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Chances are you might have read my latest article about online robo-advisors. And now you may be convinced that opening an account with an online investment platform is the BEST WAY TO START INVESTING!
But after reviewing my list of online robo-advisors active in Europe, you find that there is just one small problem:
With about 30 different platforms available, how can you possibly choose the right one?
I am with you.
Which is why there are a few things to consider when you choose an online investment platform.
1) Consider currency for your online investments
The majority of the online robo-advisors accept EU and Swiss residents. And that’s great because it means you can choose where to open an account. And you don’t have to stick to the platforms that are based in the country where you live.
Especially if you there are better and/or cheaper alternatives elsewhere.
Having said that, our beautiful European continent is a place where we have different currencies, including the Euro, the Swiss Franc, the British Pounds, the Swedish Krona, etc. Well, you see my point.
And though we may not pay too much attention to it, exchanging money from one currency to another is usually a very costly affair.
Costly enough that it could very well defeat the point of seeking a robo-advisor with a lower management fee in another country if it means investing in another currency.
And unfortunately, most online investment platforms offer accounts in one single currency (although there are a few exceptions including ETFmatic, Scalable Capital, Simplewealth, and Swissquote Robo-Advisory).
Now, of course, for smart millennials like you and me, there are a couple of ways to exchange money very cheaply and even (almost) for free. One way to do that is with digital bank Revolut (which should be an absolute must for the well-traveled and international-minded person that you are!).
But there are still downsides of exchanging currency even when using Revolut and the likes. The major one is that you have to process the currency exchange manually yourself EACH TIME you want to invest.
And this is a sure way to forget about doing it regularly. Or not doing it at all.
For this reason, check my list of robo-advisors and look for an online robo-advisor that offers an account in the same currency as your savings and/or salary.
2) Select an online robo-advisor with a low management fee
There is just so much research out there which confirms that choosing low-cost investment alternatives is nearly the single determinant of investment performance.
The cheapest online robo-advisor active in Europe right now is Germany-based Weltsparen (EUR), which currently charges an annual management fee of only 0.33%. There are further low-cost options if you seek to invest in EUR, including ETFmatic and Quirion, which both offer management fees below 0.50%.
For investing in Swiss francs, you would be better off with the likes of TrueWealth and Simplewealth, which both currently charge a management fee of 0.50%.
Also, many online robo-advisors offer a sliding scale management fee. This means that the more you invest, the lower their annual management fee. So depending on how ‘big’ you are, you might be paying less with other online platforms such as Growney (EUR), Whitebox (EUR), MoneyFarm (GBP) and Nutmeg (GBP).
There are also a couple of platforms, including Ginmon (EUR) and Marie Qantier (EUR), that charge a low management fee and then take some kind of ‘performance’ fee. In other words, the platform first has to make sure YOU make money before they can take anything further from you. Now, this is less straightforward than a simple fit-all management fee. But surely the practice has a lot of merits!
Caution: online-robo advisors do change their fee structure from time to time. So make sure to check what the current rates are before you open an account!
3) Select an online investment platform based on your specific preferences
There are other valid reasons for preferring another platform than the absolute-ultimate-lowest-cost platform(s).
i). Impact investing
What if you could invest your money, meet your financial goals and do so in line with your values? That is called impact investing. And it is possible.
Swiss-based online investment platform Yova (CHF) was created to let you do just that. When you open an account, you can indicate in which ‘impact’ sectors you would like to invest, such as renewable energy, clean water, or education.
With Yova, you can also choose to invest in companies which actively support human rights, gender equality (!) or low CO2 emissions for example.
While Yova is the only platform I have come across which focuses solely on impact investing, other online robo-advisors also offer various degrees of impact investing, including Fintego (EUR), Liqid (EUR), Simplewealth (multi currency) TrueWealth (CHF), Visualvest (EUR), and Wealthify (GBP).
If you like the idea of women at the wheel (like I do!), then you might want to invest with Whitebox (EUR), a Germany-based online robo-advisors founded and led by two ambitious women.
And wouldn’t it be great to invest through a platform tailored to women needs and preferences? A platform which would define investment strategies based on the life cycle of a woman just like you?
Well, this already exists in the US, with Ellevest, and will soon be a reality in Europe with Finmarie (EUR), a soon-to-be-launched online-robo advisor based in Germany.
4) Other things to consider when choosing an online investment solution
Other things might influence your choice of an investment platform, including:
- How established and reputable is the platform? You might feel ‘safer’ going with one of the better-established platforms, including Germany-based Growney (EUR), which has won several prizes for excellence.
- In which language is the platform? This is an important one for me, and it might be for you too. I like to use English for all my investment related activities (and about anything else too ;-). You might prefer German or French. Just check my list to see which platforms are available in your favorite language.
- Are retirement solutions available? Several robo-advisors offer tax-efficient retirement products as well. In Switzerland for example, you could open a 3a pillar with VZ Vermoegenzentrum (I used to have one such account there). Check my list to see which platforms offer retirement solutions in other European countries.
- Can I open an account for my children? Alright: this is a BIG one for me. I have two lovely boys, and I want to invest the money they have rather than let it sit on a savings account for decades. And for simplicity reasons, I would like to do that with the same online platform I use for myself. Check my list to see with which platforms accept children.
- Does the platform accept US citizens? That is another critical one for me because my eldest son was born in New York and hence is an American citizen. And it is practically mission impossible for Americans to invest with any financial institutions in Europe. Luckily, there are a couple of rare exceptions, including Simplewealth (CHF), Digifolio (CHF), Marie Quantier (EUR) and MoneyFarm (GBP). Or you could also wait for the launch of Finmarie (EUR) as they will also accept US persons.
And that’s it for now.
I sincerely hope this helps you choose the right online robo-advisor!
As a next step, make sure to click on the button below to download my list of online robo-advisors active in Europe.
And above all, remember the number one thing you should do for building long-term financial security, which is:
So choose an online investment platform and JUST-GET-STARTED!
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