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Moneyfarm

Moneyfarm

INTRODUCING MONEYFARM

Launched in Italy in March 2011, MoneyFarm was Europe's first robo-adviser and today is one of its largest with 60,000 clients in Italy; it is regulated by the FCA and Banca d'Italia. 

Based upon information provided during the application process algorithms within MoneyFarm's platform identify one of six model portfolios of exchange traded funds (ETFs) appropriate to the client's financial objectives and risk profile and automatically invest on their behalf.

MoneyFarm aims to be accessible to those new to investing and to simplify things for experienced investors; it can be accessed online, through its BudJet trading app or via a bricks and mortar 'investment shop' in Milan.

A key point of differentiation is that human MoneyFarmers monitor the investments that are suggested and adjust them according to market conditions as appropriate.

However heated the debate, MoneyFarm aims to deliver genuine 'advice' by incorporating emotional responses into its sign up questionnaire and ensuring that there is no conflict between what a client says and the investments that are chosen for them; as it says 'simple, efficient and tailored to your profile, the MoneyFarm investment plan maximizes your long-term returns whilst protecting your wealth'.

A recent deal saw Allianz take a minority stake in MoneyFarm which could see the former add robo-advice to its traditional product offering and may also see actively managed funds included in its model portfolios.

 

  • Automated discretionary investment management
  • No minimum investment; open an account with £1
  • Financial advice based on objectives, risk profile and emotional response to financial loss
  • Diversified portfolios of ETFs designed to achieve goals within risk tolerance 
  • Management fee 0.7% to £20k, 0.6% £20k - £100k, 0.5% £100k - £500k, 0.4% £500k +
  • ETF charge typically 0.3%
    General Investment Account, ISA
  • Access to Investment Consultants; asset allocation managed by humans

 

 

 

MONEYFARM: SIMPLE, EFFICIENT

MoneyFarm aims to revolutionise the wealth management industry by offering simple, innovative and transparent investment solutions to everyone - 'we want to empower people to take control of their finances and
manage them independently in a simple and efficient manner'.

MoneyFarm delivers online discretionary wealth management which, because of the unique 'behavioural' nature of its application process is considered to constitute genuine financial advice.

Whilst the precise definition of advice remains a moving feast, and the boundary between advice and guidance has yet to be indelibly inked into the regulator's handbook, the fact that MoneyFarm includes questions about an applicant's emotional response to risk and potential financial loss means that its output more closely approximates what you would expect from a traditional adviser.

Whilst its online presence is slick and its BudJet iOS app is stylish, the impression is that MoneyFarm is powered by more flesh and bone than many of its peer group; would be applicants are given the opportunity to speak to an investment adviser when setting their objectives and risk profile, and an investment committee maintains it's model investment portfolios to ensure they remain on track as market conditions change.

MoneyFarm operates six model portfolios of ETFs and once the application process has established what type of investor you are - experienced, or otherwise; short or long term; cautious or gamey - you will be invested into a diversified portfolio of assets appropriate to you.

It is important that you select a risk category that you feel comfortable with during the application process; thereafter the platform is mandated to make investment decisions on your behalf based upon your risk category.

MoneyFarm offers a General Investment Account and an ISA wrapper to protect your investments from the tax man; whilst it is theoretically possible to open an account with £1, the nature of the underlying investments means that anything less that £1500 would mean that you would not get the full benefit of a truly diversified portfolio.

     Simple - automated discretionary wealth management service

     Flexible - General Investment Account, ISA; human assistance available

     Secure - robust online application process, high levels of data integrity

     Accessible - no minimum investment; 24/7/365 access

     Low Fees - 0% <£10k invested; 0.25% (ave) ETF management charge

     Low Fees - 0.6% < £100k; 0.4% < £1m; 0% £1m >

     Risk Managed - model portfolio allocated according to individual profile

     Dynamic - ongoing risk assessment and adjustment of asset allocation

     Transparent - no hidden charges, real time view of performance

STARTING WITH MONEYFARM

MoneyFarm's sign-up process consists of an online questionnaire which allows you to set your objectives, asks you for your knowledge and experience of financial products, considers your personal circumstances and assesses your attitude to risk.

