New Model Adviser® is trying out robo-advice! Here's how news editor Charles Walmsley got on with Moneyfarm. Keep your eyes peeled for future instalments looking at other robo-advisers and further updates on our experiences.
Last March I decided to invest some of the savings I had built up living with my parents for six months when I first started working full time. Despite the best efforts of the Thameslink ticket office, I saved around £1,500.
Moneyfarm was my choice online investment vehicle, in part because at the time its only rivals appeared to be Nutmeg, which was not offering advice, and Parmenion-backed online services run by IFAs, which charged around £300 for a financial planning report. In contrast, Moneyfarm said it would give me investment advice and the first £10,000 would not be charged.
After setting up an account I was taken to a questionnaire to determine my risk profile. This was meant to be the advice process, but anyone looking for a comprehensive plan would have been disappointed.
I was asked whether I agreed or disagreed with the statement, ‘I am familiar with exchange-traded funds (ETFs), mutual funds and similar instruments, and consider them a good way to diversify investments and reduce risk.’
I said I agreed, but most people would if they were asked if this was good.
Another statement read like a hastily composed compliance line: ‘I am comfortable that in the case of a negative market trend some losses may be incurred’.
The question that really took me by surprise was, ‘What is the highest degree or level of school you have completed?’ I have a degree in English literature, so selected undergraduate degree. Presumably had I put GCSEs were the limit of my schooling I would have been given a different profile, although I am not sure how this helps to make a financial recommendation.
Those years studying Wordsworth were not wasted, as I was given a profile of adventurous investor and recommended a portfolio.
Transferring the money was straightforward, as I used my online banking. Moneyfarm phoned me when they received the money to reassure me, and that was it. I was a robo-advice client.
Since signing up, my portfolio has delivered returns of 18%, bringing the value to £1,770.
Moneyfarm rebalances portfolios when it needs to. For example, it sold out of UK sovereign bonds ahead of the EU referendum last June. My portfolio is most heavily weighted in developed market equities, with 48% held in ETFs provided by iShares, Vanguard Asset Management and SPDR.
I have not contacted Moneyfarm about my account, but receive statements and a newsletter.
Advice is not just about the performance of my investment. Despite the returns of my portfolio I have not added more funds to it. I do not save more than I did before, and there is no current prospect of 24-year-old me drawing nearer to that unobtainable goal of getting on the housing ladder.
As a relatively simple way of putting some money away and getting returns on it, Moneyfarm is good. As a robo-adviser, it still has some way to go.