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Speaker 1: This is a C N A podcast.

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Speaker 2: If listeners really want to use robo, it's important to

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Speaker 2: desire in a way that do not sabotage the performance

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Speaker 2: of their funds by taking emotions out of the equation.

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Speaker 2: Hello and welcome to money talks Now. If you're wondering

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Speaker 2: why Sarah sounds a little bit different. Well, that's because

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Speaker 2: I am sitting in for her today. My name is

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Speaker 2: Andrea Heng and I present money mind on C N

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Speaker 2: A 938. But back to this episode of money talks now,

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Speaker 2: if the names Saif, stash away and Dallas, if they

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Speaker 2: all ring a bell, then you'll have a clue as

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Speaker 2: to what we're talking about today.

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Speaker 2: They're called robo advisors and they've gained traction in recent

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Speaker 2: years and are especially popular with younger investors thanks to

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Speaker 2: low fees and easy to use apps. It really is.

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Speaker 2: As simple as completing a questionnaire about your risk profile,

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Speaker 2: your investment goals. Voila, you're in business. A sophisticated

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Speaker 2: algorithm uses the money that you put in to invest

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Speaker 2: in a slate of products based on the profile that

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Speaker 2: you've revealed in your questionnaire, you don't even need to

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Speaker 2: speak to a human being to get this done gone out.

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Speaker 2: The old brokerage firms fees. Financial advisor who buys you

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Speaker 2: a meal in exchange for buying an investment product. Has

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Speaker 2: investing really becomes

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Speaker 2: so simple. Can you completely rely on these fintech products.

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Speaker 2: What if you run into problems to break this down

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Speaker 2: is ferris we ferris is a master trainer with the

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Speaker 2: Institute for financial literacy. Hi ferris, Welcome to money talks.

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Speaker 2: Hi Andrew thanks for inviting us first and foremost, should

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Speaker 2: everyone sign up with a robo investor? I mean,

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Speaker 2: there's the low management and transaction fees, the algorithm to

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Speaker 2: do all the hard work for you. It sounds like

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Speaker 2: a good deal. So generally, I think robo advisors kind

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Speaker 2: of appeal to consumers and customers who are cost conscious

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Speaker 2: about fees in order for them to jump into the bandwagon.

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Speaker 2: They will need to be comfortable and confident with tech. Right?

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Speaker 2: The hallmark of Robot

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Speaker 2: Advisor is there is of online access. However, if listeners

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Speaker 2: are intending to invest via robo advisory, something that they

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Speaker 2: need to take note is if the returns on their

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Speaker 2: investment with the Robot adviser do not outweigh the total

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Speaker 2: cost associated with the advisory firm, right? Such as fees,

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Speaker 2: then they are better off not using one. It's also

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Speaker 2: essential to pay attention to what exactly they are investing in.

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Speaker 2: So I would like to encourage listeners to try because

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Speaker 2: this is a very good platform, including myself, I have

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Speaker 2: three rubles, you know, which I use. Yeah, a lot

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Speaker 2: of research that needs to be done before you venture

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Speaker 2: into something like that. And the thing is because it's

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Speaker 2: so appealing to the newbie investors out there or those

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Speaker 2: that don't even have an investing account. This just makes

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Speaker 2: it that much more accessible, doesn't it? Okay. We already

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Speaker 2: have those traditional brokers, financial advisory firms. How diff

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Speaker 2: exactly our robo investors to your traditional brokers. Do they

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Speaker 2: actually replace traditional firms or do they actually provide a

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Speaker 2: brand new service? That's uncharted territory really, it really depends

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Speaker 2: on user's preference, whether they want to get a rowboat

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Speaker 2: or rather than getting a human advisor can robo advisors

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Speaker 2: make you money? The answer is yes, They can make

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Speaker 2: you money with a robo advisor, just like you can

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Speaker 2: make money with any financial advisors that you place your

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Speaker 2: business with

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Speaker 2: and can you lose money with robo advisors? And the

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Speaker 2: answer is also yes, you can lose money with them,

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Speaker 2: particularly with rebalancing cars and fees and also when you

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Speaker 2: cash out during market downturns, like now, what robo advisors

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Speaker 2: lacks is they are usually limited to investments only there

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Speaker 2: are some, they are able to provide financial planning service

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Speaker 2: from a financial planning perspective, it will be better to

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Speaker 2: go with a human advisor financial advisors because they will

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Speaker 2: be able to

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Speaker 2: provide holistic financial advice by seeing the whole picture, a

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Speaker 2: good one especially will be able to sense beyond what

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Speaker 2: is said by asking good questions, right, that enable them

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Speaker 2: to understand the client or financial situation. For example, the

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Speaker 2: person might be going through a tough time in this marriage, right?

