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Want financial advice? Ask a robo-adviser

Amid the confusion that has bedevilled the first months of pensions freedom, one thing has been clear: some investors do not want to pay for advice. Savers have reacted with anger when told that, unless they employ a financial adviser, they cannot invest their pension as planned. So much so, that insurers have felt bold enough to demand that the regulator drop the requirement for savers to take advice if they have guaranteed annuity rates linked to their pensions.

Want financial advice Ask a robo-adviser

They’re not the only ones turned off by conventional financial advice, or, in some cases, turned away, as half of financial advisers impose account minimums of at least £50,000. Younger investors often don’t have enough money to access traditional advice. Even if they can find someone to accept them, the fees that advisers charge — an initial review typically costs £500, says the adviser search website unbiased.co.uk — don’t look cost-effective on smaller sums.

For some savers, this isn’t a problem but many, faced by the prospect of managing their money alone, feel out of their depth. This has led to the rise of the robo-adviser, online automated guidance services for a lower fee.

A growing presence in the US, the robo-advice model has been slower to catch on in Britain. Recently, some innovative web-based services aimed at helping investors to make financial choices have emerged. Not all of them are true robot advisers, where you outline your goals and an algorithm pumps out a tailored plan. Some still rely on the input of human specialists to determine the best course of action.

Pensions

For savers who don’t want to buy an annuity, don’t feel comfortable managing their pension in retirement and don’t want to employ an adviser, Standard Life has set up a ready-made drawdown service. It has been designed in collaboration with the New-York based True Office.

The process, called Standard Life Active Retirement, can be operated entirely online, however, for an fee you can talk to a human being if you get stuck. The only decision you have to make is to how you want to withdraw you money and how much. Your money is then split between up to three pots to give a mix of lower risk and growth investments, with the underlying funds selected by Standard Life.

Charges vary depending on how your pension is divided between the three pots, and the size of your portfolio, varying between 0.71 per cent and 1.53 per cent. You can change your mind if you decide you need to make a large withdrawal.

Jenny Holt, of Standard Life, says: “There are no charges for changing the income levels.”

Investments

Automated services aimed at the general investor are more common. The best known is Nutmeg, though its founder and chief executive Nick Hungerford, right, isn’t keen on the robo-advice label, pointing out that investment experts, not machines, decide where your money is invested.

Once you are signed up you say what you are saving for, how long you plan to invest, how much you want to contribute and what level of risk you are willing to take and it creates a portfolio of funds that give you exposure to various markets. Fees vary between 1 per cent and 0.3 per cent. On top of this you pay fund costs, though, because Nutmeg principally uses low-cost exchange traded funds, the average charge is 0.19 per cent.

Wealth Horizon, works in a similar way. You answer some online questions and it recommends how your money should be invested. What you are signing up for is a discretionary management service, giving Wealth Horizon the right to buy and sell investments on your behalf as it sees fit. As with Nutmeg, it says you can get started in just ten minutes, and investments will be largely passive to keep costs down.

There is an initial fee of 0.25 per cent plus an ongoing charge of 0.75 per cent of your investment and fund charges vary between 0.2 per cent and 0.3 per cent. The minimum investment is ÂŁ1,000 or ÂŁ100 monthly.

Chris Williams, of Wealth Horizon, says: “Customers who visit our site are taken through a process to explore their individual circumstances, capacity to invest and appetite for risk. Following this, we produce a 20-page tailored investment proposal which outlines an investment strategy that’s right for them.”

However, customers can also speak to an adviser at any time, he adds.

Money on Toast uses algorithms that draw on the expertise of a team of investment analysts to provide advice on pensions and investments. It is free to use until you invest, after which you pay an annual 1 per cent fee plus fund fees on top averaging 0.49 per cent. The minimum investment is a ÂŁ1,000 lump sum or ÂŁ100 a month.

Finally, the asset manager Fidelity has a quick questionnaire to help you decide your level of risk and will then point you in the direction of one of its Pathfinder range of funds.