Unlike its rivals, MoneyFarm includes behavioural questions regarding the applicant's emotional response to various circumstances, and in particular the value of their investments falling; it feels much more like the fact find that would be undertaken by an adviser and the result is considered bona fide financial advice.

There are fifteen questions in all, that broadly group together as shown below, including entering personal details and banking arrangements.

Based upon your risk profile, and assuming you are considered suitable to receive automated investment advice, you are allocated a portfolio of exchange traded funds (ETFs).

The mixture and weighting of different investments and asset classes within your portfolio are adjusted over time by an entirely human investment committee according to changing market conditions.

ETFs are the highly flexible and cost-effective building blocks with which many robo-advisers build their portfolios and each of MoneyFarm's six model portfolios comprises seven individual ETFs in order to ensure that each delivers a well diversified range of underlying investments.

 

Step 1 - Try putting together a dummy portfolio

 

Step 2 - See projected returns based on a range of variables

 

 

 

 

Step 3 - Enter your personal details into the Investor Profile

 

 

 

 

Step 4 - Find out what type of investor you are - we're a 'balanced investor'

 

 


 

 

Step 5 - See the make up of a proposed investment portfolio based upon your assessed risk profile

 

Step 6 - See potential returns based upon a range of variables

 

 

MoneyFarm feels as though its working with you; the projections it returns are easily understood and can be adapted according to a range of variables.

MoneyFarm gives you the choice between a General Investment Account or an ISA which allows you to shelter the returns on your investment from the tax man; at a time of punishingly low rates for savers and with investment returns hard to come by, the MoneyFarm ISA may be the ideal solution for those looking to establish a long term investment regime.

 

MONEYFARM IN ACTION

Once you have been assessed to have the correct personal circumstances, right level of knowledge and experience and sufficient risk tolerance to invest with MoneyFarm you are assigned a portfolio of ETFs considered capable of achieving the financial goals you have set whilst remaining compatible with the level of investment risk to which you are exposed.

The firmly homo sapiens investment committee, boasting 100 years of wealth management and financial services experience, has constructed a range of 6 risk-adjusted model portfolios of ETFs and it is possible to see how each would have performed historically; they consistently monitor the portfolios in the context of changing markets and aim to optimise returns whilst staying within the bounds of risk tolerance.

MoneyFarm's projections are based upon a 95% probability and allow investors to tinker with a range of variables for illustrative purposes, whilst ensuring that their investments reflect the risk assessment delivered by its algorithms.

The portfolio that is generated from the questionnaire can be altered by adjusting the risk profile, investment amount and time horizon; as these inputs are fine-tuned the proportion of less risky assets (cash) relative to the proportion of riskier investments (equities) are adjusted which adds a degree of user input.

Many of the next generation wealth managers claim 'democratising wealth management' as a core objective, and with so many denied access to, or unwilling to pay for, traditional financial advice this is a laudable ambition; MoneyFarm gives the impression that this is a very important part of its remit.

In March 2016 the Financial Services Consumer Panel criticised a number of robo-advisers that claimed to deliver financial advice but were not authorised to do so; MoneyFarm acted swiftly to confirm that it does indeed provide regulated financial advice.

MoneyFarm believes that investors get the best returns when portfolios are diversified, cost-effective and based on a careful study of global trends; it focuses on long-term investment performance whilst not losing sight of short-term opportunity.
It uses strategic, multi-asset solutions - bonds, equities, commodities and currencies - designed for investors who seek to increase their wealth and also to preserve it in difficult times.

MoneyFarm takes a strategic approach that combines a range of techniques in building its investment portfolios - quantitative and qualitative, dynamic and static - reviewing them regularly to reflect its view on the economic outlook.

A comprehensive look at MoneyFarm's investment strategy document can be found here.

The two main components of risk are the volatility of each asset class and the correlation between asset classes. MoneyFarm believes that historical data on asset returns in recent years provide a good indicator for volatility and correlation between asset classes and therefore medium term risk.

Your initial portfolio allocation is displayed when you sign up and the changing portfolio allocation and real-time performance can be viewed through the secure customer login 24/7/365 from your choice of device.

 

MUCKLER'S VIEW

MoneyFarm aims to revolutionise the wealth management industry by offering simple, innovative and transparent investment solutions to everyone, and we think it does a good job in that.

