down in the future as more companies launch into this space.

*Traditional advisors often have minimum account sizes of $500,000 plus, which puts them out of reach of most people
**None of the current Japanese robo-advisors are willing to take on the risk and paperwork from US government compliance requirements

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Robo Advisors

They are multiplying!


It seems like 2016 is the year of the robo-advisor in Japan. I am aware of three services operating right now, with more on the way.

Robo-advisors are financial services that use software to replace humans for portfolio management. This should result in more consistent results and lower fees.

I am very excited about the rise of robo-advisors in Japan. I think this development has a huge potential to help a lot of people get started investing.

The benefits of robo-advisors are that they will provide you with a diversified portfolio and rebalance it for you. All you have to do is put money in.

The current disadvantages are that you can’t use tax-advantaged accounts like NISA or J401k, and the fees are too high at the moment.

The three services I am looking at are:

8 Now!
This service requires an $88 minimum deposit and charges 0.88% a year.

THEO
This service requires a 100,000 yen minimum deposit and charges 1% a year.

WealthNavi
This service requires a 1,000,000 yen minimum deposit and charges 1% a year.

Right now I think the annual charges are too high for all of these, but with increased competition they should come down in the future. It seems like they all provide basically the same service.

I have a THEO account that I am quite happy with, and am currently opening an account with 8 Now! for comparison purposes.

I was planning to open a WealthNavi account as well, but a million yen is a bit too much for me just to be able to write about it on this blog 😉

Any other robo-advisor services I should know about? Any good or bad experiences?

7 Responses

    1. Hi David
      I just emailed 8 Securities to ask, and I’ll post here when they get back to me.
      All the best

      2. Hi David
        Bad news I’m afraid (but not unexpected). Due to unwillingness to deal with the US government and their reporting requirements, 8 Securities will not accept customers with US citizenship or residency permits.
        Your best bet is probably Interactive Brokers or a US-based company.

  3. Hi again! 🙂
    Forgot to ask — how does Theo compare to the Rakuten robo these days?
    And, how safe is Theo in the long run? Is it protected? (If Rakuten can offer a very similar predict, Rakuten seems to be ‘safer’ in the long run–but that’s just a gut feeling. How about you?).
    What are your thoughts?
    I’m seriously considering using a robo for the ‘extra savings’ division. Just need to choose which one now 🙂
    Thanks!

    1. I stopped using Raku Wrap a while back: I found it much less user-friendly than THEO.
      Looking at the website, Rakuten doesn’t really seem to be pushing it any more. They still have a 100,000 yen minimum and charge about 1% (the site says ‘under 1%’ but it’s near enough.
      As for how safe THEO is, they keep customer assets separately and operate under the supervision of the financial authorities (and are covered by the same guarantees as other institutions).
      They seem to be doing well setting up partnerships with other banks, etc.
      My take is that there is a small chance of them going out of business, but a tiny one of that costing you money.