Should you let a roboadviser manage your finances?
Roboadvisers offer a low-cost, hands-off way to grow your investments. Here’s what to be aware of if you’re thinking of picking one.
So you’re thinking about starting your investing journey, but how do you choose where to put your money?
Of course, you can consult a financial adviser, but this can be quite costly, so if you’re just starting out, it might feel prohibitive.
However, as a novice investor, you might also feel you lack the knowledge or confidence to take a DIY approach to your portfolio.
There is a middle ground – you could opt for a roboadviser.
What is a roboadviser?
A financial roboadviser is an automated digital platform that provides algorithm-driven financial planning services.
Typically, they will ask you to fill out a questionnaire about your risk appetite and investment goals and then suggest investments based on that information.
There are no humans involved in this process, which means they come at a lower cost than their flesh and blood alternatives.
To create your portfolio, the roboadviser will take the information you give it and create a portfolio that suits your preferences.
They might boast lower fees and smaller initial investment amounts, but it’s also worth keeping the drawbacks in mind.
Beyond the fact a human won’t actually be reviewing your decisions, they also tend to offer fewer options for you to invest in and still won’t be as low cost as if you were picking your investments yourself.
What are your options?
Several robo-advisers are available to clients in the UK, as well as AI tools for financial analysis.
Intellectia is an AI-powered financial agent that aims to inform your decision-making. While you can’t invest on the platform, you can ask its chatbot for insights on a stock, ETF, or crypto asset, and it replies using LLM technology. Prices start from $143.52 per year.
Nutmeg is one of the oldest roboadvisers in the UK. You set your goal after filling out information about yourself, the amount you want to invest and your desired risk level. Afterwards, you can choose from a number of pre-made investment portfolios, and from then on, you can take your hands off the wheel. It’s free to join, and fees range from 0.25 to 0.75 per cent.
Moneyfarm works in a similar fashion. You build your profile, get matched to a portfolio, and add your funds into your account. The yearly management fee is 0.65 per cent, and other fees range from 0.10 to 0.31 per cent. The platform estimates your total annual cost at 0.96 per cent.
Wealthify allows you to manage your account online or via their app. Like with the others, you pick your investment plan and tell them how much you’d like to invest, and how often. After that, your portfolio will be managed for you. The annual fee is 0.60 per cent, and other costs range from 0.30 to 0.70 per cent.
Vanguard’s digital adviser charges 0.15 per cent per year. You need £100 to enrol, and you can calculate what your individual cost would be based on what you want to invest with this tool on their website.