Online wealth management firms compared

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If you want to start investing through an online wealth management firm, what’s on offer and how do they work?

Online wealth management firms compared

I’ve looked at several of the main online wealth management firms. There are new ones springing up all the time, so I’ll add to this article in the future. I’ve looked at what funds or portfolios they offer, what they charge in fees, how much you need to invest and how they’ve performed in the past, if these figures are available.

What is an online wealth manager or online wealth management firm?

There are lots of firms with online platforms that let you invest, but in this article I’m including firms that only let you invest in a limited range of their own funds rather than those that act more like investment fund supermarkets and offer hundreds of different funds.

Five online wealth management firms compared

I’ve looked at five of the big wealth management firms and I’m listing the firms alphabetically.

Moneyfarm 

Moneyfarm is an Italian owned investment platform which offers several different portfolios. These invest in something called exchange traded funds (ETFs). These are funds that track the performance of a particular index or a group of investments. Like ordinary shares, ETFs are listed on the stock exchange.

SAVVY TIP: The main advantage of ETFs over other pooled investments such as unit trusts is that they are very low cost. You can read more about ETFs in my article called Should you invest in exchange traded funds or are they too risky?

Moneyfarm has six different portfolios, from low to high risk. If you invest up to £50,000, your money will be split between up to seven funds. If you invest more than £50,000, it will be split between up to 14 funds. You can read about the make up of the different funds on Moneyfarm’s website.

Moneyfarm has only been going in the UK since January 2016, which isn’t really long enough to look at how it’s performed in the past. However, I’m including some figures as most online wealth managers have this information on their site. I’ve taken the first year’s performance – from January 2016 – January 2017 – purely because it’s easier to calculate from their website.

SAVVY TIP: Moneyfarm shows its performance figures after the underlying fund fees have been deducted but not once Moneyfarm’s own management fees have been taken out. I’m not sure why this is as most if not all of the other wealth management firms show performance once all costs have been taken into account.

Portfolio 1, investing less than £50,000: a profit of 5.5%, investing over £50,000 – a profit of 5.5%.

Portfolio 2, investing less than £50,000: a profit of 8.8%, investing over £50,000 – a profit of 8.6%.

Portfolio 3, investing less than £50,000: a profit of 16.5%, investing over £50,000 – a profit of 15.4%.

Portfolio 4, investing less than £50,000: a profit of 18%, investing over £50,000 – a profit of 15.1%.

Portfolio 5, investing less than £50,000: a profit of 19.3%, investing over £50,000 – a profit of 14.1%.

Portfolio 2, investing less than £50,000: a profit of 19.6%, investing over £50,000 – a profit of 15%.

Minimum investment levels: You can pay in as little as you want, but your money won’t be invested until you have £100 in your account.

Fees: Moneyfarm’s fees are 0.7% of your investment on the first £20,000, 0.6% on amounts between £20,000 and £100,000, 0.5% on amounts between £100,000 and £500,000 and 0.4% on anything you invest above £500,000. The average investment fund costs are 0.3%, which you’ll pay on top of Moneyfarm’s fees. The fund fees will be taken by the fund provider.

Moola

Moola’s funds are made up of exchange traded funds (ETFs) and it says you can sign up and start investing in ten minutes. It has partnered with BlackRock to offer its range of ETFs.

There are three ready made portfolios based on your attitude to risk, or you can put your own together. The three that are ready made are:

Cautious, which is designed to be more stable in exchange for a lower return.

Moderate, which aims to strike a balance between the cautious and adventurous portfolio.

Adventurous, which could perform better over time but with potentially more swings along the way.

I couldn’t find any information about past performance about these portfolios, only projected expectations (which I’m assuming may be based on past performance). Past performance, as we’re always being told, isn’t a guide to future returns and, as I’m writing this, Moola hasn’t been going for very long. Even so, it would have been useful to have had the projected returns translated into an annual rate.

Minimum investment amount: You can invest from £50 a month.

Fees: There’s a flat fee of 0.75%, which you pay no matter how little or how much you invest. The average ETF fee is 0.19% to 0.25%, which is paid on top and taken by the fund provider.

Netwealth

It offers a range of investment portfolios, primarily made up of ETFs, but with other passive funds (ones that track a stock market index) as well.

Netwealth launched in May 2016 and has seven portfolios:

Risk level 1 (lowest risk) returned a profit of 2.9% between May 2016 and May 2017.

Risk level 2 returned a profit of 7.4% between May 2016 and 2017.

Risk level 3 returned a profit of 11% between May 2016 and 2017.

Risk level 4 returned a profit of 16% between May 2016 and 2017.

Risk level 5 returned a profit of 19.1% between May 2016 and 2017.

Risk level 6 returned a profit of 22.5% between May 2016 and 2017.

Risk level 7 returned a profit of 25.6% between May 2016 and 2017.

These figures are after all charges have been deducted.

