Wealthify is similar to many of the other robo funds in many ways. It tries to keep costs down by investing in ETFs where the management fee is very low but also it tries to automate the process of matching your risk appetite with a portfolio with a matching risk profile. But of course it does differ in very significant ways. The first one is that instead of nestling amongst the coffee shops of South London it's based in Cardiff in Wales and the second thing which is really refreshing is that the Chief Investment Officer, Michelle Pearce, is a woman. That's so rare in the investment industry and it's so nice to see.
There's no better way to find out how it works than to invest your own money so that's exactly what I've done, and here's the recording. Hopefully you find it useful.
Meet the Team
Here's the website and you can see that the team is a really important part of their marketing.
Here's the bio for Michelle Pearce who's the Chief Investment Officer. She has an interesting background. She started off at medical school but then left to enter the world of investing.
It's reassuring to see that the first 50k of your investment is protected by the Financial Services Compensation Scheme and of course they're authorized by the Financial Conduct Authority.
Frequently Asked Questions
It's worth having a quick look at the frequently asked questions particularly the part about fees. They're very transparent about their fee structure and it's very clear that they are trying to keep the cost down.
If we look to see how they keep their fees so low they point out that they've automated the investment process and that means they don't need so many fund managers because fund managers can be very expensive. And because all of their customer relationship's done online they have no face-to-face meeting with clients which also keeps costs down.
Their simple annual fee is based on the value of your investment and it's never more than 0.7 percent but as we'll see in a moment you can keep that down by joining a Wealthify circle. VAT is included in the fee.
On top of Wealthify's management fee you have to pay for the underlying funds. These are the funds which Wealthify itself buys on your behalf and on average they charge point one seven percent per annum.
So let's see a little bit more about Wealthify circles because that's a way of reducing your fees. This is kind of like an affiliate program so if you get other people to join Wealthify then you all benefit from starting one of these circles. Wealthify benefits because they get more clients you benefit because your fee will be lower. If you get fifty or more people in your circle the discount can be very significant, up to 20%, so that's certainly something that would be worthwhile if you are thinking of investing in Wealthify.
Choosing a plan
So let's go to the investment process. You can either start an ISA or you can start a regular plan. The ISA allowance for 2017 is 20,000 pounds and of course that's a tax-free wrapper so you wouldn't have to pay any capital gains tax on your investment in Wealthify. I'm going to go for the regular plan. One of the unique things about Wealthify is that the minimum investment is just one pound so I could just put one pound here but instead I think I'll invest one thousand. I'll have no regular payments and I'll have an investment horizon of ten years and the predicted value is £1,777.
As with any robo fund you can choose your investment style from very cautious which is number one to very adventurous which is number five and I think they explain the risk-reward trade-off very well. So if we go for the most adventurous portfolio the predicted value after 10 years is 2018 pounds but you can also see that the risk of underperformance is very high. We can reduce the risk of underperformance by increasing the time scale or choosing a lower risk style.
If we go for the middle risk category the average annual return is something like 6% so let's go with that for now.
Straight away I get this nice description of what I'll be invested in with that risk profile. You can break it down by investment type, by region, or by investments. For this risk profile there's a lot of cash, 8%, but also lots of cash equivalent assets which are probably generating a very low return. We're generating some income from corporate bonds, which make up about a quarter of the portfolio, and government bonds which return very low income, but which are very safe, are about 10 percent of the portfolio. The rest is in shares, about a third of the portfolio, and that's where most of the risk of the portfolio will come from.
If we look at the regions in which the money's invested you can see that the UK makes up 80% of the portfolio. Emerging markets, which are most risky, only make up 3% of the portfolio. And here they explain the kind of investments that the money is put into.
Straightaway you can see that the first month's fee will be about 72 pence which on a thousand pounds is quite reasonable, that's 0.7 percent per year and they break it down. The fund charges are just 14 pence and the fee for Wealthify is 60 pence and the more I invest the lower the fee would be. So the Wealthify fee would go down to 0.5% if I invested more than fifty thousand. So I'll go ahead and set up this plan.
Risk Questionnaire
So here's the robo part of the fund, I'm going to answer their risk questionnaire.
Definitely not.
Certain high return is a nonsense, there's no such thing. Chance of high return with possible losses sounds about right.
"If markets fell and this plan lost half of its value how would your future financial plans change?" Well, it certainly would affect my future financial plans, but I wouldn't withdraw all of my investments so I'll say moderately.
"If this plan lost 20% of its value over a 12-month period how would you feel?" Unconcerned. 20% is the typical move of the stock market in a year, either up or down, so that's not surprising at all, so I'd be unconcerned.
"What's your main consideration when choosing an investment - what I could gain or what I could lose?" For me it's what I could gain.
"Excluding any mortgages how would you describe your current level of debt?" More savings than debt for me.
"Aside from the money you intend to invest in this plan do you have emergency savings and that's enough to cover your living expenses for three months?" Yes. Well that's interesting, they see whether my investment style matches the answers I just gave, and in this case it does so let's continue.
So now I'm going to enter some personal details and we'll come back to the onboarding process once that's filled in. Okay, so the onboarding process is finished. I entered my details and I'm now officially part of the new wave of investors.
Let's take a look at the dashboard. You can see that it's currently awaiting funds.
That was very easy, very quick. One thing I noticed was that the risk questionnaire was a lot shorter than some of the other funds and that made the process quite a lot quicker. So I'm very happy with that. I think Wealthify has done a great job of creating this interface. They're very upfront with their fees, which I love, they explain their investment process and, again, it's fantastic to see that the CIO is a woman. So that's a big thumbs up for Wealthify.
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