Moneyfarm vs Wealthify

Investing has come a long way in the last few years, and that’s largely thanks to the rise of the internet.  If you’ve taken a look at some of my recent guides to online investing, you will already know that I’ve looked at a handful of platforms out there which are starting to gain some prominence.  Naturally, I thought it would be worthwhile to consider which of the major UK online investment platforms was worth more of our time and money.

Investing has been made easier thanks to platforms such as Moneyfarm, Nutmeg, InvestEngine, Wealthyhood, and Wealthify, but each still carry their own pros and cons.  I’ve examined both services in previous match-ups, which does make this guide something of an all-star showdown.  Ultimately, though, both services have plenty to offer people who want to start investing money from home, or from the comfort of their smartphones.

I’ll take you through everything you need to know about both Moneyfarm and Wealthify, and which measures up best – if at all – as a solid online investment platform.

Moneyfarm vs Wealthify: Summary

• Depending on the package you choose, Moneyfarm will let you pay as little as 0.35% in fees each year.  Wealthify has a flat rate of 0.6%.
• Both services offer an automated investment system to an extent, though you will still have access to human expertise and support through Moneyfarm.
• Wealthify is virtually free to join and start investing in, however, with Moneyfarm, you will need at least £500 to get started.
• Both Wealthify and Moneyfarm allows you to dabble in both ISAs and pension schemes as you wish.
• Both services are protected via the FSCS, meaning that any money you put in up to £85,000 is backed.
• Both services take an approach of diversifying your finds as much as possible.
• Moneyfarm is backed by Allianz Global Investors, which should supply a modicum of confidence.
• Wealthify is backed by Aviva, which should give some confidence to seasoned investors.

Moneyfarm in Detail

What is Moneyfarm?

With £2.4 billion in assets under management and more than 90,000 clients, Moneyfarm is one of the successful platforms amongst the relatively new breed of robo-investment platforms. They started operations in 2012, but launched in the UK only in 2016. Having moved away from solely DIY trading to ready-made portfolios in 2016, the service now offers a range of products and services which are backed with expert advice and guidance.

Much like Nutmeg, Moneyfarm’s focus on robo-investing and ready-made portfolios will appeal to anyone looking for a hands-off approach.

Which type of accounts does Moneyfarm offer?

Moneyfarm offers general investment accounts, stocks and shares ISAs, JISAs, and pension accounts. You are going to need to invest at least £500 in any of these choices to get started.

What Investment Options Does Moneyfarm Offer?

Moneyfarm chooses a portfolio based on your attitude to risk. The service ascertains which portfolio management system is likely to work best for you on the back of a short questionnaire. However, to be able to get a  closer look at the options available, you will need to register and complete the introductory process.

Remember that this is a robo advisor service – in that it’s completely ‘hands-free’. Your Moneyfarm advisor is easy to adjust as you go, however, there’s no need to worry about making big portfolio decisions on your own. This can be a make-or-break feature for many investors – as, if you are comfortable with it, there are certainly some benefits to travelling the DIY route!

Moneyfarm portfolio profiles swing between bonds and stocks, with willing risk-takers likely to receive a package that’s weighted more towards the latter. These portfolios are ready-diversified, meaning you get a fresh, global pick of ETFs and funds recommended by Moneyfarm’s impressive robo experts.

While Moneyfarm’s portfolios consist of 3rd party underlying funds, they provide two tiers of service built with these funds:

1. Fixed Allocation: The fund allocation amongst the various asset classes (stocks, bonds, cash, etc.) is set at the beginning of each year and then remains fixed until the next rebalancing period. This rebalancing is done once per year. This makes it very similar to Nutmeg’s Fixed allocation funds or Vanguard’s Lifestrategy funds. Barring exceptional circumstances, Moneyfarm does not adjust or rebalance over the course of the year.
2. Actively Managed: The name is slightly misleading as the underlying funds are still index trackers, however Moneyfarm’s portfolio managers introduce their own secret sauce to actively allocate assets amongst the chosen asset classes. The portfolios are rebalanced more frequently based on their manger’s outlook on current events.

