Moneyfarm review: Including an independent analysis of portfolio performance

Anyone who wants to grow their wealth but is too nervous to make their own decisions could benefit from this sort of service. Even those who are sceptical about using algorithms can tap into the free human consultants. It’s friendly and easy to use and can provide some useful insights, especially if you are unsure which account would be best for you or would like an analysis of your external investments, including allocation and risk.

One of the advantages of this service is how simple and easy it is to use; however, this can quickly become a disadvantage when you can’t quite access the information you want or find there is a lack of interactive experiences. So you do need to be comfortable handing over the reins here. That being said, the expansion of services to share dealing is paving the way for more experienced investors, albeit with a way to go before this could be considered a comprehensive platform for all types of investors.

This is not the cheapest way to invest (if you are very cost conscious then have a look at my InvestEngine review), but this is a suitable option for beginners and those with very limited investment experience.

Moneyfarm is a robo-advisory service. So, if you are looking for a minimum-effort way of getting matched to a portfolio that is suited to your risk profile and investment goals, then this is an option.

It’s worth noting the minimum investment amount for Moneyfarm, which at £500 is higher than a lot of the platforms of this nature.

General investment account (GIA)

You can access both the managed portfolios and share investing from the GIA without limitations. It’s free to open an account and, once open, you will incur a yearly custody fee of 0.35% for share investing. This account also provides access to investment consultants.

Stocks and shares ISA

You get all the usual tax benefits by investing via the Sometimes called an investment ISA, a stocks and shares ISA is an individual savings account that allows you to invest in shares, unit trusts, investment funds, and bonds. You will not need to pay tax on any income or capital gains earned on investments within an ISAstocks and shares ISA but what makes the Moneyfarm ISA stand out from a lot of the competition is that it’s flexible.

What does this mean? Well, simply put, it means that you can deposit and withdraw your money from your ISA as many times as you like without affecting your ISA allowance for that year. Ordinarily, every deposit you make into your ISA would count towards your allowance (currently £20,000 for the 2023/24 tax year), regardless of whether you have also withdrawn from the account.

However, with a flexible ISA, each time you withdraw, that amount gets credited back to your allowance.

This isn’t an advantage for everyone, and with investments, it is always advisable to leave your money invested for a minimum of five years. However, there are circumstances where this can be a significant bonus.

Read more about ISAs

Junior stocks and shares ISA

The Junior ISAs (Individual Savings Accounts) (JISAs) are tax-free savings accounts for children under the age of 18. Only a parent can open a JISA but anyone can contribute. You can choose to save for your children through either a cash Junior ISA where you will earn interest on any cash in the account, or a stocks and shares Junior ISA where you will invest your child’s savings on their behalfJunior ISA also provides access to Moneyfarm investment options and human advisors, but it is otherwise unremarkable. You can save up to £9,000 a year into this account, which your child will then be able to access when they turn 18.

It’s a decent option, and if you held your other accounts here, I can see how the convenience of having them all under one roof would be appealing. However, I still think the Hargreaves Lansdown Junior ISA is the best stand-alone product out there.

Pension

The Moneyfarm Pension comes with all the usual tax benefits of saving into a pension product. You will have access to a range of investment options to help your money grow towards your retirement, but this is pretty normal for a A self-invested personal pension (SIPP) is a type of private pension that allows you to control the specific investments that make up your pension fundself-invested personal pension (SIPP). However, where the Moneyfarm SIPP does differ is in its access to expert guidance. This can be useful for retirement planning and knowing when to reduce your risk without sacrificing too much in potential investment gains.

While it is free to transfer your existing pensions into the Moneyfarm pension, you should first check for any exit fees your current provider may charge. There is also a free pension drawdown service when the time comes to retire. The pension calculator is one of the best I have come across, helping you define your monthly contribution amounts in order to hit your retirement targets.

The other thing to note is that it is possible for your employer to contribute to your Moneyfarm pension. You simply submit a form to register your employer, and Moneyfarm takes care of the rest.

So how does the Moneyfarm Pension fund perform when compared to industry peers? There are better performing pensions available as our independent analysis has revealed. Feel free to toggle between different cumulative years to get a picture of how historical returns stack up.

Read more about SIPPs

Portfolio performance

The most important question you should be asking is, ‘Will this platform make my money grow?’

This all comes down to the performance of the portfolios (unless you are engaging in direct share access, in which case the onus is all on you to research the best opportunities out there or check out our share tips page).

Below is a snapshot of how the portfolios have performed in the last 1-5 years when compared to similar platforms. These are interesting results, although I must take this moment to stress that you should not rely on historical performance as an indicator of future performance; however, it can give you an insight into how well the portfolio is managed.

