💌 Trusting a robot to manage your money 👾 👯

This week on Vestpod: An introduction to fintech and automation, meet the robo-advisors managing your investments and a list of useful apps to help you with personal finance.
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We are not certified financial advisers! This newsletter is for information and educational purposes only!
I never cut class. I loved getting A’s, I liked being smart. I liked being on time. I thought being smart is cooler than anything in the world.” Michelle Obama
Personal finance in the age of automation
Do you feel like you’re increasingly bombarded with tech-y, futuristic jargon, but have no real idea what any of it actually means in practice? While we can’t give you a complete summary of all the latest developments in fintech (that’s financial tech for those of you who’ve been living under a rock), because you’d be stuck with us ‘til morning, what we can offer is a low-down on handy tools that can make your financial life much easier and more streamlined. But first, a little intro to the world of automation.

Emerging technologies are steadily and ruthlessly disrupting the financial services; navigating this disruption can be tough for the legacy players (eg. the big banks), but the good news is that the customers - that’s you - benefit from much of the changes. Millennials have been credited for the rapid reshaping of the industry - as the largest and most technologically adept generation in history, the generation proved that things that were once deemed necessary are now outdated or inefficient. Fintech startups have responded to the way millennials manage their money and their attitudes to traditional financial services (according to Neopay, 50% don’t trust their high-street bank). Although millennials were indeed the primary driving force for these changes, they’re not the only ones profiting from the innovation: according to a study by Spectrem Group, the average robo-advisor user is 48 years old.
  • What’s the deal with automation?
In today’s world, a large portion of judgments and decisions are made by smart machines, and traditional investment firms haven’t evaded this trend. Recommendations usually made by financial planners and brokers—advising what financial assets a client should invest in— are now often made by computers, providing a service known by the somewhat Terminator-esque term “robo-advisors.”

Deloitte reports that "automated financial advisors can offer unbiased, data-based advice, but humans, often less than rational in their actions, require some behavioural science interventions to ensure they make the best use of it.”  In other words, robo-advisors provide basic investment advice, like matching portfolios to risk preferences and asset allocation. Check out this article on effecting behaviour change in a world of automated financial advisers.

Need a better idea of how popular robo-advisors are? Get this: BI Intelligence, Business Insider's premium research service, forecasts that robo-advisors will manage approximately 10% of all global assets under management by 2020. This would equate to approximately $8 trillion. So, why is the service so in-demand? It’s actually quite simple - many consumers find financial management stressful and time consuming. The ability to automate routine (or, some might say, mundane) financial tasks helps ease unnecessary stress, and who doesn’t want a hassle-free financial life?
  • Is robo-investing for you?
If you’re considering using a robo-advisor, you’ll be heartened to know that you’re in good company: millennials, retirees and high-net worth individuals all use the popular automated investment service. Deloitte points out that the typical mentalities of a re-wired investor (someone who is more likely to use the service) are: keen to stay in control, have a DIY attitude, skeptical of authority and very much all about ‘anytime, anywhere’.  
  • Keep the drawbacks in mind
It wouldn’t be fair to praise a service without also highlighting it’s drawbacks, so here’s a couple of things you have to keep in mind: a major issue with tech-driven financial advice is that it relies on a very small amount of information provided by the client. Everyone’s risk profile is different and constantly changing due to various factors - from income fluctuations to getting married and having children - which simply can’t be boiled down to a couple of short answers you provide upon signing up to a robo-advisor. Robo-advisors thus lack the ability to directly communicate with their clients and adapt to their changing circumstances, which can take a toll on your investments. Because of this, critics say that robo-advisors are overly simplistic and even a bit gimmicky.
Practical fintech: are you ready to go digital?
Personal finance apps are all the rage, and for good reason: according to statistics, people waste up to 30% of their incomes simply because they do not control them. We’re living in an age of technology, so why not use your iPhone as a personal piggy bank come financial advisor and planner? Here’s a round-up of the most in-demand apps that will help ease your life.

Meet the new breed of digital challenger banks:
  • Atom - Durham-based Atom was the UK’s first app-only bank and has been popular with savers thanks to its market-leading deals - it offers the best rates on fixed-rate bonds. Atom hopes to launch a full range of banking products this year, including current accounts, debit cards and instant access savings, all of which will be managed through the app.
  • Monzo - a mobile-only bank that allows you to track your purchases in real time, create budgets, and freeze your card temporarily if you misplace it. It has a restricted licence, which means that it can test out products while it seeks to prove to regulators that it can operate as a fully functioning bank.
  • Tandem - set to launch its app in June, Tandem will allow customers to link their existing accounts to the app, which will then check your finances for better products across the market including credit cards, savings and energy.
  • Starling - similar to Monzo, the app also gives customers real-time notifications on where their money is going, which helps people manage their money better. It also offers other handy functions including - if you temporarily misplace your card but think you know where it is, you can turn it off until you find it again.
We keep talking about robo-advisors (we’ve written about them on Vestpod previously), but what are the best platforms to try? Here are some popular robo-advisors for you to check out:
  • Nutmeg - one of the most recognisable names in the UK due to its early dominance in the market, Nutmeg offers pensions and ISA’s catered to your investment goals.  
  • Scalable Capital - centres their model on diversifying assets among all the major categories including equities, bonds, commodities, real estate, and cash.
  • Moneyfarm - uses low-cost ETFs to invest your funds. It manages your stock market/ bond investments for you while cutting out the transaction fees associated with investing.
  • Wealthify - popular among younger users, Wealthify encourages clients to invest with very small amounts of money.
  • True Potential - relatively new to the market, True Potential offers clients an array of services to choose from including financial and investment advice as well as the opportunity to manage self-directed investments.
  • PensionBee - combines all your old pensions into one new online plan.
A handy tool for automated savings:
  • Moneybox - encourages millennials to invest by putting their ‘spare change’ into a stocks and shares ISA, allowing users to invest as little as £1.
And one to help you set budgets - and stick to them:
  • Pariti - this app reads your bank account data and calculates your weekly spending, which allows it to forecast when you’re likely to go in the red.

Have you used any apps for personal finance management? What do you look for in a money management app? Do you feel like there’s a gap in the market? How important do you think personal interaction is when it comes to personal finance?

Last Thursday, the incredible Paola Garbini invited us to speak at a NOI Club event, which took place at Escape the City and involved a fantastic congregation of inspiring women. We discussed an array of topics; from personal experiences to female leadership and inclusion. We loved seeing so many passionate, intelligent and vibrant women in one place! Thank you all for attending and thank you to NOI Club for having us.

Thanks for being with us! Until next week.

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We are not certified financial advisers! The articles and information made available on Vestpod are provided for information and educational purposes only and do not constitute financial advice. You are advised to consult with an independent financial advisor for advice on your specific circumstances. Read our Disclaimer  here.
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