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Speaker 2: Or they may have dependence or not well, or they

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Speaker 2: may have habits that may put their finances in disarray,

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Speaker 2: like addiction to for example, gambling or spontaneous spending. So

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Speaker 2: ultimately it goes back to the users their preferences and

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Speaker 2: also their needs. Yeah, indeed, I think the nuances of

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Speaker 2: our lifestyle is not something that a robo advisor necessarily

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Speaker 2: would be curious about, unlike a human being I suppose.

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Speaker 2: Is that what you're saying? Right? Yes, yes. When they

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Speaker 2: engage the robo advisors, you're going through a digital platform, right?

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Speaker 2: You're not having a human face to face interactions. So

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Speaker 2: what they usually ask is just

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Speaker 2: of questions, they don't really make you dig deeper. So

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Speaker 2: similarly you need to trust the selection of the funds

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Speaker 2: which they select for you. And if you were to

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Speaker 2: pick a financial advisor who go through the process, you

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Speaker 2: need to be able to trust your advice, right? So

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Speaker 2: if you are able to find a good financial advisor,

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Speaker 2: then they will be able to see a holistic picture

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Speaker 2: for you and give you good advice and a robo

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Speaker 2: can really make you feel. So I remember this quote

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Speaker 2: that I like very much people will forget what you,

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Speaker 2: but people will never forget how you made them feel.

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Speaker 2: So advisors, good one will really sends beyond the numbers

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Speaker 2: and give you a good Yeah, you're absolutely right because

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Speaker 2: that human emotion and in a face to face meeting

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Speaker 2: that body language, when you respond to certain questions, especially

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Speaker 2: personal ones, which financial advisor is a good one would

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Speaker 2: need to ask you in order to assess what kind

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Speaker 2: of financial appetite or

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Speaker 2: capabilities you have, that's something that I guess a robot

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Speaker 2: can't do is just a simple questionnaire and I suppose

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Speaker 2: that's what you're going for when you're speaking with a

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Speaker 2: financial advisor or broker in that sense. So let's go

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Speaker 2: back a little bit back in time. Robo investing isn't

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Speaker 2: actually knew I did some digging up. The first robo

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Speaker 2: Advisor was called Betterment and it's still around, it was

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Speaker 2: launched in 2008.

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Speaker 2: And since then obviously things have blown out. It's now

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Speaker 2: 2023 lots of robo advisory platforms are out there. What

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Speaker 2: do you think has changed since Betterment in 2008 compared

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Speaker 2: to what we have now? Right now, the fees are

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Speaker 2: much cheaper. And also with the proliferation of internet social media, right.

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Speaker 2: A lot more people are jumping on the bandwagon and

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Speaker 2: there's a greater adoption rate

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Speaker 2: and there's also a larger amount in terms of choices

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Speaker 2: in terms of the fund selections typically robust, they focus

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Speaker 2: on passive investing's but be aware that there are some

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Speaker 2: rules they do active and some they may even get

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Speaker 2: into leverage strategies for investors for picking rubles. They really

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Speaker 2: need to look at the underlying funds because of the

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Speaker 2: wide variety of changes and options that they have is

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Speaker 2: therefore important to select the appropriate robles with the

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Speaker 2: probably underlying asset fund or E. T. F. That is

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Speaker 2: in line with their risk profile, how would you be

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Speaker 2: able to know which ones to go for then? Would

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Speaker 2: you need to do a lot more research than you

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Speaker 2: would normally do if you went to a financial advisor,

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Speaker 2: for example, besides look at the fees which is given right.