Lowest risk portfolio for cautious investors – 5-year average 10.8%

Medium risk portfolio for confident investors looking for a balanced portfolio – 5-year average 22.8%

High-risk portfolio for adventurous investors – 5-year average 44.4%

Actively Managed
The actively managed portfolios will incur a greater cost to the investor, but in exchange, a team of investment experts will constantly monitor and adjust your investments in order to make the most of fluctuations in the marketplace and hopefully maximise your returns. This also means that your exposure to risk is kept in line with your risk appetite.

Moneyfarm invests in a diversified selection of ETFs on your behalf. It’s a great approach, especially if you have limited to no investment experience and would like experts to manage the entire process for you. However, the only way to establish whether this is a feasible option for effectively growing your money is to examine the historical returns minus the fund fees.

Fixed Allocation

This is a passive strategy, meaning your funds are left to grow in a diversified portfolio matched to your risk level. It’s a hands-off approach that will cost you less but the expectation is that you may not earn as much as you could with an actively managed portfolio.

Liquidity+

This is a new addition since the first time I reviewed this platform, so I decided to invest funds in Liquidity+ to test the process.

Liquidity+ is a low-risk way to keep up with inflation with very limited exposure to risk (just to be clear, there is still some risk involved, however small). Moneyfarm keeps this risk minimal by investing in a Mutual funds enable you to pool your money with other investors to ‘mutually’ buy stocks, bonds, and other investments. They are run by professional money managers.mutual fund that includes assets such as government bonds and commercial papers to provide a short-term option or a haven during times of market volatility. It’s a good option for scenarios like keeping tax money working hard to beat inflation while still having access to it when the taxman sends his bill. At the time of this review, Liquidity+ was offering a 5.3% gross annualised yield on savings. Take out the Moneyfarm fee of 0.3% and the fund fee of 0.10% and you are still earning 4.9%, which is decent in the current climate but won’t beat Moneybox’s cash ISA, which is offering 5.16% The annual equivalent rate (AER) is used to describe the percentage of interest you’ll receive on your savings and investments. AER accounts for compound interest whereas the gross interest rate does not. AER is also known as APY (the annual percentage yield). AER.

Share Investing

This is the latest development for Moneyfarm and feels like a step away from the robo-advisor space. It very much puts the onus on the investor to make the right decisions. There is a list of UK stocks to choose from, with more from the US and Europe in the pipeline.

There are also ETFs (exchange-traded funds) to choose from; however, these appear to be thrown in with the stocks, and can’t be separated, which feels like an odd way to present the two assets. The funds are provided by names such as Vanguard, iShares, and Fidelity.

I feel like there is a way to go until this becomes a great addition to the robo arm of the platform; however, it is early days yet for share investing and it will be interesting to see how this develops.

Socially responsible investing (ESG)

Socially responsible portfolios are available, using funds that contain assets that include companies that adhere to environmental, social, and governance principles. This is a fairly standard offering among similar platforms.

Thematic Investing

Thematic investing paves the way for investors to put their money towards long-term opportunities or trends affecting industries. This can include climate, sustainability and development.

Moneyfarm provides growth themes, which include disruptive technology, sustainability, society, and multi-trends. You will need at least £10,000 in your actively managed portfolio to add this option.

Robo-advisory services

When you open your account with Moneyfarm, you will automatically be steered towards some simple questions that are designed to match you with your perfect portfolio. Some of these may seem a little personal, but this is how Moneyfarm establishes your risk profile, financial goals, and investment knowledge. Expect questions about previous investment experience and knowledge of ETFs, your educational attainment, and reactions to market downturns.

Moneyfarm has a web trading platform and a mobile app. Both offer a clean, easy-to-navigate experience, where you can get matched to your portfolio and manage your account. There is a decent amount of information available without being overwhelming in any way.

Web platform
Expect clean, simple lines and the ability to view your portfolio breakdown and performance. You can also fund your account, invest your money, sell your investments, and conduct withdrawals from here.

The only thing that was missing for me was any obvious support outside of the FAQs; however, if you do venture into the FAQs, there is the option to call or email the investment consultants.

Mobile app
The mobile app offers the same level of functionality as the web platform, with the important distinction that you can access the highly responsive live chat from here and there are some notifications available (although notifications are generally limited to marketing materials and live chat updates). All in all, the app provided a slightly better user experience for me, although this is mainly due to the live chat.

Here’s the Achilles heel for Moneyfarm: Anyone looking for the most cost-effective, actively managed robo advisor will be running for the hills (or straight into the arms of InvestEngine) but that’s not necessarily the right option. Bear with me while I explain.

So, let’s say you have £5,000 to invest. Moneyfarm is the most expensive of the robo advisors I analysed (unless we include Moneybox in this comparison). However, let’s not forget the end game – to grow your money. So, to obtain a true picture, you need to take growth into account and see where you are left minus fees. InvestEngine is certainly the most cost-effective option in this space; however, because they are still so new to the market, we are unable to see how their portfolio performance compares. In fact, despite several efforts, they were unwilling to provide me with any data on performance. Take them out of the picture, and the main competitor here is Nutmeg. Nutmeg portfolios have done well in recent years and their 5-year annualised returns look healthier than Moneyfarm in most cases. This is worth taking into account when you make your final decision.

