Moneyfarm Review – Should You Trust the Robo Advisor to Manage Your Investment Portfolio?

Often cited with fear that they will take jobs, robots and artificial intelligence (AI) could also make life easier and simpler in others.

The latter seems more likely as far as the investment industry is concerned. Advances in financial technology, or fintech, have led to the emergence of a new breed of investment advisors known as robo-advisors.

A robo-advisor is an online platform which automates the investment process. By asking a set of questions, it determines your risk profile and identifies your goals. The robo-advisor then recommends a model portfolio and manages it on your behalf.

Robo-advisors are making investing more accessible. They tend to suit investors who don’t have sufficient funds to hire a traditional advisor but need some guidance when it comes to putting their money to work.

Moneyfarm is one of the robo-advisors serving the UK market. Founded in Italy in 2011, it received Financial Conduct Authority (FCA) approval in 2015 before launching in the United Kingdom in early 2016. It’s backed by Allianz, the German insurance titan.

According to its latest financial statements, Moneyfarm had assets under management of £260 million, making it the second biggest robo-advisor in Europe. Moneyfarm is also ranked among the top robo-advisors in the UK by returns.

Moneyfarm Account types

Moneyfarm offers three types of accounts, so you should be able to find one that meets your needs.

Moneyfarm ISA – (Stocks and Shares ISA)

An Individual Savings Account (ISA) is a tax-efficient account which protects your returns from capital gains tax and income tax.

You can invest up to £20,000 in the 2018/19 tax year, either in a lump sum or as monthly contributions. According to Moneyfarm’s website, you can set up an ISA in 10 minutes and then log in whenever suits to see how your investments are performing.

You can only open one stocks and shares ISA each tax year, but Moneyfarm doesn’t charge any fees if you’d like to transfer an ISA from a different provider.

Pension account

If you’re saving towards retirement, you can open a pension account with Moneyfarm.

As with all private pension plans you receive tax relief on contributions, which Moneyfarm claims on your behalf (additional rate taxpayers must claim through their tax return). Once you retire, you can take an income without paying extra fees.

Like an ISA, Moneyfarm doesn’t charge to transfer a pension, so you can combine your retirement savings if they’re currently spread among different providers.

Don’t forget, the annual allowance for the 2018/19 tax year is £40,000, and it falls when you start drawing your pension.

General investment account

You can also open a general investment account if you’ve used your full ISA allowance or you aren’t saving for retirement. Opening this type of account is quick and easy, and you can log in at any time to track the performance of your portfolio. 

Moneyfarm Platform Review

Account opening

As we mentioned in the last section, the process of opening an account with Moneyfarm is simple.

You start by providing your personal details and then move on to a questionnaire asking for the same information as a traditional investment advisor.

Your answers help Moneyfarm develop your investor profile based on your attitude to risk and your goals. Moneyfarm then uses your profile to recommend which model portfolio is most appropriate for you.

There are only 15 questions so the questionnaire shouldn’t take too long, even for inexperienced investors. Once you finish it, you then select the type of account you’d like to open.

Funding your Moneyfarm account

There’s no minimum deposit to open an account with Moneyfarm, although you need a balance of at least £100 before investing in a portfolio.

You can fund your account by bank transfer if you want to pay in a lump sum, or you can set up a monthly contribution by direct debit or standing order.

Moneyfarm Mobile App review

These days, people use a mobile device for everything from ordering a cab to booking a hotel room, so most investors expect to be able to monitor the performance of their portfolio on the move.

Moneyfarm offer apps for iOS and Android to check your investments and administer your account.

  • The Moneyfarm iOS app has a rating of 3.9 out of 5, out of 37 user reviews.
  • The Android application has a rating of 4.1 out of 5 from from 310 users.

User Ratings from Moneyfarm Customers

A useful metric when evaluating a robo-advisor is how your fellow investors rate it.

Moneyfarm refers prospective customers to Trustpilot, an independent review platform which lets users provide an overall rating based on their experience of an online service.

Moneyfarm scores an average rating of 8.5 out of 10 based on 188 customer reviews, and 88% of investors rate their experience as great or excellent (as of 14th June 2018).

You can find Trustpilot ratings with brief feedback on Moneyfarm’s website and more in-depth reviews on Trustpilot’s website.

Moneyfarm’s Investment Strategy

Moneyfarm offers the choice of six model portfolios, built using Exchange Traded Funds (ETFs).

ETFs are funds that track an index or a pool of investments and trade on the stock exchange like shares. They’re transparent and offer flexibility, while the management fees are typically lower than other asset classes due to the reduced transaction costs.

Moneyfarm’s six portfolios range from low to high risk and contain diverse assets including bonds, shares, currencies and commodities covering several different geographical regions.

The level of risk depends on the mix of asset classes, so a portfolio weighted in favour of cash and bonds carries lower risk than one with a higher proportion of shares. All portfolios are monitored by Moneyfarm’s investment experts who make sure they remain within the pre-determined risk parameters by rebalancing the asset allocation when necessary.

For pension accounts, Moneyfarm offers target date portfolios which reduce the level of risk in your portfolio as you approach retirement. When you’re young, you can afford to take more risk with your retirement savings, as you won’t need access to your money for a long time.

As you get older, Moneyfarm rebalances your portfolio, swapping riskier assets like shares for income-generating investments such as bonds.

Remember, your money is at risk when you invest. The value of your investments can go down as well as up, and you may get back less than you invest.

Moneyfarm’s Performance: Current Track Record

Past performance isn’t an indicator of future returns, but it’s understandably a metric that you might want to consider when choosing a robo-advisor.

Moneyfarm lists the overall performance for its six portfolios dating back to January 2016. It breaks the results into two sections: one for investments below £50,000 (holding seven or eight ETFs) and one above £50,000 (holding 14 ETFs).

Here’s a summary of each portfolio’s returns in order of risk (one is lowest risk and six is highest) as of 14th June 2018.

Under £50,000 Over £50,000
Portfolio 1 6.7% 6.7%
Portfolio 2 12.0% 11.6%
Portfolio 3 21.9% 19.2%
Portfolio 4 26.2% 22.8%
Portfolio 5 29.7% 23.5%
Portfolio 6 33.2% 26.6%

Moneyfarm Fees

Fees eat into your returns, especially over the long run. So the less you pay, the more you get back from your investment.

As we mentioned earlier in this review, one of the reasons investors like robo-advisors is because they keep fees low by using ETFs.

As with the rest of its platform, Moneyfarm tries to simplify the fees it charges. Here’s what you pay:

0-£20,000 £20,000- £100,000 £100,000- £500,000 £500,000 +
Annual fee of invested amount 0.70% 0.60% 0.50% 0.40%
Average fund fee 0.30% 0.30% 0.30% 0.30%

These fees cover:

  • Investment advice
  • Investment management
  • Account management
  • Custodial charges
  • Trading costs

Is Moneyfarm the right robo-advisor for you?

Hopefully, you now understand how Moneyfarm works.

It offers a simple user experience and all the features you’d expect from a robo-advisor, including a range of investment accounts and model portfolios.

Before you decide, make sure you shop around. There are several robo-advisors available to UK investors, and it’s worth spending some time researching each of them to figure out which one is right for you.


Also published on Medium.

Keith McGuinness

Keith McGuinness is a freelance investment and trading writer and active investor and trader.

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