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Speaker 2: And it's easy to find out. The second thing that

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Speaker 2: users may want to find out would be the portfolio

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Speaker 2: management and experience like the leadership behind. Right? And look

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Speaker 2: at the underlying funds. So they can actually look at

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Speaker 2: their website

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Speaker 2: one way. Another way is they can even go to

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Speaker 2: the extent of writing to the customer service to the support. Say,

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Speaker 2: what are some of the historical performance? Can I see

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Speaker 2: what are some of the underlying funds that you're investing

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Speaker 2: in for your core portfolio then? With that they can

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Speaker 2: actually do further research whether historically, although I need to

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Speaker 2: qualify that all investments comes with risks, historical performance, not

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Speaker 2: indication of future performance. Right? But having said that if

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Speaker 2: you are able to see a fund or E T.

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Speaker 2: F that has right through the volatility that even during

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Speaker 2: crisis

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Speaker 2: is to eventually recover, then you can have the confidence

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Speaker 2: that you can stay in this for the long term.

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Speaker 2: You do not want to invest in a fund or

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Speaker 2: in the E. T. F. That over time actually is

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Speaker 2: not growing. The returns are diminishing, right? So the research

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Speaker 2: has to take this, of course. I mean, the same

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Speaker 2: would apply. Right? Yeah. What happens here is with the

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Speaker 2: certainty is in terms of cost. So you would have

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Speaker 2: an edge in terms of savings in terms of course.

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Speaker 2: So the same thing when you look for advisor. Yes,

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Speaker 2: you need to look at and so you are absolutely right.

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Speaker 2: Hi, my name is julie you and I'm the host

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Speaker 2: of the climate conversations. Each week I speak to guests

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Speaker 2: who give us tips on how we can protect the

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Speaker 2: earth every once in a while. We also have interesting

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Speaker 2: stories like how Singapore's first Tesla owner prompted billionaire

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Speaker 2: Elon musk to reach out to Prime Minister Lee hsien

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Speaker 2: loong or chef who makes the juiciest burgers from only

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Speaker 2: plant based ingredients for more stories like these. Look for

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Speaker 2: the climate conversations under C N A and me listen

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Speaker 2: apps or wherever you get your podcasts

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Speaker 2: with robo investing, Farris my impression is that people just

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Speaker 2: put money into the platform or the app and then

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Speaker 2: let the algorithm do its thing. I mean that's what

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Speaker 2: we do on our social media app. Right? It's just

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Speaker 2: I enter to search them google does it for me, voila. Right.

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Speaker 2: But there also is no close monitoring of the stock

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Speaker 2: market or you're not making frequent

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Speaker 2: transactions and you alluded to some of these limitations earlier.

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Speaker 2: Is that really the case though? Can you really just

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Speaker 2: hand over portfolio management wholesale to an Ai you can

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Speaker 2: provided that they demonstrate a good track record, what I

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Speaker 2: would like to share would be in terms of some principles,

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Speaker 2: right principles that I thought, introduction to personal investing.

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Speaker 2: What I emphasize on during our sessions is in order

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Speaker 2: for investors or for participants to be able to invest

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Speaker 2: with confidence, right? They need to invest on a regular basis.

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Speaker 2: When this is investing in a regular basis means dollar

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Speaker 2: cost averaging, but dollar cost averaging is not like a

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Speaker 2: super bullet right? Three conditions I would say must exist

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Speaker 2: for it to work effectively.

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Speaker 2: The first is the investors or the participants needs to

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Speaker 2: have time in the market, right? That's the first one,

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Speaker 2: staying for the long haul. Right. Second. They must not

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Speaker 2: panic sell. But the third condition is the most important,

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Speaker 2: which I alluded earlier, which I have explained this. They

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Speaker 2: must invest into a good underlying assets, right? Or fun

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Speaker 2: or E. T. F. That demonstrated that even when there's

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Speaker 2: a crisis, right, They will event

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Speaker 2: actually recover. So with that, let me share with you

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Speaker 2: one story. Uh of course this is my story. I

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Speaker 2: need to be real, right? So as I shared with

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Speaker 2: you earlier that I use three different types of robo advisors, Right?

