One We Like: Wealthify - Black Swan

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One We Like: Wealthify

April 25, 2016

By Consulting Group

We’ve often written that despite all the talk about robo-investing in the UK, there haven’t been any true robo-investing providers. That changed earlier this month with the launch of Wealthify, which builds 5 basic portfolios using a combination of algorithms and a human investment team. It’s this element which most differentiates it from Nutmeg, its most obvious competitor, in its approach.

wealthify

We should point out that Wealthify is a previous client  – you can check out the case study of the market sizing project we did for them here – but, much as we like them personally, that’s not why we’re featuring them here. They’ve built a great product, with several innovative features which we think will become integral parts of investing in the future.

One feature which is not offered is any kind of regulated advice. While this is an important regulatory point, the strength and the tone of their comments about it suggest they see their ‘non-adviser’ status almost as a badge of honour. Chief Investment Officer and Co-Founder Michelle Pearce told FT Adviser on the day of the launch,

“What our target audience is really looking for is a very simple ISA and the majority don’t need advice,”

and went on to illustrate the point with anecdotes from her own experience and those of her friends.

Being a similar, though sadly slightly older, age to Michelle, this is a point with which I have long agreed. There is not an ‘Advice’ gap in the UK investment market, there’s a confidence gap. People feel that investing is not for them because it’s too complicated, and they don’t trust professional advisers – in any field, not just financial services. They are much more likely to trust the advice of their family and friends.

It’s this fact which makes Wealthify’s ‘Circles’ feature so interesting. Every Wealthify investor is free to create, join and invite members to an investing circle of their choice. Membership of a circle gives you a discounted fee, from 5% if there is one other person in your circle to 20% if there are more than 50. This is a first step towards making investing social, and getting friends, family and colleagues to discuss investing, help each other and overcome the confidence gap which holds them back from investing at the moment. There is so much more which can be done with this feature in the near future – integration with social networks, and the facility to communicate within the Wealthify site for example – but it is great to see a company finally helping its clients to communicate with each other.

Even without Circles, Wealthify does a good job of simplifying the investment process as much as possible. It is easy, on web and importantly mobile too, to choose whether you want an ISA or not, how much to invest upfront and/or monthly, and the length of time you wish to invest for. It is also easy to choose your portfolio, from one of 5 options – 1 is labelled as cautious, with 5 as adventurous. After viewing your portfolio and entering name and address details, you go through a short, sharp and to the point suitability questionnaire, one of the best of these that I’ve seen, for a couple of reasons. First, not only is it short, all the questions are very clear and objective. Secondly, you get very clear guidance, but not advice, if your answers indicate that your chosen portfolio is not suitable. For example, you’re unable to progress if you state that you don’t have 3 months salary in savings at all (generic financial advice, and therefore not regulated) while if you choose an adventurous portfolio along with a short time frame you get a warning, and can choose either to continue at your own risk or make changes to your portfolio.

The one area where I’d like to see Wealthify further simplify their process is on the choice of portfolio. One is terminology – I’m slightly loathe to criticise as I don’t really have any better suggestions, but I don’t think ‘Cautious’ and ‘Adventurous’ are brilliant descriptions of the relevant portfolios. However, perhaps more importantly, they are not always accurate – the portfolios don’t change depending on investment time frame, so were a customer to invest in portfolio 5 over 40 years it would be a very sensible, but distinctly unadventurous, choice.

In the absence of beneficial suggestions about correcting the terminology, something I would suggest, following on from the Financial Advice Market Review (FAMR), is more support for users elsewhere on the site on how to choose the right portfolio for them. As the FAMR made clear, there is no regulatory barrier to operators providing guidance on choosing how much risk to take. In Wealthify’s case, this could not be within the portfolio selection part of the website, which would be too close to providing advice on which Wealthify portfolio a customer should choose, but it could be provided elsewhere. Regardless of what portfolios are called, this would give new investors much more confidence that they were choosing the right one.

This however, can all go on the product backlog. Wealthify has built an excellent, simple product that can be used by anyone to invest for their futures, and it is unafraid to tackle head-on the challenge of getting people to invest for the first time. With a maximum fee of 0.7% per year and a minimum investment of £250 it is unafraid to market itself to those with small sums to invest, and speaking as one of those Wealthify is sure to receive some of my meagre funds very soon!

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