Another player has entered the increasingly crowded ‘robo-advice’ space to cater for modest investors who have been priced out of conventional financial advice.
The new service, called Tiller, will pit against the likes of Nutmeg and Moneyfarm in a bid to win the custom of those investing smaller amounts who are under-served by financial advisers.
Like many of its competitors, Tiller creates a personalised portfolio which is rebalanced if necessary, buying and selling depending on what the markets do.
Tiller uses clever algorithms which select funds that best reconciles with the user’s risk profile
But the robo is one of few that offer investment baskets comprised of passive funds – those that seek to replicate the performance of a given index like the FTSE 100 – as well as actively managed propositions – those that are cherry picked by a fund manager.
Tiller provides financial advice – albeit a watered down version of what’s offered by a flesh and blood human being.
The robo adviser, or online wealth manager, is only available to those who have at least £10,000 to invest and levies a charge of 0.75 per cent for a portfolio of exchange traded funds (a type of passive investment), rising to 0.9 per cent on portfolios incorporating active funds.
The investments costs are typically 0.25 per cent and 0.54 per cent for ETF and active portfolios respectively.
But is it worth it? We take a look.
How does it work
Users are able to choose one of three portfolio types: core, smart and select.
The ‘core’ portfolios are made up of low-cost ETFs, while the ‘smart’ portfolios include actively managed funds.
The ‘select’ portfolios work slightly differently. They allow investors to added themed investments, such as those with an environmental, social and governance slant, to diversify their portfolios. These are only available to those with at least £100,000 to invest, however.
Once the portfolio type has been selected, the user is quizzed to tease out their attitude to risk.
This information is fed to clever algorithms which select the funds from Tiller’s universe of active and passive funds that best reconcile with their risk profile.
The new online wealth manager allows users to model the impact of switching strategy before making the final decision
Users can view every holding and its exact weighting in their recommended portfolio as well as model the impact of switching strategy before making the final decision.
The advice on offer is called simplified advice which is an important distinction from a regulatory point of view.
This type of advice is a halfway house between fully regulated financial advice and guidance. Here, recommendations aren’t based on your whole financial position.
How does it compare?
Tiller stands out from the crowd in the sense that while the vast majority of robos put investors’ money in passive investments – typically in ETFs, its users have the option of investing in actively-managed funds.
However, it is not the only robo out there that offers these products.
Investec Click & Invest, which offers simplified advice, primarily invests in actively managed funds. It levies 0.65 per cent on the first £100,000 invested for the privilege. Investment costs averaging 0.60 per cent also apply.
So too does EQ Investors via its simplified advice service, which allows users to invest entirely online or receive advice from a fully qualified adviser, either on the phone, by Skype or in person.
Its ‘best ideas’ portfolio costs 1.19 per cent up to £99,999 and investment costs averaging 0.80 per cent also apply.
Meanwhile, UBS SmartWealth offers fully-regulated financial advice to individuals with a minimum of £15,000 to invest. However, its active and passive propositions are restricted to its own products – i.e. they’re created and managed by UBS.
The fees for a portfolio with active propositions range from 1.3 per cent to 1.9 per cent. These are all-in fees, so include both annual advisory costs and on-going charge figures.
I was able to try Tiller out for myself ahead of launch and I have to admit, the user experience was slick and easy.
The process of sending supporting documents for identity confirmation, which is a purely digital affair, was notably intuitive and streamlined.
The incorporation of actively-managed funds is a key selling point for Tiller – but the feature will cost you.
For those going down the active route, the service will cost you 0.9 per cent rising to 1.44 per cent when the average investment fees are factored in.
What’s more, £10,000 is by no means a small amount of money but is the minimum you need to use this service.
Robo-advisers are designed for people with modest savings who want to invest their cash for healthy returns but don’t know where to start and are not confident to do it themselves.
They are spared the time and hassle of having to find and visit a financial adviser, who will grill them on every aspect of their financial affairs to come up with a bespoke investment strategy as part of a detailed financial plan.
You can find a round up of the different robo-advisers available here.
But for someone who likes to do their own research and legwork and get very actively involved in their investments, DIY websites may be the best port of call.
They offer a relatively cheap way to purchase investment products – but that means taking responsibility for setting your own investment goals, working out your risk appetite and choosing your own investments – even if you buy ready-made portfolios.
Read our guide on how to choose the best (and cheapest) DIY investing Isa for more information.