‘Simple, efficient and tailored to your profile. The Moneyfarm investment plan maximises your long-term returns whilst protecting your wealth.’
If you are reluctant to pay for a financial adviser or you don’t have the time, energy or knowledge to select your own investments, Moneyfarm might just be the perfect option for you to kick-start or refine your investing career. Not sure about Moneyfarm? Let Orca clear that up in this extensive, professional and data-driven Moneyfarm review.
Moneyfarm is considered a so-called “robo-advisor” that aims to make investing more accessible for first-time investors and remove the hassle from investing for more experienced investors. Like other robo-advisors, Moneyfarm will ask you a series of questions during the signup process, which will help you to determine your personal risk profile and investment objectives. Moneyfarm will then automatically invest your money into a liquid, cost-efficient portfolio, which is suited to your financial goals.
The company was founded in Italy in 2011 and has assumed a market leading position in the Italian market. Moneyfarm UK launched April 2016 and the digital investment manager has quickly established itself as predominant figure in the UK robo-advice market. Moneyfarm has attracted more than 10,000 customers since its launch and is managing around £260million in assets under management.
Benefits of a Moneyfarm Investment
When compared against a financial advisor, Moneyfarm’s investment process has a number of benefits:
- Lower cost
- Traditional advisor fees are typically 1-3% AUM while Moneyfarm fees are much lower (free for the first £10,000, 0.6% charged from £10,000 to £100,000, 0.4% charged at £100,000 to £1,000,000 and free for assets above £1,000,000).
- Less upkeep, but there when you need them
- No need for long face to face meetings, but always available online or over the phone. Moneyfarm has also experimented with opening “popup” stores in Milan.
- No minimum commitment
- When investing in Moneyfarm there is no minimum investment and Moneyfarm fees are waived until your investment surpasses £10,000.
- Ability to view your investments online
- Moneyfarm is focused on its users (investors). An intuitive platform provides an overview of your investment performance.
Moneyfarm has the following benefits over traditional investment platforms:
- Removes the hassle of selecting investments
- Moneyfarm will invest your funds on a purely discretionary basis with no active involvement from yourself required.
- Time saving
- Save time on researching investments. Moneyfarm’s expert team of finance professionals constantly monitors ETFs and market conditions to ensure your portfolio is performing adequately.
With these benefits, Moneyfarm is well suited to individuals who want a low-costing, hassle-free investment. Perfect for first-time investors, particularly for people who are already comfortable with managing their finances online. As an investor, you’ll be able to hold your investment in a tax-efficient ISA or a General Investment Account (GIA). The tax-efficient ISA ensures that interest earned is sheltered from the tax-man.
Moneyfarm is well suited to individuals who want a low-costing, hassle free investment
Moneyfarm Sign-up Process
So, how does it work? The whole ethos of Moneyfarm is to make investing as simple as possible. As well as the normal details you would expect from an online sign-up process you will also be asked a series of questions to determine your suitably and tolerance to financial risk. This is important as the answers you give, combined with your financial goals, which you are also asked, drive the Moneyfarm algorithms to allocate your investment.
Questions on risk are not solely based on how financially adventurous you are, but also your knowledge of investments and your financial situation. If you have a high appetite for risk, yet you have little financial security, a high-risk portfolio will not be suitable. This question-led approach is actually very similar to how a financial advisor would determine your suitability to financial products. Personally, I actually enjoyed answering the questions, it’s a fun process and useful in helping you to think about your financial goals a bit more clearly!
The whole ethos of Moneyfarm is to make investing as simple as possible
Here are some example, with answers required in agree/ disagree format:
- 1. Risk does not worry me. It is the best way to maximise the probability of returns.
- 2. I regularly invest in ETFs, mutuals or other financial products.
- 3. I am familiar with Exchange Traded Funds (ETFs), mutual funds and similar instruments and consider them a good way to diversify investments and reduce risk.