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Speaker 2: And to be honest, although I'm a master trainer from

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Speaker 2: Institute for Financial literacy, I still find myself having a

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Speaker 2: habit of constantly checking the prices

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Speaker 2: because the apps are available in our mobile phone. Yeah,

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Speaker 2: it's like a job has it for you, isn't it?

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Speaker 2: We have easy access to them. Right? Exactly. Yeah. Yeah.

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Speaker 2: And it makes me wonder if the funds that invested

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Speaker 2: has gone down, gone out. It makes me really, really emotional, right?

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Speaker 2: So just now you were saying that can we just

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Speaker 2: leave it to them if you have done your research, Right?

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Speaker 2: And they have demonstrated that over the long haul, even

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Speaker 2: after crisis they will recover over a significant period time.

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Speaker 2: Let's say they went to crisis, for example, 97 dot com,

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Speaker 2: you know, sorry, 2008 as well. 2008. So I covid

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Speaker 2: so and so forth. So what happens to me, right?

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Speaker 2: Because of the constant looking at the app, sometimes it

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Speaker 2: triggers my emotion and give

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Speaker 2: a lot of anxiety, right? Yeah. And I actually redeem

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Speaker 2: some of my funds. Yeah. So practical tip to the

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Speaker 2: listeners and I did it for myself. Okay. Some of

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Speaker 2: you may find that it's a bit extreme. So I

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Speaker 2: want to show view. So if listeners really want to

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Speaker 2: use robo is important to design in a way that

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Speaker 2: do not sabotage the performance of their funds by

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Speaker 2: taking emotions out of the equation how, by investing regularly,

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Speaker 2: which I have just mentioned, right? The dollar cost averaging,

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Speaker 2: which I talked about the three conditions time in the market.

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Speaker 2: They mustn't panic sell like me and that is triggered.

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Speaker 2: They're going to sell right? The third one is the

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Speaker 2: underlying asset must have demonstrated this one. I have emphasized

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Speaker 2: this again and again after researching and having the confidence

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Speaker 2: that this is the robo that you have selected.

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Speaker 2: The listener may want to after setting up after putting

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Speaker 2: your money after triggering the money investing amount or the

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Speaker 2: annual amount or lump sum investment, depending what they need

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Speaker 2: their risk profile in the preferences. Delete the app, delete

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Speaker 2: the app and continue to invest it regularly and look

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Speaker 2: at it in 10 years time. This is what I did. This,

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Speaker 2: this is this is like me and Facebook

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Speaker 2: like this is causing too much anxiety, too much work.

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Speaker 2: I don't want to think about it. I'm just going

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Speaker 2: to delete it. I mentioned that I use a few

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Speaker 2: rubles frankly. This is what I did with one and

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Speaker 2: all that. So I want to be honest, one that

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Speaker 2: I'm significantly invested in. It's quite a significant amount. I

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Speaker 2: also want to let you know, let the listeners know

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Speaker 2: that confession is good for the soul. I do have

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Speaker 2: a small portfolio which I pick my own stocks. However,

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Speaker 2: looking at my historical performance, I mean I'm not very smart.

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Speaker 2: The funds that invested in the has much better returns

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Speaker 2: than the portfolio that I'm managing on my own. So

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Speaker 2: I do admit that there are a minority out there

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Speaker 2: who does better than the market. But despite me being

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Speaker 2: a trainer who teaches financial literacy right? Humans being humans,

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Speaker 2: I think that I'm very smart. But the data shows

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Speaker 2: that I'm not very smart.

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Speaker 2: Well nobody is immune to such things, right? Nobody is

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Speaker 2: immune to not knowing enough for making mistakes. Okay, so

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Speaker 2: one of the biggest attractions of robo investing is like

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Speaker 2: you said, and we all know the low cost in

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Speaker 2: terms of fees, it's a very big attraction. So when

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Speaker 2: we pay for a human broker now,

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Speaker 2: what are we really paying for that? We may not

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Speaker 2: get from a robo advisor, break it down for us

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Speaker 2: various When we pay a human advisor, what they do

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Speaker 2: is they do the holistic planning, But if you are

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Speaker 2: engaging human advisor or financial advisors that just go through