Amid the confusion that has bedevilled the first months of pensions freedom, one thing has been clear: some investors do not want to pay for advice. Savers have reacted with anger when told that, unless they employ a financial adviser, they cannot invest their pension as planned. So much so, that insurers have felt bold enough to demand that the regulator drop the requirement for savers to take advice if they have guaranteed annuity rates linked to their pensions.

They’re not the only ones turned off by conventional financial advice, or, in some cases, turned away, as half of financial advisers impose account minimums of at least £50,000. Younger investors often don’t have enough money to access traditional advice. Even if they can find someone to accept them, the fees that advisers charge — an initial review typically costs £500, says the adviser search website unbiased.co.uk — don’t look cost-effective on smaller sums.

For some savers, this isn’t a problem but many, faced by the prospect of managing their money alone, feel out of their depth. This has led to the rise of the robo-adviser, online automated guidance services for a lower fee.

A growing presence in the US, the robo-advice model has been slower to catch on in Britain. Recently, some innovative web-based services aimed at helping investors to make financial choices have emerged. Not all of them are true robot advisers, where you outline your goals and an algorithm pumps out a tailored plan. Some still rely on the input of human specialists to determine the best course of action.

Pensions

For savers who don’t want to buy an annuity, don’t feel comfortable managing their pension in retirement and don’t want to employ an adviser, Standard Life has set up a ready-made drawdown service. It has been designed in collaboration with the New-York based True Office.

The process, called Standard Life Active Retirement, can be operated entirely online, however, for an fee you can talk to a human being if you get stuck. The only decision you have to make is to how you want to withdraw you money and how much. Your money is then split between up to three pots to give a mix of lower risk and growth investments, with the underlying funds selected by Standard Life.

Charges vary depending on how your pension is divided between the three pots, and the size of your portfolio, varying between 0.71 per cent and 1.53 per cent. You can change your mind if you decide you need to make a large withdrawal.

Jenny Holt, of Standard Life, says: “There are no charges for changing the income levels.”

Investments

Automated services aimed at the general investor are more common. The best known is Nutmeg, though its founder and chief executive Nick Hungerford, right, isn’t keen on the robo-advice label, pointing out that investment experts, not machines, decide where your money is invested.

Once you are signed up you say what you are saving for, how long you plan to invest, how much you want to contribute and what level of risk you are willing to take and it creates a portfolio of funds that give you exposure to various markets. Fees vary between 1 per cent and 0.3 per cent. On top of this you pay fund costs, though, because Nutmeg principally uses low-cost exchange traded funds, the average charge is 0.19 per cent.

Wealth Horizon, works in a similar way. You answer some online questions and it recommends how your money should be invested. What you are signing up for is a discretionary management service, giving Wealth Horizon the right to buy and sell investments on your behalf as it sees fit. As with Nutmeg, it says you can get started in just ten minutes, and investments will be largely passive to keep costs down.

There is an initial fee of 0.25 per cent plus an ongoing charge of 0.75 per cent of your investment and fund charges vary between 0.2 per cent and 0.3 per cent. The minimum investment is ÂŁ1,000 or ÂŁ100 monthly.

Chris Williams, of Wealth Horizon, says: “Customers who visit our site are taken through a process to explore their individual circumstances, capacity to invest and appetite for risk. Following this, we produce a 20-page tailored investment proposal which outlines an investment strategy that’s right for them.”

However, customers can also speak to an adviser at any time, he adds.

Money on Toast uses algorithms that draw on the expertise of a team of investment analysts to provide advice on pensions and investments. It is free to use until you invest, after which you pay an annual 1 per cent fee plus fund fees on top averaging 0.49 per cent. The minimum investment is a ÂŁ1,000 lump sum or ÂŁ100 a month.

Finally, the asset manager Fidelity has a quick questionnaire to help you decide your level of risk and will then point you in the direction of one of its Pathfinder range of funds.