Who best suits platforms that rely on algorithms to make investing decisions? And what’s good to know if you have more time and money to invest?
Low-involvement, digital wealth management platforms can be a good fit for new investors but also costly.
With a DIY investing platform, you have explicit control over the companies and sectors you invest in.
Robo-advisers are not designed to beat the market, but to keep up with or track it. In addition, they are not designed to give you scope to act.
Robo-advisers, or digital advisers, rely on software, rather than people, to make investment decisions for customers who sign up to their platform.
It works by asking the customer a few basic questions, crunching that data, and then a set of investments are made to broadly fit the customer’s profile.
The value of investments can fall as well as rise and any income from them is not guaranteed and you may get back less than you invested. Past performance is not a guide to future performance.
EQi does not provide investment advice. If you are in any doubt as to the risk or suitability of an investment or product you should seek advice from an independent financial adviser.
The extent and value of any ISA tax advantages or benefits will vary according to the individual's circumstances. The levels and bases of taxation may also change.
For investors just starting out and unsure of where to begin, the robo-advisers initially offer an easy route into investing.
These algorithm-driven sites also attract people too busy to make decisions about what to invest in, as well as those who decide they don’t want to pay for financial advisers or wealth management services.
Three reasons to consider moving on from your robo-adviser.
Low-involvement, digital wealth management platforms can be a good fit for new investors but as the value of a portfolio grows, the impact of fees can be hidden.
Costs can add up to hundreds of pounds a year, which will eat away at the value of your returns.
Costs matter, as, like interest rates, they compound over time. If you pay less year on year, you’ll have more to invest, which can go a long way to helping you meet your long-term investment goals.
Here’s an example of how robo-adviser costs can accumulate on a portfolio of funds valued at £50,000.
Self-investing puts you in control. If there is a company or sector that you are interested in, you can select where to invest. If the market outlook changes or you are planning to withdraw money in the near future, you can decide whether to move your money into funds that aim to protect capital.
You can review risk or look to re-balance in line with your aims as no algorithm will have a better understanding of what your goals are than you.
Robo-advisers are relatively new, and most began trading during the last few years, at a time when the stock market has been delivering positive returns.
As robo-advisers are not designed to beat the market, but to keep up with or track it, portfolio returns will fall during a downturn and they are not designed to give you scope to act.
Ultimately, the decision about whether you would prefer to take a hands-on role when it comes to planning your financial future is yours.
Over half of our customers don’t pay a custody fee.
Why? Because if they trade shares at least twice in a quarter, the EQi custody fee is offset. Visit our pricing page for more more about how it works.