As you may imagine, the fixed allocation approach requires less work on behalf of Moneyfarm’s staff. Consequently, Moneyfarm passes this benefit on to their customers in the form of lower fees.

Is Moneyfarm good for beginners?

Moneyfarm offers a managed investment service, which means that they do all the heavy lifting for you. Your portfolio is designed based on your risk tolerance and return goals. You are not required to select individual funds or pick stocks, which makes it very easy for beginners. It takes most of the stress out of investing!

What is the Minimum You Need to Invest?

Moneyfarm’s minimum investment requirement is £500.

What are Moneyfarm’s fees?

MoneyFarm will offer you a sliding scale of fees that is refreshingly easy to understand. MoneyFarm has simplified its management pricing structure – which promises to reduce rates slightly for most customers. As with most investment service providers, you will have to be aware that you will be paying for two sets of fees:

1. Platform fees: This is what the providers like Moneyfarm or Hargreaves Lansdown charge for their services
2. Fund fees: This is the fee charged by the underlying funds in the portfolios. This fee varies based on the provider of the fund and whether it is actively managed or a passive index tracker or ETF.

Actively Managed

There are now seven main tiers of pricing that apply to the entirety of a portfolio, based on asset value within. Here’s a quick breakdown of what you can expect:

• £500 – £9,999: Pay 0.75%
• £10,000 – £19,999: Pay 0.70%
• £20,000 – £49,999: Pay 0.65%
• £50,000 – £99,999: Pay 0.60%
• £100,000 – £249,999: Pay 0.45%
• £250,000 – £499,999: Pay 0.40%
• £500,000+: Pay 0.35%

This pricing structure effectively means you can expect to pay a lower annual rate the more you choose to invest. Therefore, this sliding scale clearly benefits those who have more to save. Moneyfarm has a helpful calculator that can help you accurately determine how much you will pay.

However, do also take into account underlying fund fees (representative 0.2%) and market spread (representative up to 0.09%) on your portfolio. Effectively, these fees all ensure your portfolio remains fully managed, and that you also have access to your own investment consultant. 

Fund fees are ‘built’ into the price of running your portfolio, meaning the main cost you will see is the annual rate(s) suggested above.

Fixed Allocation

Moneyfarm offers an even lower pricing tier for accounts if you choose to go with their fixed allocation portfolios. The fees are set up in the following manner:

• £500 – £99,999: 0.45%
• £100,000 – £249,999: 0.35%
• £250,000 – £499,999: 0.30%
• £500k+ : 0.25%

Moneyfarm Fee Examples

Let’s use an example of £50,000 to see how much you’d expect to pay annually for Moneyfarm to manage your portfolio.

From the get-go, this allows for a management cost of 0.60%, which adds £300 to your total. An underlying fund fee of 0.2% (representative) adds £100, with market spread costs of 0.09% (representative) adding a further £45.

Overall, an investment of £50,000 is likely to demand fees of £445. That’s a rate of 0.89%.

That considered, let’s take advantage of Moneyfarm’s high-investment, low-fee benefits. By investing £500,000, you’d pay £3,200 (representative) – but at a rate of 0.64%.

Does Moneyfarm have an app?

Yes, Moneyfarm has an investment app. Investment via mobile apps have become an almost indispensable component of the industry now. Moneyfarm’s app is intuitive and friendly enough to appeal to most beginners and casual investors, and what’s more, you can ask the app to provide you with a starter portfolio based on your knowledge level.

Is My Money Safe With Moneyfarm?

Yes. As with all good investment services, Moneyfarm is FSCS protected. This means that, should the company fold, you will receive protection on money you have invested up to a certain point. Moneyfarm clearly states that you could receive compensation up to £85,000, for example.

Wealthify in Detail

What is Wealthify?

Wealthify is a bit of a different fish to Moneyfarm, however, it does follow a similar ideal of hands-off investing.  The Wealthify approach is to do this through a robo-investor platform, where you can get started from as little as £1.  That’s not going to travel too far unless you’re an investor genius, however, it’s worth knowing that the buy-in here is a little easier to swallow than Moneyfarm.

