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Ian McKenna: The robo-adviser that lives up to the hype

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A recent study by Accenture of more than 3,000 UK consumers found 74 per cent would now be prepared to use a robo-type service to choose investments. One in four people saw the impartiality of an automated solution as a key benefit. Noticeably, this increased to nearly one in three (32 per cent) for people over 65.

This news makes the launch of Munnypot seem perfectly timed. Set up by Simon Redgrove and Andrew Fay (who sold Cavanagh Group to Close Brothers for £26.2m in May 2011 before leaving mid-2014) Munnypot offers a full advice service with a personal recommendation and suitability report using chat bot technology.

The objective is to provide a jargon-free proposition that actually talks to clients in ways they can easily understand and delivers a solution that makes sense (that is,  the cost of the advice does not undermine the investment returns).

Users interact with the software as if they are having a conversation. Many of the questions it asks typically require yes or no answers, although some are more complex, such as those capturing the level of existing savings. Further questions are generated based on responses received.

Munnypot’s fees are very low and very transparent. The website includes a simple fee calculator, which allows users to enter the initial investment and/or monthly contribution (minimums being £25 per month or £250 as a single payment) before it tells them exactly what to expect to pay.

The platform fee is just 0.11 per cent, investment charges vary from 0.15 per cent to 0.22 per cent and there is a one off advice fee to set up of between £5 and £500 (the latter being the maximum fee for all investments of £100,000 and above). There are no more charges, meaning users can withdraw as much or as little as they want at any time.

What’s on offer?

Space will not allow me to cover all the features I really like but here are some of the highlights.

There is a great play area that lets the consumer test the system without having to give any personal information. The graphics are really clear, showing the user’s projected pots based on different growth assumptions. They are coloured orange if they fall short of the goal, and blue when they are projected to hit it.

The risk descriptions of “pessimistic”, “realistic” and “optimistic” are exactly the sort of plain English the FCA has been seeking to encourage for a long time. Users do not have to put in any significant personal information until they are totally happy with the plan. Clear checks are made to ensure investors have sufficient emergency money before they are committed to long-term savings, which have a minimum limit of five years.

This system really does what it says on the tin – or should I say the pot? It shows investors that saving does not have to be complicated. Perhaps all financial advice systems will be this user-friendly one day.

Munnypot is already live as a direct-to-consumer proposition and the firm is developing relationships with affinity groups and third party organisations whose members would find it helpful.

It is also considering whether it will white-label the service to other advice firms. This could be extremely valuable in the workplace pension arena, helping millions of auto-enrolled consumers who might want to complement their contributions with other savings.

The technology behind the site was provided by three Dutch software suppliers: Ortec Finance delivered the risk profiling technology; Virtual Affairs built the user interface and front-end design;  and Five Degrees provided the CRM component.

Munnypot is a highly innovative solution that brings a fresh approach to the challenge of delivering low cost, affordable advice to millions of consumers. It might just have caught the mood of the time brilliantly.

Ian McKenna is director of the Finance & Technology Research Centre

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Have just had a couple of plays using fairly common simple scenarios and although its definitely user friendly, I think it sums up for me the shortfalls & limitations of this kind of service.
    I wanted to save money for my children (but I didn’t want to lose control) – it went down the Junior ISA route!! Oops
    I also wanted to save £100k for my big (retirement) plan – it went straight to an ISA. No mention of pensions, which may (or may not!) have been more suitable. (Its only when you go to FAQs that it says it doesn’t cover pensions – would the sort of client who wants to use this know what the implications of that are, even if they did go looking for the info?)
    I definitely think this sort of simple and quick function has its place, as clearly not everyone can afford to pay for full regulated advice, but I think a far better solution (for the client) would be to deregulate advice where the advice fees earned are below say £300/£500 – I just think a professional human will do a better job in a two hour conversation/meeting (with no recourse or need to document beyond a recording) than a robot could achieve.

  2. Ian. I’m a little confused by the costs you state. For £100k it says the monthly fee is £64.88 or £778 per year. Inexpensive but higher than you quote. No mention is made that these fees increase as your holding value goes up (well, not clearly). My DFM would do this for 0.8% with no dealing charges so about the same “headline” cost.
    Then we have the pessimistic, realistic and optimistic projections (I agree they are nice descriptions). My £100k (for 10 years) on the optimistic projection is £237,690! I’m unsure if this takes into account inflation. There is no “probability” stated anywhere i.e you have an 85% chance of achieving your goals. Nor is it apparent that any form of sequential loss or Monte Carlo calculations have entered into the calculation.
    I don’t want to be totally negative – the interface is easy to use, the use of trackers keeps the cost down and I think the whole thing will work for the target market. All software improves over time and I’m sure that we will see more and more sophistication in such applications. I think the real way forward is some form of robo/adviser mix, where advice can be made available at a much reduced cost – a sort of semi automatic process! As you are aware, we are working towards this end!

  3. MunnyPot appears to simply stick your cash into a single Vanguard LifeStrategy fund, and then charge some extra money for doing this.

    See here for more details:
    http://the7circles.uk/robo-advisor-roundup-munnypot-nutmeg-betterment/

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