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Speaker 2: the motion or just paddling or trying to sell your product,

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Speaker 2: then that's not a good advisor. Right? So, human advisors,

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Speaker 2: if they take into consideration your goals, your

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Speaker 2: needs, looking at finances holistically, that'd be very helpful. Why

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Speaker 2: don't we use risk profile as an example for robo

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Speaker 2: advisory platform? Usually what they do is a few sets

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Speaker 2: of questions, right? Let's say on a scale of 1

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Speaker 2: to 10, by going through this risk profile question,

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Speaker 2: the user assessed that psychologically right there skill is actually eight,

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Speaker 2: you know, they can take on high risk their growth investor. Right? However,

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Speaker 2: with a human advisor, if they did in the right way,

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Speaker 2: by understanding their needs, their circumstances right? And understanding their

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Speaker 2: ability to risk their risk capacity. So all those cycle

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Speaker 2: basically the user may be able to take high risk,

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Speaker 2: but circumstantially, maybe they have a couple of dependents who

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Speaker 2: are depending on them? Maybe they have depths that they

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Speaker 2: need to repay. Maybe their job situation is not so steady.

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Speaker 2: They may not have the ability to risk this money

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Speaker 2: much lower risk appetite, correct, correct.

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Speaker 2: Would you then say that the platform is safe because

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Speaker 2: I know that robo advisory firms are regulated here in Singapore,

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Speaker 2: which is a good thing. But what happens if the

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Speaker 2: company goes under is my money going to be safe? Yes. Yes.

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Speaker 2: All rubles are regulated by M. S. They have this

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Speaker 2: capital market license, right? The money that they are investing

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Speaker 2: in right is separated from the operating account. Right? So

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Speaker 2: in the event that if they put the fails, you

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Speaker 2: are entitled to the

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Speaker 2: right based on of course, based on the valuation at

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Speaker 2: the point of time. Yeah. So listeners do not have

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Speaker 2: to worry if they were to go bust, they will

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Speaker 2: still be able to get back their investment subjected to

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Speaker 2: market evaluation at that point of time. Okay, so one

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Speaker 2: of the biggest captive audiences that robot investing seems to

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Speaker 2: be attractive to the younger investors and of course the

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Speaker 2: retail investors, we saw

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Speaker 2: a surge in the number of retail investors, not just

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Speaker 2: in 2022 it was as early as the pandemic years

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Speaker 2: where people had all this extra cash put aside from

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Speaker 2: not traveling from not spending robo advisory was one of

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Speaker 2: those things that they decided, yes, I'm going to spend

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Speaker 2: on that because it's more accessible for me to invest now.

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Speaker 2: Why was this segment previously underserved by brokerages before the

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Speaker 2: younger generations? They are more familiar with tech

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Speaker 2: and these days with internet there's a lot more research

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Speaker 2: that you can easily, there's a lot of bloggers, you know,

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Speaker 2: there's a lot of information and google is our best friend, right?

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Speaker 2: What we need, what we don't know, we just ask

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Speaker 2: our best friend and we will be able to find

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Speaker 2: out that. But the important thing is how to distill

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Speaker 2: the information that is relevant and that is applicable to us.

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Speaker 2: But it's important to highlight just one point, not just

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Speaker 2: for the younger generation and even for the generation X

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Speaker 2: and all the baby boomers using

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Speaker 2: the advisory firm you can save in terms of fees

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Speaker 2: but if they're not comfortable they can always start with

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Speaker 2: a small sum. Right and see how things work. You

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Speaker 2: call it. Play money yes money not to use more

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Speaker 2: than 10% of your investable assets. I mean in the

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Speaker 2: worst case scenario, if you're not comfortable, the maximum that

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Speaker 2: you lost is 10%. If you find that is too high,

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Speaker 2: you can reduce the five. Absolutely. On that note though,

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Speaker 2: just a quick question about how much cost savings we

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Speaker 2: actually do save using a robo advisory compared

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Speaker 2: to using a traditional broker Ridge? How much actually in

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Speaker 2: percentage terms I suppose you can do that. How much

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Speaker 2: actually are we saving using a Robo advisor because the

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Speaker 2: fees for the advisers, I think they have been adjusted

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Speaker 2: over time. So generally speaking, the robo advisor fee is

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Speaker 2: less than 1%. Right. Let's suppose that if you will, do,

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Speaker 2: you go with a financial advisor if you read fee,

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Speaker 2: which is an additional 1%. So you could talk about 1% savings,

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Speaker 2: but if there's an upfront fee

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Speaker 2: then there's additional is being incurred. I think advisors can

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Speaker 2: also adjust their red fee, whether is it more than

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Speaker 2: one or less than one, then are there any other fees?