Wealthify is backed by scores of experts and financial gurus, and also has the solid benefit of being backed by a major financial provider.  They were adopted by Aviva in recent times.  That will have been enough to drive confidence for more experienced investors, and there’s a good chance it rubbed off well on newbies, too. 

Wealthify appeals to people because it is affordable, and because it has this strong backing.  However, is it necessarily enough to stand up against Moneyfarm, which does already have plenty going for it?

Which type of accounts does Wealthify offer?

Wealthify offers stocks & shares ISA, junior stocks & shares ISA, general investment accounts, and pensions accounts. Additionally, Wealthify also offers a savings account. However at the time of writing, the interest rate was a paltry 0.17%, so you’re like better off with someone like Chip or where the rates are significantly higher.

How Does Wealthify Actually Work?

Wealthify works on a similarly passive model to Moneyfarm and Nutmeg, in the sense that it wants to diversify the money you put in as much as possible.  It’s even more hands-off than Moneyfarm, in a way, as while there are experts involved behind the scenes, there is very much an emphasis on automating the investment process.  This could appeal to plenty of people, but at the same time, something of a human touch is generally recommended, especially when you are looking at big sums of money.

Wealthify offers a similar process to Moneyfarm when it comes to signing up.  That means you can expect to receive a series of questions which will ask you about your general investment experience, as well as where you’d like your money to go. 

Once you have entered your data, you get an output showing the sample portfolio construction. Like most services, Wealthify uses a mix of passive funds from the well known providers like Vanguard, Fidelity, Blackrock, etc.

A good feature installed into this process is an automatic block, which means that Wealthify will stop you if it believes that the system is not going to benefit you long-term.  There are some online investment services which simply let you continue, which isn’t always a great look if you’re trying to help people be responsible with their funds.

Wealthify doesn’t have anything akin to an advisor team ready to help look at your finances, however, there are always some specialists working behind the scenes to ensure that their robo-investment standards are doing exactly what they are supposed to.  Again, some form of human touch would be palatable, however, it’s easy to see the appeal in going completely hands-off.

Having said that, Wealthify does have a support team for general inquiries and assistance. They’re available via the phone, live chat, or messaging through their platform.

What Does Wealthify Charge?

Wealthify used to have a tiered fee structure, but they have moved to a flat rate structure now. Wealthify now charges a flat rate of 0.6%, regardless of the amount invested. They do highlight that there are additional investment charges – typically the costs associated with the underlying funds’ management fees and market spread. However this latter fee is standard across all platforms.

Wealthify’s fees are higher than Moneyfarm’s fees for their Fixed Allocation portfolio. On the Actively Managed offering, Wealthify is cheaper if your portfolio is less than £100,000. Beyond this, Moneyfarm is once again cheaper.

What Can Wealthify Invest In?

If you want to let Wealthify take control of your portfolio, you will need to entrust it to spread your money over a wide array of smaller, diverse pots which the system believes will be worth your while.  The Wealthify approach is, on the whole, to spread your money as far and as wide as possible. 

The actual holdings are exclusively passive funds, whether they’re ETFs or mutual funds. As stated earlier, they offer a mix of funds from providers like Vanguard, Fidelity, Blackrock, etc.

When creating your portfolio mix, Wealthify first offers two options:

1. Original: This is the typical market portfolio that would would think of which includes a mix of cash, bonds, stocks, and alternative investments.
2. Ethical: In tune with the market demand, Wealthify offers funds that have been specially selected to deliver higher scores on ESG metrics.

It appears that Wealthify lets the investor decide what their risk profile is so you have to select whether you want to be in a balanced allocation (Wealthify calls this “Confident”), growth focused (“Ambitious”), or nearly all in on equity (“Adventurous”).

