Robo advisor Moneyfarm has amended its pricing model in a move that could see some new investors paying more than existing customers in similar circumstances.
However laudable and sincere its commitment to democratising investment, by offering a £1 minimum investment and waiving fees on smaller investment pots, the company’s move will be seen in many circles as a pragmatic response to economic realities and a reflection of the high cost of customer acquisition faced by robo advisors.
In a move that broadly brings its pricing into line with its competitors, Moneyfarm is far from resting on its laurels in terms of its product suite, having announced that it would be launching an artificial intelligence personal banker as well as a personal pension (SIPP) wrapper.
The company previously levied no management fee on investments of less than £10,000, merely passing on the cost of the underlying investments – typically 0.3%
It charged 0.6% for investments between £10k and £100k, 0.4% between £100k and £1m and 0% on anything in excess of one million.
a pragmatic response to economic realities and a reflection of the high cost of customer acquisition
Forthwith, new Moneyfarmers with less than £20,000 to invest will pay 0.7%; investments between £20k and £100k are charged at 0.6%, between £100k and £500k 0.5% and 0.4% for investments over £500,000.
Existing investors will see zero fees extended to investments of up to £12,000 and the fee on amounts between £20,000 and £100,000 remain at 0.6%.
Giovanni Daprà, co-founder and CEO of Moneyfarm said: ‘In announcing a new pricing model we are maintaining our commitment to ensuring we provide the finest digital wealth management service currently available.
‘Crucial to that is total transparency in pricing and a refreshing simplicity in how the charges are applied. We are unique in the market by being both committed to a sustainable growth journey and also remaining independent.
‘Our new pricing structure will bring Moneyfarm in line with other robo advisors in the market, whilst remaining much more affordable than the more traditional, wealth managers. We are excited about this next leg of our development journey and are still committed to delivering the best for our customers.’
News of its revised pricing comes just two months after the company announced that despite attracting 10,000 customers and remaining on track to break even in 2019, it posted losses of £6.4m on sales of £167k in its first year, due in the main to staff and marketing costs – more.
Initially the preserve of fintech start-up firms, more established financial services providers are either launching their own robo advice platforms or acquiring smaller specialist firms for a stake in the increasingly crowded space.
those that have yet to engage are proving a tough nut to crack
Robo advisors have been tipped, and indeed encouraged, by both the Financial Conduct Authority and the Treasury to be to a solution to the so-called ‘advice gap’ resulting from the government’s Retail Distribution Review; however, many have thus far failed to turn a profit due, in the main, to the high cost of customer acquisition.
UK robo advice pioneer Nutmeg announced a loss of £9.3m at the beginning of the month for the prior year, up from £8.9m in the previous period, despite an increase in revenues of 50%.
However, the robos are still conspicuously successful in attracting investment and Nutmeg too has ambitious plans for expansion and technical development.
Muckler will watch Moneyfarm with great interest moving forward; with every flyer that fell from his Sunday paper came evidence of a technically sophisticated investment platform using traditional marketing techniques to reach out to those that have remained impervious to the siren call of those imploring them to take more personal financial control and turn to investing.
With ‘mony a mickle maks a muckle’ at its beating heart and a mission to educate and engage the next generation of investors it would be disappointing if Moneyfarm’s retrenchment signals that such an approach has not been successful and that there may need to be a rethink; be they millennials or a more mature target audience, those that have yet to engage are proving a tough nut to crack.