Is Your Robo-Advisor Portfolio Not Meeting Your Expectations?

I have been using robo-advisors for several years now, and overall, I have had a positive experience. They offer a simple, automated way to invest, and when the portfolios are structured correctly, they can deliver solid returns at relatively low fees.

But not everyone has had the same experience.

In a recent investment portfolio analysis view with a client, she shared her frustrations with me. She had been investing through a robo-advisor but found that the returns on her portfolio was not meeting her expectations. While we all know that the US market has delivered exceptional returns last year, I found that her portfolio had captured none of those returns.

Here’s what happened.

Despite being comfortable with risk and even investing in individual stocks on her own, the robo-advisor had placed her in a 100% bond portfolio, completely missing out on last year’s strong stock market performance.

It became clear to me that robo-advisors do not always get portfolio recommendations right, especially when the onboarding process fails to accurately access an investor’s true risk tolerance. Here’s what I suspect went wrong.

Why Robo-Advisors Get It Wrong

First of all, I do not think robo-advisors are bad. In fact, I believe they play an important role in making investing accessible to more people. However, they do have limitations, particularly in how they determine your risk profile and investment strategy.

The problem often comes down to the onboarding process. When you sign up, robo-advisors ask you a series of questions to assess your risk tolerance, time horizon, and investment goals. This information is then used to recommend a portfolio.

In theory, this sounds great. But in reality, there are two key issues.

1. New investors may not fully understand how to answer the questions.

New investors do not have a deep understanding of risk profiling, asset allocation, or investment time horizons. This can lead them to unintentionally select answers that do not reflect their actual investment appetite.

For example, someone might choose a more conservative response because they fear short-term losses, even though they are actually investing for the long term and can afford to take more risk.

Instead of making a snap decision of recommending a conservative investment portfolio, educating the investor on risk management and helping him/her understand why he/she can afford to take on more risk can be more beneficial for the investor in the long run.

2. The way the questions are structured may not bring out the right answers.

Even if an investor is willing to take risks, the wording of the questions can sometimes nudge them towards more conservative responses. And because the robo-advisor is following a rigid algorithm, it cannot detect when an investor has misunderstood a question or when their answers are inconsistent.

A human advisor, on the other hand, can ask follow-up questions, clarify doubts, and refine the risk assessment through real conversations, something robo-advisors simply cannot do.

Understanding Asset Allocation: Why It Matters in Your Portfolio

Asset allocation refers to how your investment portfolio is divided among different asset classes, such as stocks, bonds, real estate, and cash. It is one of the most important factors in determining your overall returns and risk exposure.

A well-balanced portfolio typically includes a mix of:

• Equities (stocks) – Higher risk, higher potential returns over the long term. Ideal for growth-focused investors.
• Bonds (fixed income) – Lower risk, provides stability and steady income. Often used for wealth preservation.
• Cash & Money Market Instruments – Low risk, highly liquid but offers minimal returns. Useful for short-term needs.
• Alternative Investments (optional) – Can diversify risk and provide non-correlated returns.

Your asset allocation should reflect:

• Your risk tolerance – Are you comfortable with market fluctuations, or do you prefer stability?
• Your investment time horizon – If you are investing for decades, you can take more risk compared to someone retiring in a few years.
• Your financial goals – Are you investing for retirement, buying a house, or wealth accumulation?

In my friend’s case, her robo-advisor placed her in a 100% bond portfolio, which does not align with her actual risk appetite. This misallocation meant she missed out on equity market gains, demonstrating why proper asset allocation is crucial.

Returns Are Projected But Costs Are Absolute

One of the biggest selling points of robo-advisors is their low fees, which typically range from 0.3% to 0.6% per year. This is much lower than traditional investment-linked insurance products (ILPs) or actively managed mutual funds, which often charge 2% to 4% or more, including hidden commissions.

But what if you could pay only slightly more than a robo-advisor and get a properly structured portfolio tailored to your needs? This is where working with an investment advisor can make a difference.

I know this sounds like a sales pitch but just give me 30 seconds of your time.

As an investment advisor, I am able to offer my clients a personalised investment portfolio that actually aligns with their goals and risk tolerance.

But the biggest benefit is that my clients receive adequate financial advice and education that allows them to make well-informed financial decisions beyond investing alone. I help them understand how they should approach their financial journey and get closer to their financial goals.

And they only have to pay me an annual fee of just 1% (0.4% more than a robo-advisor). It’s not as expensive as you think.

Okay, let‘s get back to the story.

What a Human Investment Advisor Can Offer That Robo-Advisors Cannot

Robo-advisors work well for investors who understand the system and know how to answer the questions correctly. But if you are unsure about your investment strategy, a human advisor provides several advantages:

Ongoing conversations to refine your investment profile

A financial advisor can ask deeper questions, clarify doubts, and detect inconsistencies in your responses to ensure your portfolio is truly aligned with your risk tolerance and goals.

A portfolio built around your actual needs

Instead of relying on a rigid algorithm, an advisor can take a more nuanced approach, adjusting your allocation based on your expectations, investment timeline, and personal situation.

Support and guidance when market conditions change

Robo-advisors do not offer much in terms of guidance during market volatility. A human advisor can provide insights, adjustments, and reassurance to help you stay on track.

Are You in the Same Situation? Here’s How to Find Out

If you have been investing with a robo-advisor, ask yourself:

1. Does my portfolio reflect my actual risk appetite and long-term goals?
2. Am I happy with its performance?
3. Do I understand how my investments are allocated and why?

If you are unsure about any of these, it might be time for a second opinion.

Get a Free Investment Portfolio Review

If your robo-advisor portfolio is not delivering the results you expected, here’s how I can help.

I offer a free, no-obligation investment portfolio review to help investors assess whether their current strategy aligns with their goals.

This includes:

• A conversation to understand your financial objectives
• A review of your existing portfolio’s performance and asset allocation
• Personalised insights on whether your investments are structured effectively

You have already invested, so make sure your portfolio is actually working for you.

Ensure Your Investments Are Working for You

Robo-advisors are useful tools, but they have limitations. If your portfolio is not performing the way you expected, it is worth getting a second opinion.

Book a free investment portfolio review today to ensure your investments align with your financial goals and risk tolerance.