A new generation of investors have been compelled to explore simpler, cheaper and more autonomous investment platforms, which are only too easy to find these days. But do digital platforms really offer the best solution for today’s young investor?
In recent months, those who felt confident enough to build and manage their own investment portfolio on a “DIY” platform are likely to have experienced some unsettling moments with the FTSE 100 down as much as 30% from highs in March (Reuters). If you chose to use a Robo-advisor the experience is unlikely to have been any more pleasant.
Bear markets (when stock markets fall in price) test the nerve of all investors, but for novice investors a falling market poses many questions; “should I sell before it falls further?”, “should I add more cash?”, “what is causing this?”, “when will it end?”. This can lead to poor decision-making. Selling out when markets have already tumbled 30% means you may miss the bounce and consolidate losses. This can have a disastrous effect on your long-term wealth.
This is where having a dedicated investment manager can come into its own. Having someone familiar with market volatility, to explain these movements and give clear advice and direction on potential changes to a portfolio, provides you with a level of reassurance not possible from Robo-advisers or DIY platforms.
It is also handy to have someone who is familiar with your individual circumstances and can help you construct a financial plan. For example, they can help you decide whether it is more advantageous to increase mortgage payments or contribute to your ISA/pension. They can help construct an active portfolio that aims to benefit from a fast-changing world rather than one that simply tracks an index.
While Robo-advisers can look optically cheap, wealth managers benefit from ‘institutional’ pricing, which means they buy active investments at more competitive prices. It may end up cheaper than using a platform to build a portfolio of funds.
So, how much value can be applied to appointing a professional to manage your financial affairs?
We believe that the relative value of our Young Professional Investment Service over and above the alternatives is significant. We combine a digital platform where you can view your investments with the benefits of having a human being at the end of the phone.
The last six months has shown that investment markets can be an unsettling place and in such an environment we ask why you wouldn’t want a professional, with all their access to market research and data, to take on that stress on your behalf and safeguard your assets for whatever your long term plans.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.