Traditionally, ‘ISA Season’ has broadly divided between a last minute dash for those that didn’t quite get around to using their allowance with brokers and platforms getting the pizzas in and answering the phones until midnight on 5thApril, and the rather self-satisfied stroll online by the impossibly organised on the morning of the 6th.
Investment platform Fidelity International even came up with the concept of a ‘Cash Park’ – somewhere those late to the party can lodge their £20,000 and remain in cash until they finally decide which (ideally Fidelity) investments to plump for.
However, the new crop of digital investment managers/automated wealth platforms/robo-advisers – you pays your money and takes your choice – are making it immeasurably simpler for those that want to establish a long term investment strategy without pawing over spreadsheets or picking individual stocks; ‘Mucklers’ looking at long term outcomes rather than short term punts or processes.
immeasurably simpler for those that want to establish a long term investment strategy without pawing over spreadsheets or picking individual stocks
Muckle continues to report upon the ever increasing numbers of options available to those looking for an online, automated investment solution; between the trail blazing start ups, the familiar institutions and the new crop of ‘hybrid’ financial advisors there will be a solution for those looking to take advantage of enhanced investment returns, at a cost they are comfortable with.
With Cash ISA rates in the main delivering returns that are surpassed by inflation (CPI remains stubbornly around 3%) those seeking a real return on their investments, but uncomfortable or unwilling to maintain a DIY investment portfolio, may find just the answer in one of the new platforms.
You will be encouraged to set your personal goals, understand your attitude to risk and will then be allocated an investment portfolio that will be monitored and adjusted according to market movements – anyone fancy taking a stab at what Brexit will do to commodity prices or what will happen if The Donald and ‘Rocket Man’ don’t hit it off?
No need, it’s all in the algorithm, but with a very healthy dose of human oversight – all you need to do to avoid interrupting Tarquin mid-Quatre Fromages is set up a regular monthly investment mandate, and you will either be served up a model portfolio or a bespoke, instantly diversified basket of investments.
It is estimated that digital investment managers currently look after almost £2billion of assets in the UK, a mere bagatelle compared with the $900 billion expected to be on such platforms in the States by the end of 2018, on its way to a forecast $2.2trillion in 2020.
However, the real, and quite legitimate, objective for the new kids on the block is the £700 billion currently languishing in savings and Cash ISA account, where they can deliver demonstrably improved investment returns over the long term.
With total costs in the region of 1%, robo advisors compare favourably with the cost of traditional advice, and with Wealthify having reduced its minimum investment to £1, it is genuinely taking investing to the masses.
There is much to admire about the new breed’s commitment to ‘democratise’ investment, and with intuitive and jargon free websites, user friendly apps and 24/7/365 access to valuations and information, there is much to commend them; ‘straightforward, effortless investing’ as Wealthify would have it.
With many having only just completed the twelve months trading required to be allowed by the FCA to announce their investment performance, it has to be said that the robos have been buoyed by exceptional global market performance, but those looking at an investment horizon of five years and beyond could legitimately choose to set up a regular ISA investment with one of the platforms.
Muckle is committed to engendering a culture of savings and investment because, like sister site DIY Investor, it believes that with increasing uncertainty about the level of state support that will be available in the future, we are likely to end up in a situation that more closely resembles that in the US where financial self-reliance is ingrained in the ‘401k/59 and-a-half’ conversations that are the staple of dinner parties the length and breadth of the country.
Want to know for sure what your retirement will look like? Take control.
Want to know for sure what your retirement might look like? Take control.
Happy to spend some time learning about investing, researching opportunities and making individual choices? Do it Yourself.
Want to have minimal input, benefit from professional investment management, but at a fraction of the cost of traditional advice? Do it For me – digital investment management.
The sheer power of the fintech revolution means that, however much it may be disliked by participants, ‘robo advice’ is now in the public lexicon, not to mention the Oxford English Dictionary; further down the line, people will be less exercised by what it is called than by what it delivers.
Despite all of the promises of Artificial Intelligence and blockchain technology, most of the current crop of ‘advisors’ – do they offer advice, or a managed investment service? – remain resolutely fleshy; there is plenty of opportunity to get help either online or by telephone, for those that require it.
There aren’t fifty of them, but shades of grey in terms of what is on offer include ‘guidance’, ‘restricted advice’, full on ‘automated financial advice’, ‘discretionary wealth management’; find out what you are buying.
Nutmeg was one of the first robo advice platforms to be launched in the UK, but it still heavily dependent upon homo sapiens investment management and support.
Each of the platforms cite cost and convenience as their key attributes and it is now possible to open a portfolio, top it up, change your risk settings, open an ISA and add a new investment goal without leaving the house or on the 07.14 hrs to Waterloo.
The platforms are also content rich, offer a wide range of calculators to produce ‘what if’ scenarios, and often ‘someone like you’ case studies.
When considering a platform it is worth looking at minimum investment levels and any associated conditions; whilst some, such as Moneyfarm have no minimum, others such as Investec Click and Invest at £10,000 and UBS SmartWealth at £15,000 require significantly more – albeit for a differentiated service.
Make sure you understand the differences between the various options – there is much to help in this regard on Muckle; also keep your eye out for any introductory offers such as fee free management or cash contributions – the robo advisors are working hard for your money this year.
the robo advisors are working hard for your money this year
Be aware that those with low minimum initial investments such as Nutmeg’s £500 may require you to make regular monthly investments to get your portfolios to a level that genuinely benefits from a broadly diversified portfolio.
There are plenty of apps to engage those that would need to be surgically removed from their smartphone; True Potential’s ‘ImpulseSave’ and Monexbox allow spare ‘change’ from everyday purchases to be to be swept into an investment pot, and you could even plump for ‘digital piggy bank’ Oinky.
Having initially seen the new kids as a threat, high street banks such as Santander, asset managers like Aberdeen Asset Management and wealth manger Killick and Co all offer services of varying degrees of automation, sophistication and integration.
Buying an ISA online may not be for everyone, but for those willing to spend a little time understanding the options, comfortable with the process and the risks they are taking, and looking for simple ISA investment solution, digital investment management may be the way to go.
ISAs – Do it Yourself, Do it With me, Do it For me – just don’t do nothing’!