Goldman Sachs And The Rise Of Robo-Advice
One of the recurring theme in this News section is the rise if the robots in the world of financial advice. The latest snippet come from Goldman Sachs, whose relaunch of its savings account, Marcus, recently featured here (a relatively attractive rate for a saving accont of 0.5 per cent AER compares to today’s newly released retail price inflation figure of 0.7 per cent).
Goldman Sachs is planning on adding a new automated investment feature to its Marcus accounts currently offered here in the UK.
The automated feature, which is already available to the bank’s American customers, will give users a tailored portfolio of stock and bond ETFs, which will be dependent on the customer’s risk level and timeline.
Marcus will handle the day-to-day handling of the portfolio, monitoring it daily and reworking the account to keep it on track with the individual customer’s goals.
An account can be opened with $1,000 in the US and is charged an annual fee of 0.35 per cent, although it’s not known how much UK customers will need to open an account with the American bank’s fintech arm.
Unlike other popular trading and investment apps, Marcus’ investment product will not let users buy and sell individual stocks, rather they will be able to invest in diversified portfolios.
The news of the new investment-friendly account comes just a week after Marcus reopened its virtual doors to UK savers after it stopped signing up new customers in June 2020 following a surge in demand.
Historical Performance And IFISA Process Guide
- Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee).
That figure is the result of over £20 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
- Money&Co. has been lending for over 5 years and has only had two bad debts so far, representing a bad debt rate of 0.03 per cent per annum.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
- Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
- Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
- Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.
The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.