Its mission to 'empower people to take control of their finances and manage them independently in a simple and efficient manner' has clearly achieved traction in Italy where 60,000 have already signed up.

MoneyFarm's platform fits with that ethos and its application process is intuitive and relatively simple; however odd it may sound when describing an online questionnaire, its behavioural twist make it feel like a genuine attempt to understand you and engage you in the process.

Its website and iOS app are clear and easy to navigate and in line with its ambition to reach out to those new to investing, MoneyFarm is rich in content regarding investment themes as well as broader economic issues.

MoneyFarm could scarcely deliver a more positive message to newbies than no minimum investment and no management fee on less than £10,000 invested; even with the 0.25% ETF management fees, the total cost of maintaining a portfolio on the site does not seem unreasonable, although it is possible to rack up a bill if your pot starts to approach seven figures.

Muckler applauds MoneyFarm's ambition to reach beyond the UK's existing pool of investors, but is ambivalent about the fact that it is possible to enter a promo code in order to get a discount on its management fees; maybe it is a small issue, and perhaps we should applaud any attempt to keep costs down, but we would hope that investors will be wooed by MoneyFarm's compelling investment proposition and engaging website rather than because it has a flash sale.

MoneyFarm has been conspicuous in terms of its marketing activity and if it is successful in encouraging more people to take an active role in planning their financial future, that can only be a good thing.

 

Muckler thinks MoneyFarm is good for:

 


     Those looking for a simple, discretionary investment management

     Those new to savings and investment and seeking advice

     Those with a smaller investment pot looking to keep costs low

     Experienced investors looking for a balanced portfolio with low fees

     Establishing a long-term, tax efficient investment regime

     Inexperienced investors with some online experience; eager to learn

     Those looking for a one stop, hassle free investment service

     Those comfortable online but glad of human support if required

 

STARTING WITH MONEYFARM 

Moneyfarm makes much of the simplicity of its proposition and takes every opportunity to offer would be Moneyfarmers the chance to 'try it', 'get started' or speak to someone that may allay any remaining fears or concerns.

Those giving it a go are able to set up a preview portfolio by trying out various combinations of initial investment, regular monthly investments, investment horizon and risk appetite.

The portfolio is presented with dummy data that allows the user to see how the portfolio would have performed historically as well as predicting future performance with a 95% degree of accuracy.

Assuming these projections are considered acceptable in terms of delivering on the client's objectives, they are then asked a series of questions designed to assess their emotional response to a range of circumstances, such as the loss of their capital, and also to consider their knowledge of financial products and investment experience.

Once they progress to full sign up a new portfolio is created in response to the answers they give in the second phase as well as sanity checking that their objectives are achievable within their risk tolerance.

 

Step 1 - Select an account type within which to set up your portfolio

 

ISA accounts are not visible until a full sign up has been completed

 

 

Step 2 - Create a preview portfolio

 

Experiment with variations of initial investment, regular monthly investment, risk appetite and time horizon until you get the result you want.

 

 

Step 3 - Historical performance

 

See how your chosen portfolio would have performed historically

 

 

Step 4 - Future projected performance

 

Future performance is predicted with a 95% degree of accuracy and presented as a range of potential outcomes, albeit carefully caveated. Projections can be taken out to thirty years hence.

 

 

Step 5 - Questions exploring human responses to changing circumstances and financial literacy

 

 

 

Step 6 - Your risk profile assessment

 

What type of investor are you?

 

And where does that put you on the risk spectrum for investors?

 

 

Step 7 - Terms of service and fees

 

Accept the T&Cs, enter a promo code and you're on your way

 

 

Step 8 - Human touch

 

Just to remind you there is some blood pumping through this robo's veins, there is a welcome from someone with the conspicuously human moniker of Will, and an invitation to enlist the assistance of the Investment Committee now that you are ready to set up a portfolio for real; nice touch.

 

 

Step 9 - The real deal

 

You are now able to set up your first real portfolio, and with the application process complete an ISA account is presented as an option.

 

That's it - get farming

 

 

 

 

 

 

 

 

MONEYFARM: LOW COST, LOW STRESS 

Whilst the debate about what constitutes financial advice and the role of simplified advice may rumble on elsewhere, Moneyfarm's position appears unequivocal - it delivers automated financial advice.

