So far we’ve taken a look at Nutmeg, the first robo-advisor to enter the UK market. Now we’ll take a look at a rival that came quite hot on the heels of Nutmeg. Moneyfarm started up in Italy back in 2011 and gained quite some following which brought about expansion into the UK direct-to-consumer market.
Like Nutmeg, it offers either a stocks and shares ISA or a general investment account. It does not, however, offer personal pensions. Again, like Nutmeg (you’ll soon see a theme emerge) Moneyfarm invests in exchange traded funds (ETFs). We discussed what ETFs are in our post “What is a robo-advisor?”. For investments of £50,000 or less, Moneyfarm invests in up to 7 funds. Anything over £50,000 increases the number of funds invested to up to 14.
When signing up, users are asked a series of questions which Moneyfarm uses to identify which of their 6 risk profiles the user most closely matches and offers a portfolio which matches that risk profile. The questions are also designed to gain an insight into the psychological characteristics, including anxiety, confidence, and auto control.
Moneyfarm offers 6 different portfolios which vary in terms of risk/reward. Moneyfarm invests in a mix of asset classes (such as equities, bonds, commodities) and investments cover several geographical areas (such as UK, Europe, US and emerging markets), currencies (such as pound, dollar) and sectors (such as banking, healthcare, energy). Using ETFs keeps their costs low and Moneyfarm regularly rebalances portfolios depending on market conditions.
If you’re new to investing and are worried about fees, Moneyfarm is an ideal place to start. The minimum investment is just £1, although Moneyfarm recommends investing at least £1,500 to have an optimally balanced portfolio (there are only so many ways you can split £1!). Fees are lower than Nutmeg, with the first £10,000 managed completely free of charge, investments from £10,001 to £100,000 charged at 0.6%, investments from £100,001 to £1,000,000 charged at 0.4%, and anything over £1,000,000 managed for free. On top of these fees, there are the underlying fund costs which Moneyfarm says is on average 0.25% (slightly higher than Nutmeg’s average of 0.19%).
Moneyfarm has usefully created an app for both Android and iPhone which pretty much replicates the information on its website in a mobile friendly way.
With low fees (no fee up to £10,000) and a £1 minimum investment, we think Moneyfarm will really gain traction with consumers completely new to investing.
Moneyfarm at a glance:
- What kind of investments? Stocks and shares ISA, general investment account.
- How many risk profiles/portfolios? 6.
- Minimum investment? £1.
- Fees? Free (≤£10,000), 0.6% (£10,001 to £100,000), 0.4% (£100,001 to £1,000,000), free (over £1,000,000). Plus an underlying fund cost (averaging 0.25%).