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US firm launches Robo Advice not focused on millennials

Although, in recent years, the number of robo advice solutions that have been developed has greatly increased, much of their focus has been primarily on the needs of one group – millennials. These twenty and thirty somethings are technologically minded, want to keep their investment costs down yet, generally, do not have sufficient savings to make traditional face to face investment advice cost effective. For them, robo advice is the ideal answer.

But what about the more mature investors amongst us who have either retired or are just about to - groups that robo advisers have typically ignored?

Launched in November 2016, True Link’s Financial Advisor platform aims to buck the trend by specifically targeting retirees and those approaching retirement. The company offers a hybrid financial planning service.  As well as providing automated financial planning tools and personalised retirement investment plans free of charge, for a flat fee, subscribers are able to access True Link’s paid for service enabling them to contact financial advisers directly and receive their full range of advisory services.

Could this new approach to robo advice modelling, explicitly targeting an older cohort principally concerned with effectively managing their savings over the course of their retirement, meet the FCA’s suitability requirements here in the UK?

It would appear that True Link’s offering could. We take a more in-depth look at the company’s robo-advice process and procedures to discover the reasons why.

How True Link’s Financial Advisor Works

In order to begin investing with True Link, investors answer a series of initial questions, asking for their date of birth, gender, the total value of their retirement savings (excluding pensions, annuities or the equity in their home) and when they expect to start making use of their savings. An initial plan is then developed which is designed to produce a consistent monthly income over the course of the individual’s retirement.

At this stage, investors are able to make adjustments to the suggested plan based on their retirement needs and current investments. Changes that can be made include the amount of income they wish to receive each month and when they want to start withdrawing money from their savings. In order to help develop a more accurate plan for each investor’s specific circumstances, further refinement can be made to health factors (to estimate longevity), risk preferences (altering the mix of stocks and bonds) and whether to include an annuity option or not.

Investment Methodology

Like many robo advisers, True Link uses Modern Portfolio Theory (MPT) as the basis for developing personalised investment strategies. However, unlike many robo advisers, True Link makes use of bond ladders, to help reduce interest rate risk, together with a time based investment strategy. Personalised investment allocations not only include stocks and bonds but, where deemed appropriate, can also include an annuity option.

In summary

True Link delivers a comprehensive service for retirees by developing a personalised investment plan and offering financial advisory services that not only focus on providing them with ongoing income over the course of their retirement but also help to balance the amount of money that they can withdraw each year. As well as taking into account an investor’s spending requirements and investment preferences, True Link also incorporates health and demographic factors to help develop a plan that meets the specific needs of each individual.

As True Link’s free service does not use a risk questionnaire it can avoid giving a personal recommendation. The “paid for” financial planning service is provided by one of True Link’s own financial advisers and so appears to be a model which could work in a UK regulatory environment.

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