Moneyfarm offers investment management to help build your nest egg, with low fees and risk-based investing.
One of the so-called robo advisers, Moneyfarm combines technology and real investment experts to offer digital wealth management. It aims to be an easier, low-cost alternative to traditional investment services for those looking to build their wealth but who lack the time to do so themselves.
What is Moneyfarm?
Moneyfarm is an online investment adviser that offers customers a discretionary investment service. This means it builds and manages an investment portfolio on your behalf, with a focus on long-term investing. It provides pensions, stocks and shares ISAs, as well as general investment accounts.
Unlike other investment managers, Moneyfarm primarily invests in exchange-traded funds (ETFs), which can include equities, bonds and commodities from the UK, US and European markets.
How does Moneyfarm work?
Once you sign up with Moneyfarm, you’ll need to complete a questionnaire to determine your investment goals and appetite for risk. Moneyfarm’s algorithm will then match you to one of seven investor profiles and build a portfolio based on your needs. The seven profiles are split based on the level of risk, with 1 representing the lowest level of risk and 7 representing the highest.
Once your portfolio has been set up, you can add funds to your account via your bank or online. You’ll need to invest a minimum of £500, with a maximum investment of £2 million.
Moneyfarm then actively manages your portfolio and will rebalance your investments to better track with your investment goals and risk. The performance of your Moneyfarm portfolio, and your returns, will differ based on which profile you are matched to.
You can manage your investment performance online or by using the Moneyfarm app and can withdraw your money in five working days.
What products does Moneyfarm offer?
Pensions. The Moneyfarm pension is a self-invested personal pension (SIPP) that is managed by the Moneyfarm investment team. You will be matched to one of Moneyfarm’s seven portfolio profiles, and your portfolio will then be rebalanced automatically over time. You can also transfer an existing pension into a Moneyfarm account, as well as access a pension drawdown service.
Stocks and shares ISA. The Moneyfarm ISA lets you invest up to £20,000 per year in a portfolio, and any profits will not be subject to capital gains or income tax. Like with pensions, Moneyfarm matches you to an existing profile and then manages your portfolio on your behalf.
General investment account. If you’re not looking for a pension or ISA, you can open a regular investment account. You’ll also be matched to one of Moneyfarm’s investing profiles based on your goals and appetite for risk.
How does the Moneyfarm ISA work?
The Moneyfarm ISA is a stocks and shares individual savings account that lets you invest up to £20,000 per year into a Moneyfarm portfolio. The benefit of an ISA over a regular investment account is that your profits are exempt from capital gains and income tax, regardless of your regular income or tax rate.
A Moneyfarm ISA differs slightly from other ISAs in that you are not responsible for selecting the investments in your account. Instead, Moneyfarm’s investment advisers fully manage your portfolio, and rebalance your investments based on performance and your risk appetite.
Moneyfarm fees and charges
You’ll be charged an annual management fee that varies based on the size of your investment, as follows:
|Investment amount||Management fee|
|£0 – £20,000||0.70%|
|£20,001 – £100,000||0.60%|
|£100,001 – £500,000||0.50%|
|£500,001 – £2 million||0.40%|
The following fees will also be charged:
- Underlying fund fee. 0.20%
- Market spread. Up to 0.09%.
There are no set-up or subscription fees, as well as no trading commissions or fees. You’ll also be free to withdraw your investment at any time, with no added charge.
Moneyfarm offers seven investment portfolios, each offering a differing level of risk, with 1 being the lowest risk and 7 being the highest. The make-up of each portfolio will therefore differ, and so will the likely performance over time.
Past performance is not indicative of future results, and your potential returns will vary based on the profile portfolio you select, as well as the size of your investment.
It is also worth keeping in mind that a higher portfolio risk level doesn’t guarantee a higher return, and you may find that the performance of a specific portfolio varies dramatically over time.
Moneyfarm portfolio performance over time
The table below outlines the simulated past performance of each Moneyfarm portfolio between 1 January 2016 and 13 October 2019, with portfolio 1 representing the lowest level of risk and 7 representing the highest level of risk. These figures do not include the Moneyfarm management fee which would normally be deducted from your portfolio.
|1||10.9% (+2.8% annualised return)|
|2||18.3% (+4.5% annualised return)|
|3||29.7% (+7.1% annualised return)|
|4||31.4% (+7.5% annualised return)|
|5||34.9% (+8.2% annualised return)|
|6||38.5% (+9.0% annualised return)|
|7||50.1%* (+11.3% annualised return)|
*This portfolio has only been offered to customers since 16 May 2019, but the return has been simulated from 1 January 2016.
Pros and cons of Moneyfarm
- Low fees
- Matches you to one of seven profiles based on risk
- Offers pensions and ISAs
- Quick sign-up
- Can cancel at any time
- Your capital is at risk
- You do not choose your investments
- Investments usually limited to ETFs
- Performance may vary depending on profile
Is Moneyfarm safe?
Moneyfarm is authorised and regulated by the FCA and uses encrypted connection from Sectigo to protect your personal data. It is also covered by the FSCS, which means your investment will be covered up to £85,000 if the company goes bust.
As with any form of investing, there is no guarantee of returns, and the value of your investment can rise and fall over time.
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