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Weekend press review: the changing face of robo-advice

  • By Sue Whitbread
  • News
Newspaper

Writing in the Financial Mail on Sunday, Jeff Prestridge says savers will be delighted by last week’s summer ‘present’ – of bank base rate rising to 0.75%. IFA Magazine readers will be all too aware that savers have been suffering negative real returns from cash deposits for many years, and this isn’t going to change any time soon. With CPI reported at 2.3% in June, there’s still a big gap.  Prestridge makes the call to savings providers to respond and pass on this rate rise to savers although he accepts that excuses are often found to avoid doing so.

Robo-advice is the lead story of choice for the Sunday Telegraph Money section. James Connington reports in some detail on a number of newly launched services, such as Exo and Tiller, which are targeting more experienced, knowledgeable investors by offering them the chance to be more involved in the decision making.  He explains that Exo, which uses algorithms from a Spanish hedge fund firm to build its portfolios, starts off similarly to most other robo services, with questions about risk tolerance and investment timescales etc. Clients could just leave it at that and Exo would invest for them. But they also go a step further, with the option to select investment sectors they want their portfolio to be more heavily exposed to, such as emerging markets, healthcare or gold. The system takes that into consideration, but keeps the portfolio at the correct risk level – making daily tweaks if necessary.

Another service highlighted in the article is from Tiller, whose founders, it says, also come from a hedge fund background and does something similar.

It offers a core service, where investors are put into a portfolio of tracker funds with zero influence, a “smart” portfolio option, which does the same but includes actively managed funds, or “select” portfolios.

With the select option, investors can influence between 10pc and 20pc of their portfolio, depending on their risk level. The risk level also determines what customisation options are on offer. For example, emerging market smaller companies won’t be available to low-risk investors. It seems that these companies are targeting older investors – who for whatever reason prefer not to take face-to-face professional advice.

Another one under the Telegraph’s microscope is ETFmatic. Launched in 2015, this is different again –  Connington suggests – it is more of a guide. Based on the investor’s risk preferences, it indicates which of its portfolios meets the requirements. This is not formal advice and users are then free to customise the portfolio as much as they wish.

Of course, whilst these services offer a novel way to invest, most robo advisers still don’t offer a financial planning service, although many foresee more hybrid models that do in the future.  IFA Magazine readers needn’t be told that the role of a professional financial planner goes far beyond just helping clients manage their portfolios. Whether robo advisers can compete with such relationships which are built on trust is questionable.

The article explains that some robo services do offer advice. Scalable Capital, for instance, offers on-demand advice for clients who aren’t sure about the service, with a free phone consultation and the option of a session with an adviser if wanted according to the Telegraph.

Wealthsimple, a rival, is also authorised to provide investment advice by the FCA and has human advisers on hand.

The Sunday Times Business section has a full page feature entitled “How the funds queen hit the wall at Pru” – talking about last week’s news that Anne Richards, currently Chief Executive at M&G, will be joining Fidelity international as CEO from December this year. There’s a lot of musing as to the reasons why she has decided to make this move after just two years at M&G. Much of the debate is centred around a shake-up at the Pru which, the article suggests, has left her looking “sidelined”. Whatever her reasons, she has an excellent track record and we think that advisers (and our IFA Magazine team!) will be interested to see what impact she makes at Fidelity International in due course.

Over at the Sunday Times Money section, the lead story is all about last week’s base rate rise, its impact on mortgage holders, those with loans and credit cards – and savers of course.  There’s little here to interest advisers – who will be all too familiar with the issues involved.

As we’ve come to expect from his regular “personal account” column, Ian Cowie has some wise words again this weekend. Also writing about last week’s base rate rise, he takes it further. Whilst highlighting that most deposit accounts fail to preserve the real value of money, he takes the initiative to deliver a powerful argument as to why savers should consider investment in equities as a longer term alternative. We won’t go over all the reasons as you’ll be aware of them. It is good to see that readers of his column will be made to think about whether this is an inflection point for bonds and to inquire about the asset allocation of their funds. His suggestion is for investors to consider holding fewer bonds, less cash and more shares.

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