Finding the right robo-advisor is a matter of knowing which features are best for you.
We’ve been talking about robo financial advisors, what they are and how they take the stress out of investing.
Now I want to review one of my favorite robo platforms, how it works and how you can get started. A lot of robo financial advisors appear similar but the fact is that just a few little differences in features can make a big difference in finding the right advisor for your needs.
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Reviewing the Robo- Financial Advisors
In our last two videos in the robo advisors series, we’ve looked at how these new investing platforms work and how to pick the right one for your needs. We’ve looked at how the platforms take human error out of investing by using a computer program to match the best investments with your unique needs. We’ve also looked at how these platforms differ in terms of fees and investments.
Now I want to highlight a different kind of robo financial advisor, show you what I like about the platform and how to get started.
In this video, I’m going to review Emperor Investments which adds a twist to the robo advisor theme. The platform uses technology to invest your money in sectors and industries according to your goals and risk appetite but also uses portfolio analysts to do deeper dives into all of individual stocks within those themes.
How Emperor Investments is Different
Emperor follows a dividend focus so your wealth can grow not just from the long-term increase in value of the stocks but also from those likely consistent dividend payouts. Another way Emperor sets itself apart from other robo advisors is the ability to invest for multiple goals.
That’s important and I’ll tell you why. Most robo advisors invest your money exclusively for retirement, putting you in funds and positioning your money at a risk level for that very long-term goal. This is a problem because most of us don’t just have the one singular goal. We’re investing for retirement but also for those education costs, for that bucket list and for those big purchases like a home.
Those shorter-term goals are going to mean you need money much sooner than your retirement. So having that money invested for very long-term, it’s probably in riskier investments than is appropriate. If you’re going to be needing that money within the next five or even ten years, you don’t want it in something that could crumble in the next stock market crash.
So by investing across multiple goals, Emperor is able to closer match your investments to your needs.
Now I want to go over some basics of Emperor Investments, the fees, how it works, and then I’ll show you how to open an account.
So we’ve already talked about how Emperor Investments charges a flat 0.6% annualized fee on your portfolio. Since they invest your money in individual stocks, there are no other fees, that you’ll get with most other robo advisors. That single fee is charged at the end of the month depending on what the market value of your portfolio is at that time. For example if you had an balance of $10,000 then you’d pay $5 for that 0.6% management fee. Understand that’s 0.6% a year, not per month.
After setting up the account which I’ll walk you through next, Emperor Investments uses their technology to design a portfolio of stocks that fit your needs. They choose these stocks from what they call their ‘Dream Team’ of companies.
This a list of companies that go through a two-step process and is different from what other robo advisors do. First, Emperor uses their technology to sift through the universe of U.S. stocks every quarter and selects ones that pass all their criteria or ‘filters’. Since this part is proprietary, they can’t share exactly what they’re looking for, but one of their key filters is that companies have not reduced their dividends in at least the last 20 consecutive years.
Once they have this pool of companies, the portfolio team goes through each of them and does a more qualitative analysis that an algorithm just can’t. These are things like quality management, sustainable competitive advantage, and so on. a As you can see, there’s a lot happening behind the scenes to get you a quality portfolio.
Now keep in mind that Emperor is an advisor so your portfolio will actually be held on a site called Folio, which is a brokerage firm to hold securities. Folio is registered with the Securities & exchange commission, the SEC, and the Securities Investor Protection Corporation which means your investments are covered up to $500,000 if the brokerage firm goes under.
Another thing I like about Emperor is that accounts are separately managed. It’s not like other robo-advisors where everything is completely up to the computer program. With Emperor, your account is managed by a portfolio analyst that is watching to make sure the stocks meet your needs. Their technology is run every quarter to make sure stocks still meet the cutoff requirements and if not, they will reassess and rebalance your portfolio.
How to Open a Robo Advisor Account
Opening an account with Emperor takes less than five minutes and is mostly setting up your investor profile through a series of questions. This is going to help their technology understand your needs, from your investing goals to your tolerance for risk. Note that you can currently only open accounts if you are a U.S. resident.
When you click through, you start at this basic welcome page and the first question is just going to be about your age. The next question establishes your time horizon, how long you expect to be investing.
This is going to be important in your risk tolerance because shorter-term investors will need more safety while longer-term investors can handle more of that stock market volatility and maybe those cyclical sectors like tech. Then you’ll see this question on income stability. This is one you don’t see on most robo-advisor sites but is hugely important. The idea here is that you want to balance your investment risk and income risk.
If your income is unstable, maybe you work in an industry that rises and falls quickly with the economy like financial services, then you want more stability in your investment portfolio. On the other hand, if you have very stable income then you can afford to take more risk in your portfolio and not worry about it as much.
These next two questions get to your net worth and really how close you are to your investing goals. So first here you have your assets, adding up checking, savings, investments but excluding your home or car. Then you add up all your debt from mortgages, credit cards and personal loans.
This one gets to a really counter-intuitive idea with investment planning. A lot of investors that maybe haven’t saved enough or are behind on their goals think, well, I have to take as much risk as possible, really chase those stocks to get as high a return as possible because I need to catch up. The tragic truth here is that these are exactly the investors that cannot afford to take more risk.
What happens is that they chase stocks and end up getting caught in a crash or just making those bad investing decisions like panic-selling. Their portfolio gets crushed and now there’s no hope at all.
So understanding your net worth, how much those total assets minus debts are at this point, Emperor can get an idea of your ability to take risk. Instead of just chasing returns, it’s going to put you in the stocks that will help reach your goals but not with the kind of risk that could destroy your portfolio.
Finally here, you’ll see one more question on how you react to risk, what would you do in a market crash. This again is going to help give Emperor an idea of your willingness to take risk and how much stress you feel from those swings in the stock market.
Answering all these questions, you’ll be given a risk level, so you see that mine was a 7.5 out of 10. I imagine this is fairly high because of my age, time horizon and how much I’ve already got saved for retirement. And you’ll also see a breakdown of the stock industries suggested for your portfolio. Notice here that even though my ability to take risk in my investments is high, it’s still a fairly well-diversified portfolio. We’ve got positions in non-cyclical sectors with food products and utilities as well as some cyclical sectors like consumer discretionary and industrials.
That sets up how Emperor will pick stocks for your portfolio, then setting up the account is all basic information. You’ll first enter contact information and confirm your identity. You’ll select your account type so whether you want a retirement account or regular investment account and finally you’ll link your bank account so you can make deposits.
Once you fund your account, it takes only 1-2 business days for your money to be invested. You can check your Emperor account to see your exact holdings and check in on the progress you’re making towards your goals.
You can use this link to learn more about Emperor Investments and how it’s changing how robo-advisors manage your money. Full disclosure here, I do have an affiliate relationship with Emperor so I make a commission when someone signs up. This hasn’t influenced my recommendation and it doesn’t change how the advisor works for you. I just believe in full transparency anytime I talk about a company.