I rejoice the emergence of robo-advisers. They will give me access to a fully diversified portfolio across a range of asset classes across a range of global markets with a choice of risk appetite. All for a sub-1% transparent all in one fee with zero exit fees.
Robo-advisers (Wealthify, Moneyfarm, Wealthsimple et al) are cheap precisely because they are made up of ETFs and/or mutual funds. They are autorebalanced but not necessarily actively managed by my understanding.
This is certainly true, but itās also just a fancy way of saying āETFā or āa few ETFsā. That it costs anything to do this other than the underlying costs of each fund is the problem. If you arenāt sure what to invest in, youāre better off paying someone once (or periodically to rebalance) to help you decide the relevant ETFs to invest in and target them in the cheapest form possible (e.g. Freetrade, but Iām biased). Good, free information is also available online but clearly this wonāt be personalised to your circumstances.
The legitimisation of paying % ongoing fees for the privilege of accessing pre-existing ETFs is one of the most damaging trends of the last couple of years and reflects badly on fintech!
The legitimisation of paying % ongoing fees for the privilege of accessing pre-existing ETFs is one of the most damaging trends of the last couple of years and reflects badly on fintech!
Actually, their strong brands and investment in public attention has probably been the single biggest factor in 18-30 engagement in investment since roboadvice became trendy, so itās not all bad. But - I maintain that itās not an effective way to invest.
Interesting perspective. To take Wealthify as an example who are already undercutting the incumbents, here is their fee structure and what the customer receives in return:
It sounds attractive and cheap in isolation and pre-Freetrade and Vanguardās proprietary ISA offering maybe there was no other good choice.
But Iām afraid once youāve seen how the sausage is made you canāt unsee it, and āpersonal investment planā is simply one of circa 5 buckets of ETFs they put you into depending on risk appetite.
Aside from the fact that this may rebalance over time, charging a % ongoing fee for this is very expensive. Itās information after all, not an ongoing service. The rest sounds like what should be expected of any reasonable service platform.
I really appreciate the responsesā¦ before I even knew Freetrade existed, Wealthify was my best option Iād set my mind on. This isnāt necessarily the case now that Iām a pledged investor, but I may take the approach Iāve done with Monzo&Revolut as seeing them as compliments. Undecided yet (this is probs a whole other thread in itself about whether Roboadvisers & FreeTrade are compliments/competititors so will leave it here for now)
This is a good point, however to ensure like-for-like comparisons, we must bear in mind the all-in-one ongoing fee is attractive because it includes the ISA which Freetrade will charge Ā£36 per year for as an add-on. Why have you gone down the route of charging a nominal fee for an ISA as opposed to a %?
This is why Iāve suggested before in this forum that FreeTrade thinks about dilineating ISAs as being an āadd-onā to Basic but a mid-tier option so as to simplify cross-platform comparisons.
P.S. this reply is a bit jumbled so apologies in advance. Trying not to stray off topic to help out the leaders.
Sounds like it could be a interesting blog post.
Fair point but doing the math, it wonāt take very long for even 0.4% to become more expensive than Ā£36. And from what I can tell (newbie still learning here so I may be wrong!) for someone with an existing pot and investing enough each year need an ISA the % charge will already be larger that freetrade.
Iām assuming, there is no increase in cost to service this feature so no reason to charge people more for nothing. Give it a fair price and leave it at that to avoid confusion. But Iāll leave @freetrade_cal to give an official answer
Ā£9000 * 0.004 = Ā£36. Millennial investors are unlikely to be starting with Ā£9000 lump sum investment straight out the gate.
Additional edit: Ā£5142.86 * 0.007 = Ā£36. Even in the worst case scenarioā¦ the hurdle point of Ā£5142.86 initial capital is still high for those who want a Stocks&Shares ISA wrapper as a comparable rate.
Why would you need an ISA with that capital size? If you are starting in early 20s, get a basic account and end up paying Ā£0 for the entire scope of brokerage services until your portfolio reaches Ā£15,000 - Ā£20,000.
Then convert it into ISA. You will not be expected to report any gains below Ā£11,700 per annum and there is no way you can obtain those with less than Ā£10,000 capital.
I think @Vlad understood my point if Iām right, as someone in that exact position(less than 5k to invest) I just wonāt be using an isa until I have probably a 20k pot anyway. Rendering the 0.4% charge outdated once freetrade lands
I think a free account is perfect for people with less than Ā£10k to invest. When this has grown enough to warrant an ISA you can open one and have the ISA alongside the general investment account (GIA).
Itās quite normal to have multiple accounts with a broker (e.g. GIA, ISA, SIPP). I can imagine Freetrade will have a very nice way of presenting these portfolios consolidated or separated 
Just for brevity, given weāve discussed this elsewhere before: for many people an ISA is just a want and, especially, when itās constantly in the news to use the ISA allowance - be it cash or otherwise - itās simply prudent learned behaviour to prefer an ISA. Convenience has value and inattention is real in the economy: consumers simply donāt want to have to think about frictions such as the CGT etc. An ISA is a good option simply for peace of mind alone.
Furthermore, ISA allowances are split across the number of ISAs one has which is another factor.
Whilst unlikely, it isnāt out of the realm of possibility. Take OCADO that jumped 70% this week. There are many examples of stocks doublingā¦ so whilst ill advised to go all in on a few stocks, when doing so market-beating returns are possible.
Donāt get me wrong, I agree with this in theory. But in practice, the consumer must be educated that this is the case. Right now, the expectation is to have an ISA.
Your original point was it wouldnāt take long for the management fee to outstrip Ā£36. I proved this wrong.
Bear in mind, the charge isnāt for the ISA wrapper alone but I get the point.
Iām looking to go full Freetrade once Iām onboarded provided I donāt have to forego the value added that the 0.7% fee provides.
Iām afraid you diddnt, my point was made up of 2 premises which vlad picked up on. I did the exact same calculation as you.
Premis 1: It wouldnāt take long for the fee to increase to more than Ā£36 p/m (I see 5-9k as not taking long)
Premis 2: to make an ISA worthwhile you need a pot of 15-20+k
Conclusion: by the time itās worthwile taking out an isa your already over the hurdle point. Rendering a 4-7% charge never useful for an isa and outdated once freetrade exist
Jeff, I guess the point @Diversify was making is many people are not assertive about very basic things, those who are not acquainted with finance in any shape or form.
For them, the acronym CGT and many other tax areas are freaking so they are happy to pay whatever it takes so they do not have to spend 5 minutes reading about it. So their question is not āshall I pay at all?ā but āI will pay regardless, but what is cheaper for me?ā
And this is when they invest Ā£1-Ā£5,000 and benefit from 0.XX% ISA fee with Wealthify and other boring robots, missing all the thrill and enjoyment of real investing.
I guess I see 1-5k as a lot of money, and would have enough interest to understand exactly how it is being used. @Diversify I do concede there will be people out there not like me! I think that market will be getting smaller and smaller but there will always of course be those that want someone else to do the perceived āhard workāā¦ I just hope itās sooner rather than later that people realise this isnāt hard work in a world with freetrade!
Split into a new topic as went a little off the Revolut Wealth conversation 
Thanks Tommy! 
