Do you want to invest part of your savings in the stock or capital market? But you’re overwhelmed by the many investment options? This blog article will help you decide whether a broker, neobroker, robo advisor, asset manager, or neo asset manager is right for you and what these terms mean. You can find a more general overview of passive vs. active investing here.

What does a broker vs. neobroker do?

A broker, also called a stockbroker, executes orders of his clients on the stock exchange. A broker can be a bank, a private person, or a so-called neobroker.

Neobrokers differ from traditional brokers by having generally lower costs, less bureaucracy, and the possibility to start trading stocks with minimal amounts. Apps are often used for this purpose – you have probably heard of some best-known providers: for example, Trade Republic, Robinhood, Just Trade, or Smartbroker. 

Four risks when trading stocks via Neobrokers

All of this sounds very promising. However, experts see some risks:

1. “There ain’t no such thing as a free lunch.” The saying of science fiction author Robert Heinlein can also be applied to Neobrokers. Although neobrokers advertise that they come with no fees, customers pay indirectly and often without knowing the high costs, namely through worse stock prices or larger spreads.

2. The convenience of buying and selling shares offered by these apps also leads to users being lured into gambling and often betting on certain shares without being adequately informed beforehand. This exposes them to market risk and entrepreneurial risk. What these risks imply, you can also read here again.

3. Customers of neobrokers often like to use the apps on their way to work or on weekends, precisely at times outside the usual trading hours. However, it is precisely at these times that transaction costs are exceptionally high – and these, in turn, are incurred by the customers.

4. In addition, the offers of neo-brokers are often extremely inflexible, with minimum entry costs, limited product selection, and trading venues.

Robo Advisor

Have you ever wished that a robot would clean your apartment or give you a back massage? Then you certainly understand the appeal of so-called Robo Advisors. 

They use an algorithm for their investment decisions based on historical and current market data and partly on your preferences. They respond to price movements and market trends, are relatively inexpensive, and can make objective decisions. Sounds brilliant, right?

Four disadvantages of Robo Advisor

Unfortunately, Robo Advisors also have some disadvantages:

1. The human touch is missing and, therefore, also the possibility to offer individually tailored portfolios and advice. 

2. There are no personal contact persons.

3. The choice of ETFs and markets is often limited. For example, very few providers also allow commodities and real estate investments. 

4. As there are vast differences between the providers and often non-transparent fees, it is necessary to spend time finding a suitable provider.

Asset Manager

An asset manager invests money on behalf of clients who wish to invest their assets over a long period. In addition to private investors, clients also include pension funds, institutional investors, and companies. 

Asset managers look at their clients’ assets and then show them how they can invest their assets profitably. They also point out possible risks. 

However, disadvantages include incomprehensible or non-transparent price components, such as front-end loads and sometimes very high management fees.

UnitPlus = Neo Asset Manager

With UnitPlus, we are creating a new category: Neo Asset Manager. UnitPlus combines the advantages and simplicity of money as a means of payment with the return opportunities of the capital market. Unused money is automatically invested from a reference account and can be used as a means of payment thanks to our “pay-with-portfolio” mechanism. 

The costs are transparent and comparatively low. With us, you pay 2€ per month, no matter how often you use your UnitPlus card, and 0.5% of the invested money per year – all fees included. At UnitPlus, we focus on our customers. Therefore, personalized savings plans adapt to your lifestyle and needs. This way, you can also get started on the capital market with a very sensible, broadly diversified, and sustainable investment.