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Following the questions, users are given a profile. For example, I was deemed to be an Aggressive Investor.
After completing the sign-up questionnaire your funds will be allocated to one of six managed investment portfolios, depending on your suitability and risk appetite. You have the ability to fine-tune the exposure to risk within your portfolio, but you are not able to individually select investments. This is where the ‘discretionary’ element comes into play.
It is possible to create a number of portfolios on Moneyarm, so you can diversify even further across different risk-graded portfolios, if you want.
Moneyfarm User Portfolio: Aggressive profile
The above chart shows how Moneyfarm has allocated assets in my portfolio. This is a base case, generated from the questionnaire which can be altered by adjusting the risk profile, investment amount and time horizon. As these inputs are fine-tuned the proportion of less risky assets (cash) relative to the proportion of riskier investments (equities) are adjusted accordingly. This adds a degree of user input, if desired.
Moneyfarm accepts phone calls for investors who require extra support or simply want to speak to someone over the phone, before taking that all important next step. A nice addition to the service.
The past performance and expected performance of the above portfolio are covered below.
Moneyfarm UK Investment Strategy
Moneyfarm portfolios contain a mixture of asset classes diversified across geographical areas and currencies. To represent asset allocation, Moneyfarm invests solely in Exchange Traded Funds (ETFs). An ETF is an investment vehicle that tracks an asset index (equities, bonds, commodities) and is listed on the exchange, similar to an equity or bond. As most ETF’s are not actively managed, they have the benefit of reduced costs and as they are listed on the exchange they are highly liquid, differentiating them from index funds.
A separate strategy dictates the direction of each of the six individual investment portfolios and the assets that sit within these portfolios.
Moneyfarm has provided a detailed overview of this investment strategy including market predictions in their white paper linked below. It is an honest report, which is worth a read.
The Moneyfarm UK Investment Committee monitors investments over time and rebalances the allocation of assets based on their performance.
Moneyfarm Investment Performance
The performance of a Moneyfarm investment is determined by two main factors:
- Market conditions: As Moneyfarm invests your funds into ETF’s that track markets, the performance of your investment is largely dependent on market conditions. As an investor, you need to think of Moneyfarm as a long-term investment to account for short-term market volatility.
- Investment selection: When investing in Moneyfarm, you are entrusting Moneyfarm’s Investment Committee to allocate your funds and maximise your returns, for your given risk profile.
Moneyfarm as a long-term investment to account for short-term market volatility
To assess performance, Moneyfarm has an interactive chart on their website: https://www.moneyfarm.com/uk/performance/. For example, the snapshot below shows how a portfolio at Risk Level 4 would have performed since 2016.
Investors should be conscious that reviewing investment performance is notoriously difficult and it has been constantly proven that historical performance is not an accurate indicator of future returns. Ultimately, investors need to be comfortable with the risk profile of their portfolio and believe in the investment strategy employed by Moneyfarm.
Moneyfarm Fee Comparison
Against traditional financial advisors, robo-advisors, and particularly Moneyfarm, stack up well in terms of fees. Traditional investment advisors typically charge anywhere between 1%-3% of the asset value in annual fees.
Moneyfarm’s fee structure can be seen below:
|Investment Amount||<£10,000||£10,000 - £100,000||£100,000 - £1,000,000||>£1,000,000|
No fees attached to your first £10,000 investment
Furthermore, the Moneyfarm fee structure performs well against competing robo-adviser platforms, as seen below:
Moneyfarm Review Conclusion
The performance of investments through Moneyfarm will be demonstrated over time, but the whole ethos and ease-of-use of Moneyfarm is fantastic. For those who are new to investing, Moneyfarm may be an excellent way to get started, particularly when there are no fees attached to your first £10,000 under management!
Editor note: Despite focusing exclusively on P2P lending nowadays, we conducted a review of robo-adviser, Moneyfarm, on 14th September 2016. This is an updated version as of 17th August 2017.