Robo-advisor Moneyfarm is lowering the minimum investment for new accounts. Customers can now start investing with just £500 rather than the previous £1,500.
The move comes as the investment platform tries to make its investment services open to more customers operating at lower levels. So will this make a big difference?
How does the minimum investment compare to other robo-advisors?
Dropping the minimum investment by £1,000 is a major step but it’s still far above Wealthify which allows you to invest from just £1. Nutmeg, meanwhile, allows you to start investing from £100 in their Lifetime ISA and Junior ISA accounts. Hargreaves Lansdown allows you to open a funds and shares account for £1, with the minimum lump sum you can invest being £100. It is more in line with its direct competitors, but is still relatively high.
Why would Moneyfarm reduce its minimum investment?
Moneyfarm’s decision comes at a time of growing competition and changing customer profiles. The internet has opened up investments to more people. This class of investor is looking to operate on smaller levels and will not necessarily be looking to start off by investing more than £1,000. By bringing themselves down to £500, they attract a class of investor who are still looking to put enough money on the line to make a significant return, but whose capital is still limited.
How has Moneyfarm performed over 2020 and 2021 so far?
Revenue has been growing steadily for Moneyfarm over the past few years. However, profitability remains elusive. Last year it hit £1bn assets under management. Revenues rose from £1.61 million in 2018 to £2.72 million in 2019. Gross inflows were up 75% from January to June 2020 compared to the same period last year.
This performance is encouraging given the volatile investment market, and shows the enthusiasm for its product. However, it still missed its goal of profitability losing £13. Since 2016 the group’s combined losses amount to £47 million. Even so backers continue to pump money into the business.
Tom Cropper has been writing for us since 2015. Tom is a financial journalist and his work has appeared in titles such as the Guardian, Euromoney and many others.