In looking at their portfolio allocation, I feel that their buckets are skewed a little bit towards the conservative side. Consider for example the industry standard allocation for a balanced investor – 60% in equity and 40% in bonds. Wealthify’s equivalent plan, called Confident, has a 50-50 allocation. Similarly, the industry would have a growth investor at 80-20, whereas Wealthify’s Ambitious plan is at 70-30.

What this means is that in the long run, a Wealthify portfolio will underperform even a standard Vanguard Lifestrategy fund due to a more conservative allocation than perhaps necessary.

If your risk tolerance tends to be on the lower side, then you’re going to be fine. However for those who have a neutral or higher risk tolerance, Wealthify will most likely undershoot on expectations.

Can You Control Investments Through Wealthify?

Ultimately, you have very little to do with how your investments are handled via Wealthify.  This means you are going to need to trust the robo-advisors with a lot, which shouldn’t be too much of an issue if you are confident in their backing from Aviva, and in their summary of your profile.  If you feel that Wealthify has got a good measure of you, then there are very few reasons why you shouldn’t move forward.  However, always measure the rough with the smooth.  For beginners, the appeal of a hands-off investment service is probably going to be fairly strong.

Does Wealthify have an app?

Yes, Wealthify does have an app and it works on both iOS and Android.

Is Wealthify safe?

Yes – again, like Moneyfarm, your money is protected up to a certain amount by the FSCS.  The amount you’re protected up to is exactly the same, too.  £85,000 appears to be the standard, and this at least means you should be well-safeguarded in case anything disastrous happens to Wealthify in the short term.

Before we wrap up completely, let’s take a look back at both Moneyfarm and Wealthify, and attempt to narrow down the pros and cons which will appeal to people most likely to use their services.

Wealthify vs Moneyfarm: Pros and Cons

Wealthify Pros and Cons

Pros

• Wealthify is extremely cheap to start with.  You can put in £1 and start making money back!
• There are no account closure fees, though do be aware that other charges may apply during your time investing through the platform.
• The hands-off approach here lets you completely automate the money you spread across investments.  This could appeal to people who want to avoid having to make tough decisions!
• Wealthify benefits from the backing of a big name in the world of finance – Aviva.  This should do a lot to balance out the perceived risks of letting the system completely manage your money for you.
• There’s a useful ‘block’ which comes into play if Wealthify believes that investing, and robo-investing, aren’t going to be worth your while.  It’s a very nice touch which shows the brand is concerned about risk.
• There is a dedicated app available, which will let you check how your investments are performing on the move.
• Wealthify appears to be a good choice for anyone who may not be confident about investing.

Cons

• One of the main drawbacks of Wealthify lies in the fact that it is completely free from human expertise.  There are people working behind the scenes, but you won’t get the benefit of personal assistance or control.
• Fees at Wealthify are not competitive with Moneyfarm. The only time they’re lower is if you choose the Actively Managed option at Moneyfarm and have less than £100k.
• Wealthify’s asset allocation takes a more conservative approach than industry standard. If you are a young investor and/or have higher risk tolerance, you may end up underperforming.
• Do also be aware that Wealthify is fully automated, which means that there is even less control here than there is through Moneyfarm.

Moneyfarm Pros and Cons

• Moneyfarm offers a careful, managed ready-made portfolio system based on your unique approach to risk. 
• Historic data shows that Moneyfarm weathers volatility well, though this is no indicator for future performance.
• The website has several eBooks and helpful guides to ease you into the process.
• Moneyfarm’s fees are higher until you get to the £100,000 threshold for invested assets on the Actively Managed side. If you choose the Fixed Allocation portfolios, Moneyfarm is cheaper throughout.
• Moneyfarm has a higher minimum investment threshold £500 to get started.

Moneyfarm vs Wealthify: Verdict

Both Moneyfarm and Wealthify are similar in terms of their approach to online investing.  They both believe in a model where you should feel free to let a service or a robot make the right choices for you.  To many people, this will definitely be appealing.  To others, there may simply be too much risk on the table.  There’s only a minor difference in fees, so I wouldn’t use that as a differentiating factor.  Ultimately, too, Moneyfarm gives you a little more control – meaning that it just clinches the head to head.