Two members of the Rothschild family* have backed a new robo-advice platform that gives ordinary investors more control over where their money goes. The new platform is called Exo Investing and I think it's well worth considering for many investors
What is roboadvice?
If you don't know what 'robo-advice' means, it refers to digital investment platforms where the investment decisions are taken for you. The best known platforms are probably Nutmeg and Wealthify. (Nutmeg was the pioneer in this space and launched in 2012. )
With a robo, you start the process by filling in an online questionnaire about your finances, attitudes to risk, and investment goals. Then once you've paid in some cash, the site will invest that cash in a portfolio that's designed to fit with your profile, as ascertained from the questionnaire.
Most, if not all, robo sites use ETFs as the building blocks for their investment portfolios. That's because ETFs tend to be cheap and offer a wide range of investment opportunities. Robo-advice sites are designed for people who aren't that interested in investing and enable those investors to have a bespoke investment portfolio at relatively low cost.
Slow start
When Nutmeg launched six years, I expected the concept to take off pretty quickly. But, to my surprise, the whole sector is still pretty small - late last year Nutmeg only had about £1 billion under management. I'm not sure why that's been the case. Perhaps the different sites haven't been able to spend enough money on marketing. Or perhaps the concept is too complicated to understand easily. Or maybe there's an issue of trust. Hard to know.
Cost is another possible explanation. Robo platforms are certainly cheaper than a traditional stockbroker or wealth manager. But if you want to invest really cheaply, the best option is to pick a portfolio of cheap ETFs yourself and manage them on a low cost fund supermarket such as AJ Bell or Cavendish Online.
But what about Exo?
Exo Investing launched in May this year and it's different from its rivals in two ways. Firstly, the site claims that its investment process is more sophisticated than its rivals. The process uses data supplied by a Spanish company called ETS Asset Management Factory, and the data goes back to the late 80s. The data is analysed using AI and Exo says that analysis should enable Exo to deliver better investment performance than its rivals. We'll have to see whether that proves to be true.
Exo also says that it's providing truly bespoke portfolios for all its customers. The site isn't just using a few 'off the peg' portfolios. Every investor's portfolio is continuously reviewed using AI and can be rebalanced as often as once a day if necessary.
What's more, Exo allows the investor to have more input into the investment process. While most robo platforms just concentrate on your circumstances and your attitude to risk, Exo also asks if you have any preferences when it comes to asset classes (bonds or shares etc), regions, and sectors.
Now I suspect that many investors won't really want that extra input, and it may not boost performance at all. But it might appeal to some folk and it certainly intrigues me.
The investment process
Take a look and see what happened when I began the investment process on Exo.
First, I filled out a fairly typical robo questionnaire.
I said that my investment horizon was longer than 10 years and that I've invested in shares, funds and derivatives in the last five years. I said how much money I've got (I'm not going to reveal that here) and said that I'd be comfortable with a loss of 15% along the way. Exo said these answers meant I had a risk profile of 8 out of 10 which felt about right to me.
Then I moved onto the interesting bit - the extra questions which I don't think are asked by any other robo platform. Exo calls this the 'Investment Focus' section.
I said that I was happy to invest in bonds and had no preference between the different fixed income sectors. When it came to equities, I expressed a preference for small caps and value. My preferred regions for equities were UK, Europe and Global, and I also gave technology the thumbs up. As for alternatives, I was positive on gold, private equity and real estate.
Exo then used all that information to create a portfolio for me. To be clear, my portfolio isn't exclusively made up of assets fitting my 'investment focus' preferences. Rather, Exo built a portfolio that complies with my attitude to risk and then slants that portfolio towards the areas which I've highlighted in the 'Investment Focus' section. But it's only a slant. For example, the portfolio still includes some emerging market shares even though I didn't highlight that region in my answers.
So here's how my portfolio looks:
Asset class breakdown
Asset class% of portfolioStocks54.54Bonds33.93Alternative assets11.52
Geographic split
Country or region% of portfolioUK44.2Global20.4US15.9Europe12.7Emerging markets6.8
Main ETFs
ETF% of portfolioiShares Core FTSE 10014.1%Pimco Sterling Short maturity source13.1%iShares MSCI Europe Ex UK12.7%DB X-trackers S&P 50010.9%iShares Core Corporate Bond9.3%iShares Core UK Gilts7.6%DB X-trackers MSCI China6.8%Other ETFs (8 in total including a tech ETF)25.2%
It's an interesting mix although I was a little surprised that as much as a third of the portfolio was allocated to bonds. Bonds are pricey at the moment which is why I've largely avoided them in my own self-managed portfolio.
Charges
If your portfolio is worth less than £100,000, you'll pay an annual charge of 0.75%. If your portfolio is larger than £100,000, the annual charge is 0.5%. You also pay the fees levied by the ETF providers. However, you don't pay any trading fees as your portfolio is rebalanced. The minimum investment size is £10,000. Some robos have smaller minimums - Nutmeg's is £500 although you must also invest £100 a month on top of that.
I've invested
As I said earlier, Exo's platform intrigues me. I especially like the greater input that's offered to the investor when it comes to asset classes, sectors etc. And maybe I shouldn't be quite so down on bonds.
So even though I can invest more cheaply running my own portfolio, I've decided to put £10,000 in an account on Exo while continuing with my own larger portfolio.
It'll be fascinating to see how the portfolio develops and how much rebalancing happens in the end.
The two members of the Rothschild family are Benjamin Rothschild, chairman of Edmond de Rothschild Group, and his wife Ariane.
