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3 Ways Automation Offsets Investment Fees

Capital Markets CIO Outlook | Friday, July 24, 2020

Automation is transforming the investment sector by enabling the investors to cut down the overheads associated with investment fees.

FREMONT, CA: Cutting down on investment fees is one of the simplest ways to enhance investment returns. The above initiative includes offsetting the explicit fees as well as the fees that come up as overheads. Investment fee is a largely undermined aspect that impacts the overall performance of the investment. According to Investor Junkie, an automatic way of selling and buying stocks via computer algorithms can not only enhance the overall value of the investments but also offset the cost of investing. A robotic advisor is an essential advancement when it comes to automated investments. Here are some of the means through which automation can minimize investment fees.

Reduced Operational Costs

Maintaining a typical financial advisor requires certain overhead costs such as office rent, additional wages for a secretary or assistant, and utilities as well. On the other hand, automated advisors leverage the power of the internet to offer their services, thereby implying that their operational costs are significantly lower than their human counterparts. Further, investing online eliminates various costs associated with traditional investments as well.

Authentic Sales Pitches

Most of the financial advisors charge fees close to 1 percent of the assets. The others charge commissions on products they recommend. The sales pitch is another aspect that influences the returns on investments. While a relevant sales pitch might enhance the investments by influencing the investors into buying the right investment products, a biased sales pitch can significantly upset the returns. An automated advisor eliminates the product recommendation fee as well as a biasing factor from the sales pitch.

Affordable Investments

Automated or robo advisors have much lower minimums when it comes to the funds needed to start investing when compared to traditional investment methods. Thus, investors can use financial services even when they are planning to invest a small sum. Further, investors will be able to sustain their investment goals in the long run due to low investment fees charged by the robo advisors.

Increasingly investors are opting for automated advisors in place of their human counterparts. The trend is in its early stage and automation is all set to transform the world of investments.