Difficulty
Finax is a robo-advisor
The first robo-advisors were established in the USA back in 2008. Their job is to help small investors and financial agents choose the most optimal portfolio composition based on the individual circumstances and preferences of the client. Most robo-advisors recommend passive investing with rebalancing (automated adjustments of portfolio composition).
High labour costs are immediately translated into higher fees that are imposed on the customer. By eliminating these costs, robo-advisors significantly reduce the price of investment services and consequently increase the customers’ net profits.
When Finax started, it was the first robo-advisor in the CEE region. In comparison with our competition in Europe, we have gone much further in terms of customer advisory. We are one of few robo-advisors that offers its services through external advisors – financial agents as well.
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Moreover, financial agents help clients understand and manage their personal finances. Financial agents also provide long-term assistance with the clients’ finances for a fixed fee.
Providing information online and automating processes allows us to offer our services at a significantly lower price. We have also published a FAQ article on our website with the aim of decreasing the workload of our employees, which results in lower fees for our customers.
However, if you have any questions, feel free to call us or write us an email. You can also ask your questions during our live webinars.
How Do the Algorithms Work?
First and the most important prerequisite for choosing the most suitable portfolio for you are truthful answers to the questions that we ask during the investment setup phase. The answers influence the risk profile of your investment; therefore, it is very important to answer them according to your current plans and life situation.
Source of Information for Portfolio Setup
The questionnaire is our only source of information for a proper setup of your investment, that should take decades.
Answers that do not match reality can make your investment face greater risk exposure than you’d be comfortable with. In the event of a market crash, a wrongly set risk profile of your investment can lead to you not being able to withstand the pressure and terminating your investment.
Closing a position during a market crash is one of the biggest mistakes that investors make. To invest successfully it is paramount to stick to the initially set investment horizon, which is an important variable for choosing the most suitable portfolio for you.
The other way around, false answers can also lead to a portfolio that is too conservative and will deprive you of higher profits as a result.
Algorithms assess your individual ability and willingness to undertake risks based on the investment horizon, your financial situation, experience and your attitude towards risk. For example, the longer your investment horizon, the higher the chance that your investment will result in profit and greater returns even with a riskier portfolio.
For every of the past eight years Finax has proven that our algorithms are set correctly. We have made no changes to the algorithms since they were launched.
Our clients sometimes want to change their investment strategy. You can always choose a more conservative portfolio, but the algorithm does not allow you to choose a more dynamic portfolio.
The reason is that the provided answers indicate that a riskier portfolio is not suitable. In that case, check whether your answers were correct. There have been instances when a client wishing to deposit 50€ a month stated that it was their entire fortune.
There Are Things You Shouldn’t Forget About
1. What if my situation changes?
At Finax we have already thought of every possible scenario. If your situation changes (e.g. becoming a parent or a change in your life plans) or you just want to modify your original answers, you can always change your answers in the settings section after signing into your account. You can also adjust your investment strategy in the Advisory section. In any case, we will remind you to reconsider your investment profile every year, as we are mandated by the law.
2. If you are married
Your answers should reflect the financial situation of your family. For instance, your home mortgage is solely in your partner’s name, that does not mean it has no effect on your financial situation. Married couples have joint liability over financial obligations and joint ownership of assets acquired after marriage. You should keep this in mind when making investment decisions.
3. How does investment horizon influence your investment strategy?
One of the golden rules of investing is longer the investment horizon the higher the chance of achieving profit and higher returns. If you are willing to invest your money for a long period of time, the system may recommend a more dynamic portfolio. It also works the other way around. In case you are planning to invest in the short run, your investment will be more conservative.
4. The effect of income and expenses on your investment
One of the key roles of robo-advisors is to understand your financial situation. Your ability to handle risk depends on your income type, investment amount, value of your assets and financial obligations. For example, if you decide to invest a significant share of your wealth, the algorithm will not recommend a 100/0 strategy, but it will adjust the risk accordingly.
5. How to leverage your knowledge and experience?
If you are not exactly sure what is a bond, stock or what is the difference between an index ETF and a mutual fund, you can learn more by clicking on the corresponding links. If you state that you know what these securities are in the questionnaire, you should also be aware of the risks they bear and how they generate returns. If you owned securities or positions in funds before, or you are a part of a private pension scheme and you understand the principles behind them, then you have experience with these financial instruments.
Can I Really Expect the Return Predicted by the Robo-advisor?
We did our best to make our algorithms as precise as possible. Our operations are overseen by The National Bank of Slovakia, which means that we have to provide our clients with true, verifiable and provable information.
Our algorithms are derived from statistical data available since 1987. We are able to forecast the future appreciation of the client’s investment based on historical data; however, past returns do not guarantee future results.
Our investment board has the final word in our forecasts. Therefore, our predictions are more conservative, than the long-term statistics. In the following chart, you can see indicators of specific Finax portfolios, so that you can get a better image of the expected risks and their potential returns.
Return p.a.
Is the modelled annual historical return after fees and with our rebalancing over 37 (1987 – 2024) years.
Expected return p.a.
Is the expected annual return after fees and with our rebalancing.
Pessimistic return p.a.
Represents the 90th percentile of historic data statistics, which means that you will achieve the stated results with 90% probability on an investment horizon longer than 20 years.
Number of drops > 10%
Number of market drops over 10% for the particular strategy. For example, the 60% stocks and 40% bonds strategy had 5 drops larger than 10% over the past 30 years. The maximum drop over 37 years (1987 – 2024) was 33.4%.
Robo-advisor Was Made by Humans
All in all, Finax is a robo-advisor. We recommend and manage customers’ portfolios with a minimum of human interventions. We provide our services based on mathematic rules and algorithms, which we created and optimize regularly.
We do not contact the client unless they request it, or unless it is necessary. However, it is important to say that all the algorithms and processes were completely designed by Finax with the help of our team of experts.
Frequently Asked Questions About Robo-Advisors
1. What is a robo-advisor and how does it work?
A robo-advisor is an automated investment platform that builds and manages your portfolio based on your personal situation — income, time horizon, risk tolerance and experience. It replaces the need for a human financial advisor, which significantly reduces fees and increases your net returns.
2. Is a robo-advisor suitable for beginners?
Yes, it is designed primarily for people who want to invest without deep financial knowledge. Finax guides you through a questionnaire, assigns the right portfolio automatically and rebalances it over time. Your only job is to answer honestly and stay invested.
3. Can I trust the returns predicted by a robo-advisor?
Robo-advisor forecasts are based on historical data, not guarantees. Finax derives its algorithms from 37 years of market statistics and deliberately uses conservative estimates overseen by its investment board. Past returns do not guarantee future results, but the longer your investment horizon, the higher the historical probability of positive returns.