When signing up with Moneyfarm you are taken through a series of questions to determine your knowledge, experience, appetite for risk and financial objectives and are then recommend an investment portfolio which is in keeping with the factors in your profile; your personal circumstances, such as your emotional response to the loss of your capital are also factored in, and thereby the portfolio that is generated on your behalf constitutes the provision of investment advice.

In terms of accessibility it is difficult to imagine a lower barrier to entry than Moneyfarm's minimum investment of just £1; it previously charged no management fee on portfolios of less than £10,000.

Your investments are then managed on a discretionary basis which means that Moneyfarm's professional investment managers can then buy and sell assets on your behalf to ensure that your portfolio is optimised in terms of its performance, whilst remaining faithful to your risk profile.

The objective to 'democratise investing' trips easily off the tongue of most of the new breed of digital investment managers - but few propositions are so conspicuously geared up to attract a new generation of savers and investors; that sits very comfortably with Muckle's ethos.

Moneyfarm invites users to 'start saving more and worrying less' and its site makes much of the simplicity of its proposition and the transparency of its service.

Subject to you being deemed suitable to receive automated financial advice by dint of your emotional responses to its questionnaire, grasp of financial products and access to a sufficient rainy day fund, you will be served up a portfolio of ETFs that deliver instant diversification across a wide range of markets and asset types, all constantly monitored and rebalanced by Moneyfarm's homo-sapiens Investment Committee.

However, despite the fact that it will serve you up a portfolio for your £1 invested, in order to benefit from a fully optimised and diverse portfolio, Moneyfarm suggests £1,500 as a minimum investment and that those starting off with a lump sum of less than this should establish a regular investment in order to achieve this level.

Overall, Moneyfarm's tariff is very straightforward 0.7% < £20k, 0.6% £20k - £100k, 0.5% £100k - £500k, 0.4% £500k+; 0.3% is deducted from all portfolios to cover the management charges levied by the ETF managers.

Moneyfarm describes itself as 'data driven but with a human touch' and few of the so called robo-advisers offer quite such conspicuously fleshy support; 'whether you need advice, reassurance or just some old-fashioned conversation, our investment consultants are here to walk you through every part of your investing experience. We’d love to hear from you'  is not something you would be able to read on some other sites and Moneyfarm justifiably makes much of the 9.2 score it has achieved on Trustpilot.

A key part of Moneyfarm's proposition is its 24/7/365 accessibility which enables users to see the value of their investment or the construction of their portfolio at any time online or on any device via its Budjet iPhone and android app.

 

      Simple - automated online investment advice

     Open - 'your objectives, our investment strategy'

     Accessible - £1 minimum investment

     Risk adjusted - 12 portfolios mapping 6 risk profiles

    Low fees - low, transparent fees  

     Human - investing and support

     Flexible - GIA, ISA

 

MONEYFARM IN ACTION 

Moneyfarm describes itself as ‘simple, efficient and tailored to your profile - the Moneyfarm investment plan maximises your long-term returns whilst protecting your wealth’

Unlike some of its rivals, Moneyfarm is unequivocal – it delivers financial advice; it aims to make investing more accessible for first-time investors and remove the hassle from investing for more experienced investors.

Moneyfarm automatically invests your money into portfolios suitable to your own personal risk profile and financial goals; the questions asked during the signup process allows Moneyfarm to determine which investment portfolio is suitable to you by using its algorithms.

Moneyfarm’s portfolios, constructed of ETFs are continuously monitored and rebalanced on a discretionary basis; the assets within them scale according to the value of the investment – a portfolio of less than £50,000 will contain 7 funds whereas an investment greater than £50,000 will comprise 14 funds.

Its platform is well suited to individuals who want a low-cost, hassle-free investment; its simplicity makes it appealing to first-time investors, particularly those already comfortable with managing their finances online.

Your investment can be held in a tax-efficient ISA or a General Investment Account (GIA).

Moneyfarm has three basic risk based asset allocation models – high, medium and low, which underpins six different investment portfolios.

The ETFs that compose them are inherently diversified across asset types and geography; its portfolio optimisation is based on the efficient frontier concept within Modern Portfolio Theory.

