This week has seen the launch of what I think is a very interesting addition to the financial advice scene. US giants Vanguard launched a new digital advice service - worth a look for those aged 30-early 50s, with straightforward needs and a desire to let someone else do the heavy-lifting, reassure them that they are not being a wally, and manage their money in an efficient low-cost way.
Including administration, investment and advice, the service costs just 0.79% a year. This reminds me of finding a realistic decent quality leather ‘Prada’ handbag in Bangkok back in 2004 for $50! (That analogy may not be enjoyed by the more sober Vanguard fraternity so forgive me fellows. I meant it entirely positively. I got a well-made bag which lasted for years and made me look flash too. For fifty bucks. Happy Holly.)
Let’s also acknowledge the limitations. It’s only for those with £50,000 big ones invested on the Vanguard platform. If you’ve opened an ISA anywhere else this year they won’t play with you till you’ve transferred it to them. They won’t actively encourage actual human conversation if you have less than £100,000. It’s not for those in drawdown or at retirement. And you can’t go off-piste and broaden the scope to more complex stuff like rental properties, CGT, company pensions, trusts and blah.
But let’s get back on the Positive Piste. This costs just 0.79% a year all-in! My friends, that is pretty mega. I’ve had a demo and there is some smart tech powering this. You get a fully personalised combination of investments, managed, tweaked and optimised for maximum tax efficiency – down to the point of making sure the right investments are split between the right mix of ISA and pension tax wrappers. As an aside, I’ve had dealings in the past with one of the advisers they have hired to work with customers and know she is the sort of person who goes the extra mile to help people (hello Zoe), which all bodes well. It’s a very compelling offer for many.
Compared to this, the mahogany Wealth Managers brigade cost nearer 2.2% - 2.5% a year all-in. Of course, the full service wealth managers will (or should) provide a fuller and more personalised service which some readers will want and /or need. Catering for more complex scenarios and the minutiae of retirement. I have no doubt that some very smart people in this camp earn every penny and deliver amazing value. I also know from your emails that too many of you pay vast sums of money and get little more than a bog standard portfolio and a marginally dull monthly email from the Grand Poobah. Vanguard has set the cat amongst some pretty chubby pigeons. Clever kitty.
Our pilot Boring Money Advice is helping us to form a clearer picture of what people want from advice. The most commonly used filter on our Find An Adviser directory is Fixed Fee Adviser. Either paying less, or paying on an ad hoc basis for needs-based advice is what many people want, but struggle to find. The industry is slowly responding and digital advice is a part of this.
Despite the desire to pay less, general suspicion and thirst for more choice, there’s something a bit odd going on. People are reluctant to take financial advice from a computer.
Even though many of these digital advice models have lots of nice humans behind the scenes, taking calls, advising and offering that human touch too, there’s an innate mistrust of the concept of digital advice today. I think adoption is slower than it should logically be.
Back in the day we met an adviser face to face. Had a posh cappuccino. Chit chat. Used a computer a bit to fill out and complete a fact find. And then the nice human would send us a report and talk us through the plan. Quite often that nice human would pick our investments and blend them for us on a bespoke basis. So the computer did the admin and the human did the clever stuff. Hmmm. In hindsight, this was all a bit too random but it made us feel special.
Fast forward to 2021 and this is being reversed. We chat to a nice human on Zoom or the phone upfront to get comfort that their organisation is not dodgy and they have our best interests at heart. And then we put our info into a computer. And the computer does all the ‘clever’ stuff. So the human reassures. And the computer thinks.
Despite our initial hesitation, the evolution of these digital advice models is fantastic progress, opening up financial advice to more people, and offering lower-cost alternatives to many. It’s not just Vanguard. There is a growing range of solutions from the likes of OpenMoney (aimed at younger folk with less money), to robust digital retirement advice from the likes of Standard Life to posh digital-yet-bespoke-and-a-bit-human-y advice from firms like Netwealth. This table will show you some of the digital options available and indicate any minimums and who they might suit.
If you’re interested to see what your advice options are, have a gander at Boring Money Advice – our 1 minute quiz will tell you what flavour of advice we think best suits you. And then show you a range of products, providers or good ole humans who we think might be able to help.
In other news. Next week is a big week for markets as the US tech giants report results. Tesla, Apple, Amazon and Alphabet. Apple’s share price has doubled over the last 12 months. Amazon’s increased 440% over the last 5 years. Wowzers. If you are a trader and like dabbling at times like this, then you might be interested to learn that Interactive Investor is running a five-day trading fee-free offer for US shares to new and existing customers from Monday 26 April.
That’s it for this week, folks. Tonight I start my rowing course which I signed up to in a moment of boredom back in lockdown. Sign. When I should be falling into a gin and tonic, I will probably be falling into a smelly river :0) #prayforme
P.S. As more readers write to us, sharing experiences of dealing with financial firms, or looking for solutions, we plan to publish more reader content moving forward. If you’ve looked for a good adviser, or moved platform, or investigated the best place for a drawdown pension, would you write an article for our site? As much as we do our research, we can’t replicate your experiences and I know they would be super helpful to many who have similar questions. Please contact Caoilainn if you’d be willing to contribute a piece for us?