I recently came across THEO, a mobile, Japanese investment service offered by Money Design. THEO acts as a ‘robo-advisor’; enabling users to invest using their smartphone, and applying machine-based learning to offer users investment suggestions. The service allows users to start investment from 100,000 JPY. By answering nine questions (see Fig. 2 below), Money Design’s proprietary robo-advisor’s algorithm selects an optimum combination from about 6,000 Exchange-Traded Funds (‘ETFs’) in about two minutes and provides discretionary investment management to the user.

Fig. 2 – Screenshot of questions asked to THEO users to create their investment profile 

The user’s answers will trigger THEO’s underlying algorithms to deliver the most optimal money management plan for the user (see Fig. 3). At this point, we’ll need to consider the artificial intelligence aspect of THEO. This is where the accuracy of the proposed plan, as generated by THEO’s algorithms, comes into play (see Fig. 3 below). As one Japanese investor commented: “I am an aggressive investor with a long timescale so I was surprised to see how conservative the allocation ended up.”

Fig. 3 – Screenshot of sample diagnosis results based on answering THEO’s questions

Main learning point: The key point with apps like THEO is going to be the accuracy and personal fit of the investment plan its algorithms will suggest to investors. I wonder whether any manual ‘tweaking’ is involved in assessing investment profiles and subsequent recommendations.

Related links for further learning:

1. http://jftoday.com/THEO,+the+robo-advisory+investment+app,+exceeds+5,000+users+for+100days/
2. https://www.bloomberg.com/news/articles/2016-07-12/hedge-fund-founder-turns-robo-adviser-for-japan-s-cash-hoarders
3. http://fintechnews.sg/3137/roboadvisor/robo-advisory-services-asia/
4. http://www.retirejapan.info/blog/japan-robo-advisor-theo
5. https://theo.blue/
6. http://www.investopedia.com/terms/e/etf.asp
7. http://fintechnews.sg/3137/roboadvisor/robo-advisory-services-asia/
8. http://www.theasianbanker.com/updates-and-articles/robo-advisors-poised-to-take-off
9. http://uk.reuters.com/article/us-china-wealth-roboadvisors-idUKKCN10S2GT
10. http://finovate.com/drivewealth-brings-robo-advisory-china-new-partnership-creditease/
11. https://medium.com/@Mosaic_VC/trust-in-a-robo-advisor-world-62397cbe75fe
12. http://www.wired.co.uk/article/how-ai-is-transforming-the-future-of-fintech
13. https://en.wikipedia.org/wiki/Artificial_intelligence