Minimum investment level: You have to have at least £50,000 in order to invest.

Fees: If you invest between £50,000 and £249,999, you pay 0.65% to Netwealth, if you invest between £250,000 and £499,999, you pay 0.5% and if you invest over half a million pounds you pay 0.35%. The average investment fund fee is 0.25%, which is paid on top and taken by the fund provider.

Nutmeg 

Nutmeg launched in 2011 – ahead of the other digital wealth managers. It offers two types of investment management. One is fully managed and the other is fixed allocation. The ‘fully managed’ bit means that Nutmeg will buy and sell different funds to take advantage of economic and political events and trends. Its portfolios are made up of exchange traded funds (ETFs).

Fully managed portfolios:

There are 10 different fully managed portfolios based on your attitude to risk.

Portfolio 1 is the lowest risk, portfolio 10 is the highest risk.

Nutmeg shows its performance track record between June 2012 and September 2017.

SAVVY TIP: It assumes that you have invested less than £25,000 and the profit rate is shown once fees have been deducted. The fees are based on the average that its clients pay, which is 0.82%.

Portfolio 1 (which aims to preserve your original investment and not lose money) has returned an average 1.3% profit a year,

Portfolio 2 (which aims to preserve your original investment and not lose money) has returned an average 2.9% profit a year

Portfolio 3 (which aims for slow and steady growth) has returned an average 3.8% profit a year.

Portfolio 4 (which aims for slow and steady growth) has returned an average 4.9% profit a year.

Portfolio 5 (which aims for moderate growth without extreme volatility) has returned an average 5.8% profit a year. Volatility just means ‘ups and downs’. The more volatility, the more – and bigger – the ups and downs of your investment.

Portfolio 6 (which aims for moderate growth without extreme volatility) has returned an average 6.5% profit a year.

Portfolio 7 (which aims for higher growth by accepting more volatility) has returned an average 7.9% profit a year.

Portfolio 8 (which aims for higher growth by accepting more ups and downs) has returned an average 8.8% profit a year.

Portfolio 9 (which aims for high growth by accepting very high volatility) has returned an average 9.9% profit a year.

Portfolio 10 (which aims for high growth by accepting very high volatility) has returned an average 10.5% profit a year.

Fixed allocation portfolios

There are five fixed allocation portfolios from cautious to adventurous. Looking at the last five years (from 1st Jan 2016 to 31st Dec 2016)

The cautious fund (which aims to produce a better return than savings with low volatility) has returned an average profit of 4.3% a year.

The steady fund (which aims for steady growth) has returned an average profit of 7.4% a year.

The balanced fund (which aims for moderate growth without extreme volatility) has returned an average profit of 8.63% a year.

The growth fund (which aims for higher growth by accepting more volatility) has returned an average profit of 10% a year.

The adventurous fund (which aims for high growth by accepting very high volatility) has returned an average profit of 12.45% a year.

Minimum investment levels: You can invest a minimum of £100 a month or a lump sum of £500.

Fees:

Fully managed: Nutmeg charges 0.75% on the first £100,000 you invest, then 0.35% on anything above that. The average investment fund costs are 0.19%, which are paid to the fund provider and are on top of Nutmeg’s fee.

Fixed allocation: 0.45% on the first £100,000 you invest then 0.25% on anything above that. The average investment fund costs are 0.17%.

There are no set up, transaction or trading fees and no exit fees.

Wealthify 

Wealthify is majority owned by the pensions provider and insurer Aviva. It uses ETFs but also invests in other funds – mainly passive ones (which track a stock market index). It uses funds from providers such as Fidelity, Vanguard, BlackRock, iShares, Legal & General and Henderson for its portfolios. It has five plans from cautious to adventurous.

Performance track record

Wealthify shows its performance from 12th February 2016 to 11th February 2017. It’s not enough to give you a real idea of what it’s achieved, but I’m including it anyway. The performance figures below are after all fees (fund fees and Wealthify’s fees) have been taken.

Cautious fund: has returned profit of 8.7% in the 12 month period.

Tentative fund: has returned profit of 11.7% in the 12 month period.

Confident fund: has returned profit of 18.3% in the 12 month period.

Ambitious fund: has returned profit of 22.2% in the 12 month period.

Adventurous fund: has returned profit of 28.5% in the 12 month period.

Minimum investment amount: Wealthify says you can invest from £1.

Fees: Wealthify’s fees are 0.7% on investments from £1 to £15,000, 0.6% on amounts between £15,000 and £50,000 and 0.5% on amounts over £50,000. The average investment fund fee is 0.19%, which is paid on top and taken by the fund provider.

SAVVY TIP: You can reduce your fees by forming a ‘circle’ with friends, family or colleagues. You can set up a circle on your Wealthify account and invite others to join. It’s a sort of referral discount. You don’t pool your money and people in your circle can’t see how much you’ve invested.

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