How innovation is disrupting the financial industry
Innovation and new technology continues to change the way in which people invest, and the robo-advisor - an automated investment platform – is fast emerging as a ground-breaking investment tool. Robo-advisors have been making their appearance in South Africa with many finding it difficult to survive on their own as they struggle to attain the required economies of scale.
Robo-advisors are expensive to build, require rare technology and skilled people plus a host of particular financial services licenses, rarely present in one organisation, making the operating costs and barriers to entry very high for current and potential new entrants. Robo-advisors with brand clout will stand a better chance than those without. Those with crazy names that have no recognizable face will struggle to get investors to convert to a sale.
Another factor is that none of the current Robo-advisors are 100% independent. Most offer a particular fund managers “house” view. According to results published by Profile Data (FE Analytics) and Morningstar approximately 70% of fund managers who invest in equities underperformed the market over 1, 3, 5 and 10 years, suggesting that many investors end up in funds or portfolios that do not suit or address their investment goals.
Notwithstanding these difficulties, Itransact, South Africa’s leading low cost independent investment product platform (www.itransact.co.za), best known for being leaders in the provision of ETF based solutions, has launched its much anticipated robo-advisor brand called ItransactGO which will assist investors and financial advisors set, track and achieve investment goals by creating personal low cost investment portfolio or retirement annuities that will automatically rebalance the portfolios and track the markets.
“ItransactGO is 100% independent. Once it understands your profile, it will look across all the asset classes like cash, bonds, property, domestic and offshore equities, comprising over fifty low cost Exchange Traded Funds (ETFs) for the most efficient mix and then combine them in such a way to form a portfolio that will best suit an investor’s investment goal. It will not favour one asset manager or fund over another, it will only pick the best funds for investors. It will automatically rebalance your portfolio so that you never have to worry about the mix of assets you have chosen. It will allow you to switch between different risk profiles as your life style changes and where one need to speak to a human, one can call a highly-trained contact centre. Investing in the market has never been simpler” said Lance Solms, head of Itransact
Solms confirmed that the providers of the funds underlying the portfolios will be well known financial services companies such as Absa Capital, Ashburton, db x-trackers (Deutsche Bank), Coreshares, Investec, Stanlib and Satrix ETFs, all of which are governed by the Financial Markets (FMA), Collective Investment Schemes (CISCA) and Financial Advisory & Intermediaries (FAIS) Acts. Solms added, that all your information is protected under the Protection of Personal Information (POPI) and Promotion of Access to Information (PAIA) Acts makes solutions offered under ItransactGO amongst the most robust robo advisors in the world.
While many would mark the rise of robo-advisors as the end of the financial advisor, ItransactGO’s value proposition has been carefully considered to serve three target markets;
ItransactGO will complement the role financial advisors play by providing advisers and their clients to interact in an online environment. “If correctly deployed, ItransactGO could significantly reduce the number of face-to-face meetings required between financial advisers and investors in order to sign up a new client, thereby reducing the costs of acquiring new clients while still allowing the advisor to charge advice fees where due,” says Solms.
ItransactGO will open up a new world of investment possibilities by making the investment process simple and easy providing them with instant professionally managed investment strategies.
Financially disadvantaged investors
ItransactGO provide financially disadvantaged investors, who cannot afford basic financial direction and guidance, with a low cost, affordable option to participate in blue chip, institutional grade savings plans.
ItransactGO solutions can be accessed on Itransact’s main site with a smart phone, tablet or PC where they will be asked to answer certain questions about themselves based on modern investment portfolio theory and behavioral science where after the system performs the calculations and creates a personal investment portfolio to help investors achieve their goals be it to saving for a big idea, a house, or retirement.
Over and above offering investors personal investment portfolios, ItransactGO will also offer a free retirement annuity option where investors only pay for the investment solution. Total fees and charges for the services of the platform will never be more than 1.14% per annum including vat. Larger investments will attract even lower fees.
“We are confident that investors will be satisfied with our modern investment products with low fees, combined with a full suite of investor services such as state of the art technology, a full function contact center, an online account with a performance analysis tool, the ability to view and download investment and annual tax statements, view transaction histories and even reset passwords in a secure online environment.” Says Solms
ItransactGO sports a full educational package on how the portfolios work, supported by videos explaining how the low investment portfolios and retirement annuities work.
Solms concluded by saying that “international research over the last ten years suggests that by far the majority of clients prefer a solution that marries the human element with technology when it comes to making decisions on important matters regarding their financial future. We believe ItransactGO has achieved this.”
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