Assets held are cash, short-term government bonds, developed markets government bonds, inflation linked bonds, investment grade credit, high yield credit and emerging markets government bonds, developed markets equities, emerging markets equities, commodities and real estate.

Their geographical spread is across the UK, Eurozone, US, Japan, emerging countries and other developed countries – Australia, Canada, New Zealand, Norway, Sweden and Switzerland.

The six model portfolios then serve up a combination of these assets and geographical locations according to a client’s set objectives and calculated attitude to risk; portfolios are Conservative, Cautious, Balanced, Experimental, Adventurous and Bold.

 

It is this inbuilt diversification that makes ETFs the ideal building blocks for Moneyfarm’s portfolios – just imagine replicating this spread of assets and geography by trying to create your own investment portfolio; then invest £1!

The Moneyfarmers monitor the volatility of the assets they hold to ensure that the risk within an individual portfolio remains as it was intended; more volatile, and thereby risky, assets are replaced when the portfolios are rebalanced every two months.

Unlike some automated advice platforms, Moneyfarm is not content to just simply track a market or an index, rather it makes affirmative investment decisions based upon its own research and by having the conviction to make investments that others may consider less attractive, it gives them the opportunity to outperform the market.

Because it has now been trading for over a year in the UK, Moneyfarm is allowed to publish its investment returns and, albeit in favourable market conditions, they have been impressive.

 

PortfolioLow risk portfolioMedium risk portfolioHigh risk portfolio
Actual Moneyfarm return - 1/1/2016 - 17/1/201717.44%18.15%17.82%
Projected Moneyfarm 5 year return (not guaranteed)20.74%27.94%28.37%

 

These results can be viewed in the context of a typical pension fund or other actively managed fund which returned 15.6% over the period; it also stacks up well against other popular passive investments such as Vanguard's Lifestrategy Funds or other multi manager fund - an impressive start.

MUCKLER'S VIEW 

Muckler finds much to like about Moneyfarm; as one of the largest automated investment managers in Europe, it is the real deal.

Having earned its spurs in Italy, Moneyfarm set about engaging a whole new generation of investors in the UK with a simple and intuitive site which it has backed up with impressive first year investment returns.

With no minimum investment, Moneyfarm is working really hard to engage with those that may be comfortable to bank online, but with limited or no experience of investing.

Moneyfarm does all the things a robo adviser should do - assess risk tolerance, build and monitor a diverse investment portfolio, keep costs low and allow 24/7/365 access- with little fuss; it is possible to set up a dummy portfolio in 3 minutes and be live with your very own account in 10.

moneyfarm

Its fees are transparent and reasonable; its recently adjusted pricing model largely brings it into line with its competitors.

At first Muckler was ambivalent about Moneyfarm's use of voucher codes and the like, but promotions such as one offering a £200 Amazon voucher for ISA transfers in excess of £10,000 feels congruous with its overall mission; those transferring £10,000 into a Moneyfarm ISA qualify to have their entire £15,240 current year allowance managed with no fee.

The company may find that it needs to use fewer marketing ploys if it can continue to deliver investment returns in line with its first year of trading.

Moneyfarm's marketing effort has been prolific with its flyers fluttering from a wide range of publications, but it is the quantity and quality of its content that very much appeals to Muckle.

The content that Moneyfarm delivers treats a grown up subject in a way that is accessible and appropriate; its algorithms may be grinding away in the background to optimise your portfolio, but those wishing to improve their grasp of all things financial can do so courtesy of Moneyfarm's rich educational material.

Whereas some 'robo' offerings consist of an automated sign up process layered on top of a series of model portfolios, Moneyfarm has built a platform that delivers automated investment advice from soup to nuts; simple, transparent and affordable - and that sits comfortably with Muckle.

Albeit that it has its Italian heritage, Moneyfarm's future success, or otherwise, could well be a bellwether for the start ups in the automated advice space as the banks, institutions and even etailers, come to market.

 

Muckler thinks Moneyfarm is good for:

 

     Simple, stress free investing

     Those new to investing

    Keeping costs down and accessibility high

     Those wishing to consolidate investments

     Engaging with the next generation of investors

     Improving financial education

     Delivering results - good year 1 performance