What is a Robo Advisor?
A new breed of financial services enabled by technology (known as financial technology or FinTech for short.) A robo advisor is what it sounds like – a robot, well in this case an algorithm, that makes financial trades on your behalf. More broadly, a roboadvisor is a UK stockbroker or wealth management firm that will accept deposits from retail investors and put their money to work using the algorithm,
How do Robo Advisors work?
There are a number of different types of robo advisor, the main two categories are full and hybrid robo advisors. Full robo advisors are generally the cheapest; they allocate your money based on a questionnaire you fill out that determines the kind of risks you want to take. Unfortunately, not many robo’s have been around long enough to really know the returns they’ve achieved (typically investment professionals look at 10 year cycles) but they promise an average annual return from moderate (6%) to high risk (15%). There are also hybrid robo advisors which offer human advice alongside automatically rebalancing portfolios. These are typically more expensive, but give you a human touch point.
How Customisable are Robo Advisor Portfolios?
Many robo advisors offer some level of customisation, for example you can elect that your portfolio invest in socially responsible stocks or you can utilise tax loss harvesting, which is a strategy to sell off some stock at a loss to minimise short term tax liability from gains made. Also many robo advisors invest solely in ETFs or mutual funds so if you want an app that invests in singular stocks then there are a smaller number of services to look at-eToro, WealthSimple, eVestor and Strowz.
What are Robo Advisor fees?
Most UK robo advisors have account fees ranging from 0.5%-1.4% although eToro’s copy trader (which allows you to copy successful traders strategies) comes with no fees but also doens’t come with the perks of a robo advisor (like rebalancing and automated investing).
What is an Account Minimum
Many robo advisors have a minimum initial investment; it’s typically £1000,£5000 or in some cases £10k. Although there are also robo advisors with no account minimum, they typically charge slightly higher fees.
What are the best robo advisors in the UK?
The best robo advisor for you may not be the best for your sister, so we’re taking a look at the best robo advisors based on their features and prices.
Best UK Robo Advisors with No Account Minimum
Both Basic Wealthsimple and Wealthify offer no account minimum investing.
Wealthify has no withdrawal fees and charges from 0.76% fees for a normal portfolio and 1.31% for an ethical portfolio (that avoids oil, gas and other non ethical stocks.) Wealthify invests in mutual and index funds and ETFs. They offer JISA,ISA, general investing and pension accounts, so you can opt for tax free ISA’s if you’re investing under 20k a year, or 9k a year for your child’s JISA.
Wealthsimple also has no withdrawal fees and charges 0.9% fees for their Basic portfolio, they have 10 available portfolios to invest in. Wealthsimple has automatic rebalancing and invests solely in index funds. Wealthsimple also has JISA,ISA, general investing and pension accounts.
Wealthify has the lowest fees for trading traditional portfolios but if you want a no account minimum socially responsible portfolio Wealthsimple fees will be lower.
Best UK Robo Advisors with Human Advisor Available
Moneyfarm is a UK robo advisor with a good reputation, they have £1,500 minimum investment and a fee of 1.04% (depending on the amount you invest the fee goes down.) Moneyfarm has seven portfolios made up of ETFs and comes with an investment consultant who you can contact by app, phone or web chat. They are able to answer any investing questions you have in regards to your portfolio, the market in general or making an investment plan.
Best UK Robo Advisors with Low Fees
eToro isn’t a traditional robo advisor, they’re more an investing app with a robo feature. The app is free to use (although there are fees on trades like any other investing app.) The feature is called Copy Trading. To understand what this is, you’ll need to know a bit about how eToro works. eToro lets users see others users investing real time, it’s an investing app with a social media aspect. The Copy Trading feature shows you the most successful traders and lets you automatically copy their trades.
Best UK Robo Advisors for Ethical Investing
Tickr is a UK robo advisor app (sorry they don’t have a web app yet) it’s designed for those people who are really serious about ethical investing. They charge £1 a month for balances under £3000 and then .55%-0.95% for every pound after £3000, they vary based on the fund invested in. There are three funds to invest in:
People which is a fund investing in education, healthcare and cybersecurity.
Planet which is a fund investing on renewables, clean water and sustainable food.
People and Planet which is a fund investing in a mix of the above two.
Best UK Robo Advisors for User Friendliness
Moneybox is constantly rated one of the most user friendly robo advisor apps. One the features people love is the round up investing, which rounds up every purchase (for example you spend £6.31 so £0.69 will go directly to your investing account.) They have a £1 minimum investment and three tiers to invest in cautious, balanced and adventurous. Within an individual savings account, you can choose between five low-cost index tracking mutual funds, and socially responsible funds. Their fees start at .57% and go up to .78%.
How do I Know if my Robo Portfolio is Performing
There are a number of services that also track and report the performance of your robo advisor.
ARQ- takes into account your investments and compares them to vast quantities of data, to determine if your annual returns are good and if the fees your paying are worth it.
Swanest – is more a dashboard of all your investments, savings and pension funds. They also rely on algorithms to let you know how your entire portfolio is performing.