Below is what you can expect to pay for various-sized portfolios, divided into actively managed and passively managed, compared side by side with Moneyfarm’s main competitors in the robo advisor space.

I have provided you with the actual cost in pounds to give you a clear picture. For an overview of the percentage fees, please refer to the Moneyfarm website.

What is interesting here is that Moneyfarm is relatively expensive for actively managed portfolios but is the most cost-effective option when you look at passive portfolios. Therefore, we need to establish if the actively managed portfolio is worth the extra cost.

Below is what you can expect to pay at Moneyfarm as a percentage of your total investment:

Passive vs. actively managed – is it worth the extra cost?

Given the difference in fees between the two management styles, you would hope that the actively managed portfolio would outperform the passively managed (fixed allocation) portfolios enough to warrant the extra cost.

Sadly, the data on the fixed allocation portfolios was only available for 2023 so the research we conducted cannot be considered scientific. However, we did perform the analysis for that year assuming a £250k investment, net of fees, and found that the fixed allocation portfolios actually outperformed the actively managed portfolios for the lower risk portfolios, with the more adventurous portfolios pulling slightly ahead when actively managed.

As previously mentioned, 1 year of data cannot be considered conclusive; however, we will continue to monitor these portfolios at Investing Insiders for clarification on this subject.

In addition to the management fees, you will to take into consideration:

• Annual average investment fund fee: 0.2%
• Annual average effect of market spread: 0.10%

These charges are to be expected on any platform and therefore shouldn’t affect your decision to invest with Moneyfarm.

Please note: all published fees are correct at the time of publishing. However, we suggest checking Moneyfarm’s website for the most up-to-date figures.

For the portfolio you are matched with, there is some limited detail available. This includes:

• Asset breakdown: you can view what your portfolio is composed of and the percentage of composition; however, what’s missing is a picture of the actual assets that make up your portfolio. Some investors looking for a completely hands-off approach may find this satisfactory, however, I would certainly be more comfortable with a complete overview of my assets.
• Performance: including expected performance and past performance.

The amount of research available here is very sparse; however, this is a service for people who are looking for a completely hands-off approach and are therefore unlikely to get stuck into reams of research material.

This is a long-established platform that is constantly updating and improving its service. The recent acquisition of Profile Pensions and expansion into direct share access would suggest that the platform is financially secure.

In terms of regulation, Moneyfarm is authorised and regulated by the Financial Conduct Authority, in addition to offering cover up to the value of £85,000 from the Financial Services Compensation Scheme. This provides protection for investors should anything happen to the platform.

Account security
Again, all the appropriate measures have been taken to ensure your account is secure. Biometric ID is available on the app so you don’t have to remember passwords. This is supported with a PIN. I have no issues with safety here.

This is another area that is currently a little thin on the ground. There is a guide section that is fairly comprehensive (13 articles under ‘A Guide to Investing’ as an example) with further guides on topics that include financial markets, exchange-traded funds (ETFs), and financial planning.

There are also some helpful articles, including those relating to financial markets, investments, ISAs, pensions, behavioural economics, and financial planning.

What’s missing is any kind of interactive education. Courses, webinars, and videos are all lacking and I checked for any good content on YouTube only to draw a blank. Being a platform that is suited for beginners, I would have liked to see more in this section.

No complaints from me when it comes to customer support – I found this to be an excellent service, especially the live chat which I tested on several occasions and always got an immediate response.

It’s important to remember that Moneyfarm also offers access to human investment consultants. This is a service that sets them apart from similar platforms and I was impressed when I tested it. You can book your consultation directly via the app, selecting a date and time to suit you. You get plenty of reminders, and the consultant was extremely prompt. These sessions are designed to help you invest as efficiently as possible and, most importantly, they are completely free.

Opening and closing an account is as simple as you can hope to expect from this type of service. If you’re after the Sometimes called an investment ISA, a stocks and shares ISA is an individual savings account that allows you to invest in shares, unit trusts, investment funds, and bonds. You will not need to pay tax on any income or capital gains earned on investments within an ISAISA then have your National Insurance Number to hand.

You will be walked through a series of questions that are designed to identify your risk profile so you can be matched with a suitable portfolio. This doesn’t take long and the questions are very simple.

You will also have the option to create a preview portfolio before you commit to any investment. Moneyfarm will help ascertain how much your initial investment should be and your ongoing commitment to a monthly contribution.

Have a question about Moneyfarm that we haven’t covered? Ask it here and we will get back to you as soon as possible!

This review is the result of my first-hand experience as an account holder at Moneyfarm and in no way represents financial advice.

If you’re looking for the best robo advisor, then head to my review of all the leading robo advisors, where I dissect each one and pitch them directly against each other to establish which one is offering the best service and, most importantly, which one would have made your money grow the most in the last 5 years, taking into account portfolio performance and fees.