We are often told that if you stop buying coffee 3 times a day you could save $10.50 per day which equates to $3,832.50 per year…. Yeah yeah yeah… But how many of us are actually going to stop? Well maybe there is a new way to save for those coffee-holics who just can’t say goodbye to their friendly neighbourhood barrister (Hi Jordan)!  

With the awesome new ‘Silicon Valley’ type of Fintech companies that have been popping up over the past several years it has now helped with automated investing and the buzz word ‘Robo-advice.’ But, what does automated investing and Robo-Advice actually mean?

  Well… let me give you my personal definitions of the two as they can be used interchangeably (as it proves hard to find a definition on Google). Robo-Advice is the term coined when financial advice is given using some sort of technology be it a computer, phone or tablet and is generally delivered online. The intention is that they are easy to understand and use, with generally a limited number of investment choices. This is seen today mainly done through investment firms and in Australia through companies like Acorns Australia, Clover, Quiet Growth and Six Park.  

I know what you are thinking- get to the point where coffee can make me money – well here it is.

  These low cost robo investment options often have a ‘round up feature.’ This will allow you to link a transactional bank account to your investment account and when you purchase an item (i.e. Strong flat white) it will automatic round up the amount you spent and invest the round up portion into your investment account. Here is an example, Joe sets up an account with the ‘Round Up’ feature turned on. Joe then spent $3.50 on a coffee from his local café, then the ‘round up’ of 50c will be added to his “roundup” account. Once this round up funding account hits $5 this will then be invested into your Acorns investment account! BOOM…. And who said spending money doesn’t make you money. There are however, a number of Pro’s and Con’s about Robo-Advice and automated investing that are important to know before you rush out and set one of these bad boys up:

Pro’s

• Automatic investing can have ‘round ups’ to help you to contribute to you account without even knowing you are doing so (as above)
• Recurring ongoing investing can be as low as $5 per month
• Usually low-cost Exchange Trade Funds (ETF) investing
• Ability to withdrawal, generally with no penalties
• The cost of holding the account can be comparatively cheap, ranging from a monthly ongoing fixed fee or a % fee of funds invested
• Potential benefits from partnerships with other companies ie spend money with Woolworths Online and get 50c for each order
• Easy to use mobile App’s to keep on top of your investments
• Generally, they are authorised with a financial services license

Con’s

• Investment options are generally not active fund managers instead they track the market index
• Limited number of investments- most only have 5 investment options
• Relatively new, they have only been around for a maximum time of 3 years
• There have been a number of Robo-Advice firms have been closing down recently
• Minimum starting balances range from as low as $5 but can be as much as $10,000
• Most won’t allow a Financial Adviser to help you (besides QuietGrowth) to ensure you are investing to your wishes
• Online Security- is your more safe being invested through an online platform?

Personally, the real pro for me is that if more Aussies are starting to save and invest they are working towards their future which really excites me! As always if you don’t know where to start with your Robo-Advice or whether you should you use Acorns Australia, Clover, Quiet Growth or Six Park- then speak to a Financial Adviser at Pursue Wealth here.  

Go get investing and making money from Coffee!