traditional investment advisor

Why You Should Choose IncomeClub over Traditional Investment Advisor

How often have you heard claims from another investor that they’re not worried about their financial future because they’re working with an investment advisor? If you’re anything like the rest of us, you’ve probably heard it more times than you can count.

It seems sensible, at least on the surface. You wouldn’t trust your money to just any advisor – you’d do your due diligence, and you’d find the best out there. However, it doesn’t guarantee you’re actually working with the ideal advisor.

No matter how many years they’ve been investing, and no matter what their record of accomplishment might look like, all investment advisors have limitations and drawbacks.

IncomeClub is the first automated solution in the world dedicated to bond investing. We are also an SEC-registered investment advisor.

Other automated online investment platforms have begun to proliferate as more and more investors become digital savvy.

With other options on the market, it’s important to consider the following reasons why IncomeClub will work better for your needs.
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Even the Best Traditional Investment Advisor Is Only Human

At first blush, this seems pretty obvious. You’re all too aware that investment advisors are human.

However, it’s an essential ingredient of success that you remain dispassionate, and not let claims, promises, titles, accolades or accomplishments sway you. Don’t let flash distract you from the truth that all advisors are human, and they cannot guarantee an inhuman return on your investment.

Let’s be clear about something – your advisor isn’t psychic. He or she is not clairvoyant. They have no crystal ball that will let them determine what the market will do in the future. Regardless of their track record, they will make mistakes. They’re human. Be ready for this.

On top of this, it’s important that you understand what investment advisors go through every single day. While they might show a confident face to clients, they’re stressed. They’re working around the clock because they’re responsible for all of their clients’ money. That takes a toll.

Let’s consider a scenario. The market drops a little bit. The advisor has 100 clients. Now, imagine all of those clients calling on the same day. Some of them might actually call more than once. Just the fact that their phone is ringing every five minutes adds stress and strain, not to mention the yelling and grousing from the clients on the other end of the line.

Now, add in the stress from market fluctuations. What you have is a recipe for disaster. No matter how good your investment advisor is, it will be impossible for them to make sound, reasoned, insightful decisions with your cash.

Like other platforms, we have developed our own proprietary computer-based models utilized to create investment portfolios for our clients.

Our sophisticated algorithms make decisions about the types of securities, the amount and time when securities should be bought or sold, and more. In addition, our algorithms generate “buy” and “sell” orders and send those to brokers for execution.

Unlike human investment advisors, “robots” lack emotions. Their decision-making speed is also far superior to people. They work 24-hours per day, seven days per week without needing a break, or suffering from omissions or other problems.

“Robo-Advisors” Management Fees Are Much Less

Most investment advisors out there use a fee-based model. That means there isn’t a lot of reward for trading within your account, so it doesn’t happen very frequently.

Add to that the fact that you’re paying the advisor between 1 and 2% AUM every single year no matter what the result of their decisions or actions.

IncomeClub charges 0.20%- 0.25% for performing much better service. Other “robo-advisors” charge in the range of 0.15%-0.50%.

Let’s complete a simple comparison to show the impact of fees on your investment returns.

We’ll compare the effect of a 2% annual fee with a traditional investment advisor and a 0.2% fee charged by a robo-advisor. In this comparison, we’ll make the following assumption:

  • A $200,000 portfolio 100% invested in bonds returning 5% per year for the next 20 years

With a traditional investment advisor, the net annual return would be 3.00% (5% less the 2.0% management fee). With a robo-advisor, the return would be 4.8% (5% less the 0.25% management fee).

With compound annual returns, at the end of 20 years, your investment portfolio would be $361,222 with a traditional investor. With a robo-advisor, it would be $510,806. That’s a difference of almost $150,000!

This is just one example of how much those fees can eat into your return.

“Robo-Advisors” Have No or Low Requirements to Open an Investment Account

Traditional investment advisors usually have high minimum investment amounts, sometimes more than $200,000.

The truth is that if you have less money than this to spend, they really don’t want to work with you anyway. Traditional advisors need to generate an income high enough to outweigh the costs involved with bringing you onboard as a client.

When you add in the cost of marketing, phone calls, meetings, paperwork, legal compliance, office space and other considerations, the costs often outweigh the annual fees they charge.

With robo-advisors, those costs are eliminated or at least minimized. That means they can manage smaller accounts, at a fraction of the fees a traditional advisor would charge.

At IncomeClub, we manage investment accounts starting as low as $5,000. In addition, the investment process is automated, so robo-advisors are able to generate profits with smaller investment amounts.

Are robo-advisors perfect?

No, but in many cases, you are much better off using this type of platform than hiring a traditional investment advisor.
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