This article was written in collaboration with MoneyOwl. All views expressed in this article are the independent opinion of DollarsAndSense.sg
It seems like every other month sees a new robo-advisor joining Singapore’s investment space. Early entrants such as AutoWealth, StashAway and Smartly have now been joined by robo-advisory services from banks such as OCBC RoboInvest and DBS digiPortfolio. Other fintech companies looking to make their mark on the robo-advisory front include endowus, FSM MAPS and now, MoneyOwl, Singapore’s first bionic financial adviser.
MoneyOwl recently launched their investment portfolio service, on top of their insurance and online will writing services. If you are looking to invest your money through MoneyOwl, here’s what you should know first.
Investing Via MoneyOwl – A Social Enterprise Between NTUC Enterprise And Providend
A financial adviser and fund management company licensed by the MAS, MoneyOwl is a social enterprise and joint venture between NTUC Enterprise and Providend.
MoneyOwl has a social mission, and that is to help working families in Singapore achieve greater financial security and better preparation for their retirement. They do this by providing them with accessible financial solutions by bringing together dedicated client advisers and technology.
Robots have become an important part of our daily lives. Just think of Siri, Alexa and Google. These virtual assistants are now widely accepted and they add convenience to our lives.
Similarly in finance, we are also turning to robots to help us manage our investments and to keep track of our expenses. A report by Accenture found that 7 in 10 consumers around the world would welcome robo-advisory services. However, close to two-thirds of consumers still want human interaction in financial services.
Despite being in an era where the popularity of robo-advisors are on the rise, we cannot discount the importance of the human factor. There are some things robots cannot fully replicate, such as the client-adviser relationship where advisers are able to advise, reassure and be there in-person to support their clients.
#1 MoneyOwl as a Bionic financial adviser
MoneyOwl is Singapore’s first bionic financial adviser. Integrating technology with human advisory, a bionic financial adviser is one that brings together the best elements of both robo and human capabilities. The human element come in the form of advisory services, while investments remain dictated by algorithms.
A bionic financial adviser is a great option for investors looking to invest using robo-advisory platforms, yet still value having a human adviser to turn to. MoneyOwl has a dedicated team of qualified client advisers whom clients can reach out to for investment advice.
#2 Fees incurred when investing with MoneyOwl
Some of the fees when it comes to investing in funds include sales charges, advisory or wrap fee, custodian or platform fees and the fund’s total expense ratio. Actively-managed funds tend to have higher charges, as shown from the total expense ratios (TER), of which a significant part is sometimes used to pay advisers or distributors as trailer commissions.
MoneyOwl offers a relatively low-cost solution for investors in Singapore. Firstly, MoneyOwl advisers are not compensated by commissions and MoneyOwl receives no trailer commissions from the fund management company that it uses – Dimensional Fund Advisors, a US-based fund house. Also, MoneyOwl does not charge a sales charge. This allows MoneyOwl to keep its costs low for clients.
What MoneyOwl charges (as shown in the table above), is a low advisory or wrap fee of 0.65% per annum of assets under management. A custodian or platform fee of 0.18% is also charged but this is paid to their custodian, iFAST. In total, fees are kept at about 1.20% per annum on average, if you include the underlying fund charges.
What many investors don’t realise is the long-term impact fees have on our investment outcomes. A low-cost investment could lead to significantly higher investment returns over time.
The power of compounding can work both for and against you. The impact of high fees compound over time. With all things being equal, they eat into our investment returns, reducing the amount in our portfolio that can grow in the long-term.
On the flip side, the effect of compounding works in our favour when we start investing from a young age as it allows both our investment returns and cost savings to compound in the long-term.
#3 MoneyOwl focuses on evidence-based investing
Some people believes that they have what it takes to beat the market consistently. However, even the best fund managers face the challenge of consistently being able to outperform the market. What’s crucial to investing is time in the market.
MoneyOwl’s portfolios are made up of funds managed by Dimensional Fund Advisors. Instead of trying to guess the market, Dimensional adopts an evidence-based strategy to investing which is based on leading academic research.
Dimensional diversifies globally to capture market-based returns. The one way Dimensional aims to beat the market is by tilting towards dimensions or factors that have been proven with evidence to attain higher projected return over the long term. Examples of these factors include value and profitability. As of 31 March 2019, Dimensional has US$576 billion in assets under management.
MoneyOwl’s Investment Offerings
Investors who use MoneyOwl will be matched to 1 of 5 types of portfolios – Equity, Growth, Balanced, Moderate and Conservative. These 5 portfolios have different combinations of global equities and global bonds as well as different total annual charges.
The portfolio you are matched with depends on your ability, willingness as well as your need to take risk. These portfolios are also made up of low-cost, SGD-denominated funds that are managed by Dimensional Fund Advisors.
MoneyOwl has selected 3 funds from Dimensional Fund Advisors (DFA) to make up the portfolios. These funds are all broadly diversified, market-based and low cost, with Total Expense Ratios (TER) of these Dimensional funds at 0.32%-0.38% per annum.
The three funds are:
– Dimensional Global Core Equity Fund
– Dimensional Emerging Markets Large Cap Core Equity Fund
– Dimensional Global Short Fixed Income Fund
Getting Started With MoneyOwl
MoneyOwl allows you to make either a one-time investment or monthly investment, or both. With the minimum investment amount set at $100 for one-off investments and $50 monthly for regular savings plans, MoneyOwl is a viable investment vehicle for investors who do not have large capital to invest with.
Two key elements in determining your portfolio type and asset allocation is your risk ability and your willingness to take risks.
Step 1: Understanding your risk ability
Assessing your risk ability involves looking at your investment horizon – whether you are intending to invest for a short or long period. A longer investment period is usually recommended as it will give you the time to tide through market declines and allow your returns to compound.
Your current financials are also crucial to help you understand how much risk you can take. This includes assessing your total assets, loans, monthly savings and the most important consideration – whether you have set aside emergency funds.
Step 2: Your risk willingness
All investments come with a certain level of risk. Your risk willingness refers to how much risk you can take on. Can you accept temporary short-term losses to achieve investment gains in the long-term?
Your risk willingness is also determined based on your reaction towards having high paper losses and market fluctuations. You are also required to choose a portfolio by weighing the potential optimistic and pessimistic returns that you would be able to accept.
Your inputs will be plugged into an algorithm which ultimately determines your portfolio and asset allocation. If you are satisfied with the portfolio and asset allocation, you can start investing in this portfolio with MoneyOwl by creating and funding your account.
Special promotion: Start investing by 31st May 2019 with MoneyOwl and enjoy 0.50% advisory fee (usual 0.65% per annum) until 31st December 2019.