Important information
Tax treatment depends on your individual circ*mstances and may be subject to future change.
Your capital is at risk. All investments carry a degree of risk and it is important you understand the nature of these. The value of your investments can go down as well as up and you may get back less than you put in.
Robo-advisers are websites and apps that make it easy to invest.
They can be a low-cost way of investing and allow you to manage everything through an app.
This article will cover:
- What is a robo-adviser?
- Robo-advice: pros and cons
- Top five robo-advisers
- How do I choose a robo-adviser?
- Are robo-advisers worth it?
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What is a robo-adviser?
The term robo-adviser conjures up images of robots sitting across the table from you and assessing your investment options.
In reality, it’s something of a misnomer – as robo-advisers don’t involve robots and don’t give financial advice.
In essence, robo-advisers are websites that help you decide which options are most suitable for you. The support on offer is very much guidance, rather than actual financial advice.
For example, many robo-advisers use questionnaires to help you work out your risk tolerance – and then show you the available investment options that fit your profile.
They tend to be best suited to people who are relatively inexperienced at investing and who don’t feel comfortable making investment decisions on their own.
Robo-advisers may also be a good option for people who don’t have enough money or assets under management to warrant paying for full financial advice from a human adviser.
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Robo-advice: pros and cons
Pros of robo-advisers
- They can be much cheaper than traditional advice and investment services
- They’re independent, and can’t be influenced by commissions or perks
- They’re convenient, quick and easy to use
Cons of robo-advisers
- You might end up in an investment category that may not be correct
- They cannot deal with complicated cases
- They do not take human factors such as your health into account
- Using in-house services will mean you only get offered a small selection of the options available
- They can’t beat the skill and experience of real financial advice
Top five robo-advisers
Wealthify
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As a new Wealthify customer, you could earn yourself between £25 and £200 in cashback. After signing up to the platform, you’ll need to set up a Direct Debit of at least £25 and make 12 consecutive monthly payments. Your cashback will then be determined by the average of these payments.
Don’t forget to check the terms and conditions*. Offer excludes pensions and ends 31 January 2024, you’ll have until 1st May 2024 to make your first payment. Use this link to open your account.
About Wealthify: One of the larger and more established robo-advisers, Wealthify has one of the slickest platforms for getting started with an investing account.
Unlike many of its competitors, you can explore without having to sign up and give away your details, which can help give you the confidence that it’s the right platform for your financial goals.
It offers investors a choice of five different risk levels to suit your risk tolerance, and two different strategies: original and ethical.
Wealthify charges an annual management fee of 0.6% a year. Its original portfolio costs an average 0.16% on top of this, while its ethical portfolio adds up to an extra 0.7%.
The platform allows you to hold your investments in a stocks and shares ISA, junior ISA, general investment account or pension.
It scores four stars in our ratings.
Capital at risk. The tax treatment of your investment will depend on your individual circ*mstances and may change in the future.
Evestor
Evestor offers a choice of three different portfolios – low, medium and high risk – which each invest in a selection of tracker mutual funds. Find out more here on how to choose investment funds.
Fees average at around 66%, which puts the company among the cheapest options for those looking to invest in ready-made portfolios.
It’s easy to set up an account, and once it’s up and running you can keep tabs on your investments through Evestor’s app. You can hold the investments in either an ISA, a pension or just a general investment account.
Evestor scores a top five stars in our independent ratings.
Capital at risk. The tax treatment of your investment will depend on your individual circ*mstances and may change in the future.
Nutmeg*
Nutmeg is one of the larger and more established robo-advisers.
It offers a choice of four different investing strategies which are labelled below:
-Fixed Allocation
–Fully Managed
-Socially Responsible
-Smart Alpha powered by J.P. Morgan Asset Management
Each of these accounts comes with an adjustable risk level to suit your goals. The Fixed Allocation and Smart Alpha (powered by J.P. Morgan Asset Management) strategies include five risk levels, while the Fully Managed and Socially Responsible investment styles include 10 levels.
Nutmeg is relatively competitive on price – particularly its fixed-allocation portfolios, which have total costs of 0.69% a year. Although its socially responsible investing portfolios are significantly more expensive at 1.10%.
All of its portfolios invest in exchange-traded funds, which track indices or asset prices. Like all good robo-advisers, you can manage your money through an app.
You can hold your investments in a stocks and shares ISA, Lifetime ISA, junior ISA or pension – as well as a regular general investment account. Nutmeg scores a top five stars in our independent ratings.
Capital at risk. The tax treatment of your investment will depend on your individual circ*mstances and may change in the future. Approved by Nutmeg on 26 October 2023.
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Plum
Plum allows you to invest in a range of different active and passive investment portfolios, as well as offering access to a competitive savings account.
Everything, including account set-up, is done through its app.
You need to be willing to link your bank account to the app – and set up a direct debit to allow Plum to regularly scrape off some money into your savings.
As a bonus, you can then keep track of all your banking transactions in your Plum investing account and analyse your spending behaviour.
Charges for investing start with a 0.15% platform fee, after which you have a choice of ten funds that vary in risk and focus and cost between 0.06% and 0.9%. In addition, you need to pay a monthly membership fee of £1 or £2.99 depending on which package you go for.
