3 questions to ask before choosing a robo-adviser for your self-managed super funds

Photo: Sean Gallup/Getty Images.

As Australians we love doing things on our own terms and our retirement savings are no exception. More than one million of us are taking control of our future through being a member of a self-managed super fund (SMSF).

With control comes responsibility and the biggest obligation with an SMSF is to get the investments right and provide the best result for the members in retirement. Everything else to do with an SMSF is irrelevant if the trustees don’t have the time or experience to invest the money wisely.

SMSF trustees can now access high quality low cost investment advice through an increasing number of “robo-advisers” entering the Australian market. Robo-advisers break down barriers for SMSF trustees by creating a third option between the high time cost of being completely self-directed and the high monetary cost of traditional financial advice.

But not all SMSF robo-advisers are created equal, and so there might be some hesitancy in adoption if people are unsure about what they should be looking for in a robo SMSF adviser.

Three key factors differentiate a quality robo advice solution from one best avoided. As an SMSF trustee you need to do your due diligence to find the right solution before committing your retirement savings.

1. What benefit does the robo-adviser add to your SMSF?

Although robo-advisers can do some pretty cool things when it comes to your portfolio, the solution needs to add value and improve the running of an SMSF in some meaningful way.

A good robo-adviser should provide a better investment solution after fees compared to if you managed your portfolio yourself. Benefits such as transparency, customisation and the appropriate amount of risk for the return generated are essential starting points. All investments made under a robo-adviser should be directly in the name of your SMSF – not via an intermediary.

The process of getting advice should be simple and intuitive with everything explained in plain English. Once set up a good robo-adviser should take advantage of its technology-driven nature to provide you with clear advice presented in an easily digestible way.

2. Does it meet with all the necessary regulatory requirements?

Just because a robo-advice app is run by robots rather than humans, it doesn’t mean that all the regulations that apply to traditional human advisers don’t apply.

Before getting a robo-adviser to invest your SMSF monies you need to check to ensure they have an Australian Financial Services licence and you are provided with a Financial Services Guide and Product Disclosure Statement. Find this key information on the provider’s website or within their app.

Also check whether the advice you are getting is general advice (which is really just general information) or personalised advice. Sometimes there can be smoke and mirrors which makes general information appear to be advice tailored to you. A good rule of thumb is to step back and consider whether the recommended advice actually makes sense to you — don’t just blindly do what the robot tells you!

3. Is it backed by people you can trust?

Robo-advice makes it easier for SMSF trustees to get advice through easy to use apps – but it’s still important to check the humans behind the tech.

Just because the technology makes the advice and investment process easy doesn’t guarantee the underlying investments will perform and help you reach your goals.

Do the t-shirt wearing entrepreneurs with the hipster office on the apps website have adequate investment experience, expertise and risk management processes? Are they leveraging someone else’s investment nous? Look for a robo-advice app from a business with a good reputation solid history when it comes to investment management.

If utilising a robo-advice app that takes care of the tax and reporting obligations for your SMSF then it’s doubly important to check the credentials of the business backing the app. There is simply too much at stake with an SMSF to leave it in the hands of inexperienced players – no matter how tech savvy their solution appears.

Self-managed super provides unparalleled transparency of your retirement monies and the advent of robo-advice apps and solutions makes managing an SMSF easier now than ever before. But always remember buyer beware. Do your research before jumping into bed with a robot.

Kris Kitto is the Director of Superfund Partners and is the Head of SMSF for Superstash.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.