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Speaker 2: That one, it will be good for listeners to go

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Speaker 2: and find out. I mean one more point. One more point. Sure, yes, please.

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Speaker 2: There's something that I think listeners may not be aware

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Speaker 2: and you may be surprised as well actually for those

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Speaker 2: who prefer to pick their own stocks, who prefer to

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Speaker 2: buy and hold for exam,

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Speaker 2: they buy one of the blue chips company by a

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Speaker 2: certain E T. F. That they find a potentially it

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Speaker 2: will grow over the period of 10 years and they

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Speaker 2: just buy and hold actually it's more expensive to go

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Speaker 2: with robo rather than buy and why is that? So

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Speaker 2: because the annual management fees on the yearly basis. Right.

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Speaker 2: So let's say if it's 1% just use an example

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Speaker 2: like you have to buy and hold investor, you just

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Speaker 2: want to buy this particular company or by this particular,

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Speaker 2: Right? And you will only exit in 10 years time.

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Speaker 2: So you are only paying that breakage, the transaction fee

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Speaker 2: and the redemption fee, right? Whereas it applies to your

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Speaker 2: management fee, whatever because they are charged on a yearly basis.

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Speaker 2: I thought there's just something additional to highlight. Yeah, that's

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Speaker 2: a good caveat actually because I think people are not

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Speaker 2: really sure how long they should go, whether it's a

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Speaker 2: long play or a shorter term play when it comes

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Speaker 2: to robo investing.

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Speaker 2: Some final advice we'd like to get from you ferris

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Speaker 2: for newbies, absolute newbies to robo investing. How can they

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Speaker 2: actually seek advice to get started? What do they need

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Speaker 2: to consider? One way to start is to go through

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Speaker 2: the process, Right of research on

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Speaker 2: their own. They are with blogs. If listeners are willing,

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Speaker 2: we do have public talks offered by FL, which they

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Speaker 2: can attend as well. They can always try by opening

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Speaker 2: up one account. Then after that they can decide whether

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Speaker 2: they want to put their money in. Ultimately, in order

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Speaker 2: for them to start, they need to start by investing

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Speaker 2: and some money if they are uncomfortable, they can always

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Speaker 2: start small. Okay, that's good advice for beginner investors or

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Speaker 2: those looking to start a small portfolio with less effort.

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Speaker 2: Robo advisors could be an avenue to try out,

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Speaker 2: but it remains to be seen if the robots can

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Speaker 2: in fact fully replace humans or perhaps it will continue

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Speaker 2: to be a coexistence because in some ways nothing can

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Speaker 2: truly beat the human touch On that note. Thank you

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Speaker 2: so much for your time ferris for explaining this world

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Speaker 2: to us, ferris, we is a master trainer with the

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Speaker 2: Institute for Financial literacy.

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Speaker 2: If you have enjoyed money talks, do follow us on

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Speaker 2: apple podcasts or Spotify, if you like what you hear,

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Speaker 2: do rate us or better still leave us a review.

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Speaker 2: If you're looking for investment ideas for financial advice, you

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Speaker 2: can check out our previous episodes where we cover issues

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Speaker 2: like investing 101, the fire movement may

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Speaker 2: managing debt and investing with your CPF. Now, if you

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Speaker 2: have a topic that you're interested to hear about or

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Speaker 2: if you have feedback, please write to us at Sienna

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Speaker 2: podcasts at mediacorp dot com dot SG. The team behind

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Speaker 2: money talks is Joanne, chan, Jacqueline chan Christina robert and

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Speaker 2: I'm Andrea hang