Picture: ISTOCK
Picture: ISTOCK

Robo-advisers can save you time and money. Look out for:

1. Its determination of your needs, risk capacity and tolerance. If the questions are superficial or you are unsure of how to answer them, you could be ill-advised.

Your asset allocation should be determined by:

The risk you must take to earn the return you need to meet your goals;

The risk you can afford to take without potentially incurring an unrecoverable loss - your risk capacity; and

Your ability to stomach market lows - you risk tolerance.

Good robo-advisers look for inconsistencies in your answers and alert human advisers to contact you. They will also ask about your financial wellbeing so that they don't recommend an unsuitable investment.

2. Underlying investments, the investment mix and costs: good robo-advisers choose a suitable investment range, ensure a good mix of assets classes and negotiate the lowest fees for you.

Robo-adviser fees are:

Bizank: Between 1.14% and 1.71%, including VAT. Some funds also charge performance fees.

InvestOnline and Beanstalk charge 1.14% for advice and the platform. In addition the underlying fund fees range from 0.29% to 2.5% a year.

SIPP: 0.5% a year, including VAT, or 0.85% for a retirement annuity or preservation fund, plus exchange traded fund costs on an average of 0.2%.

Sygnia: 0.5% a year, including VAT.

iTransactGO: 0.9% to 1.4% a year, including VAT.

OUTvest: up to 1.71% a year, with VAT.

SmartRand: 0.67% to 0.9%, including VAT, depending on your risk profile and fund selection.

3. The range of products: a robo-adviser should offer you an RA, tax-free savings account or discretionary investment.

Robo-advisers must be licensed in terms of the Financial Advisory and Intermediary Services Act as financial services providers, says Caroline da Silva of the Financial Services Board.

The board has published draft requirements for robo-advisers stating such an adviser must have at least one individual employed. This person must meet competency requirements, including technological capacity to understand the algorithms, assumptions and risks, says Richard Rattue of compliance company Compli-Serve. Fully automated robo-advisers allow you to sign up for an investment online and upload the necessary to comply with the Financial Intelligence Centre Act.

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