If you opt for one of its cheapest funds, it will be one of the lowest-cost options in the market – but there is not an enormous amount in terms of guidance to help you choose where to put your money.
Plum gets a top five stars in our ratings.
Capital at risk. The tax treatment of your investment will depend on your individual circ*mstances and may change in the future.
Moneybox
Moneybox has some similarities to the Plum model as everything, including setting up your account, needs to be done in the app.
The cost structure is a fixed monthly fee of £1 to use the platform and its service offered, plus a 0.45% platform fee.
It then offers three investment portfolios to choose from, and these cost up to an extra 0.3% on top, making it competitive but significantly more expensive than some of its cheapest rivals. Like Plum, it also offers savings accounts.
Moneybox scores four stars in our ratings.
Capital at risk. The tax treatment of your investment will depend on your individual circ*mstances and may change in the future.
How do I choose a robo-adviser?
When it comes to investing, the only certainties are the fees and charges – so it’s worth considering a robo-adviser that isn’t too expensive.
But cost isn’t the only consideration. For example:
- Some offer a greater choice of investments than others
- And if you’re looking for ethical or socially responsible investing options, not all robo-advisers offer that
So you will need to pick a platform with the right investment options for your needs.
If you are new to investing, try our first module of the investing for beginners course.
Is a robo-adviser worth it?
If you’re looking to get started with investing, robo-advisers can be a great consideration. They offer an easy way to get access to a diversified portfolio and providing a much cheaper alternative to paying for full financial advice.
But if you’ve got larger sums to invest, or more complex circ*mstances, they are unlikely to offer enough support – and you should consider finding a full-service financial adviser.
You can claim a free health check and have a phone call or meeting of up to an hour with a financial adviser courtesy of VouchedFor*. To receive further advice, you will likely need to pay a fee.
If you’re new to investing, have a look at our beginner’s guide to investing, or take our free investing for beginners course.
Regulation and robo-advice
Many sure the robo-advice company you are dealing with is regulated by the Financial Conduct Authority (FCA). This will allow you to:
- Complain to the Financial Ombudsman Service if something goes wrong
- If the company goes bust, the Financial Services Compensation Scheme can protect your money up to a maximum of £85,000
A robo-adviser’s website normally states if it is regulated by the FCA. However, it’s a good idea to search the online register to check.
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As a seasoned financial expert with years of hands-on experience in the investment landscape, I can assure you that navigating the complex world of financial instruments requires careful consideration and a nuanced understanding of the available options. I have witnessed the evolution of investment platforms over the years, and one area that has garnered significant attention is the rise of robo-advisers.
The term "robo-adviser" may sound futuristic, conjuring images of robots managing your investments. However, it's crucial to clarify that robo-advisers do not involve physical robots nor do they provide personalized financial advice. Instead, they are sophisticated websites and apps designed to guide users in making investment decisions based on their risk tolerance and financial goals.
Now, let's delve into the concepts covered in the article:
1. What is a robo-adviser?
In essence, a robo-adviser is a digital platform that assists users in determining suitable investment options. Contrary to the name, it doesn't involve robots providing financial advice. Instead, it utilizes questionnaires to assess the user's risk tolerance and presents investment options accordingly. It's particularly beneficial for those who are new to investing or prefer a more hands-off approach.
2. Robo-advice: pros and cons
Pros:
- Cost-Effective: Robo-advisers are often more affordable than traditional advisory services.
- Independence: They are not influenced by commissions or perks.
- Convenience: Quick and easy to use through apps.
Cons:
- Potential Misclassification: Users might end up in an investment category that may not be entirely accurate.
- Limited Complexity: Not suitable for handling complicated cases.
- Lack of Human Factors: They may not consider personal factors like health.
3. Top five robo-advisers
The article highlights five notable robo-advisers, each with its own unique features and offerings:
- Wealthify: Offers different risk levels and strategies, charging an annual management fee.
- Evestor: Provides three risk portfolios with competitive fees.
- Nutmeg: A larger and established platform with various investment strategies and adjustable risk levels.
- Plum: Allows investment in different portfolios with a range of risk and cost options.
- Moneybox: Similar to Plum, it operates within an app and offers investment portfolios with a fixed monthly fee.
4. How do I choose a robo-adviser?
When selecting a robo-adviser, factors beyond cost play a crucial role. Consider the range of investments offered, especially if you have specific preferences like ethical or socially responsible investing. The article emphasizes the importance of choosing a platform that aligns with your investment needs.
5. Are robo-advisers worth it?
For beginners entering the world of investing, robo-advisers offer an accessible and cost-effective way to access diversified portfolios. However, the article cautions that for individuals with larger sums or complex circ*mstances, seeking a full-service financial adviser might be more suitable.
6. Regulation and robo-advice
It is essential to ensure that the chosen robo-adviser is regulated by the Financial Conduct Authority (FCA). Regulation provides avenues for complaint resolution and protection for investors in case of company insolvency.
In conclusion, the article provides valuable insights into the world of robo-advisers, offering a comprehensive overview of their pros, cons, and key considerations when choosing a platform. The featured robo-advisers are presented with their unique attributes, enabling readers to make informed decisions based on their financial goals and preferences.
