Our view: In a world of very low-interest rates WiseAlpha has made it possible for investors to generate income from high yielding corporate bonds they otherwise would not have had access to. Read more...
What is WiseAlpha?
WiseAlpha is an online investment platform that enables UK investors to invest in fractional corporate bonds. Its aim is to make bonds – which traditionally were only accessible to large institutional investors due to high minimum transaction levels (£100k+) – more accessible to private investors.
WiseAlpha was founded in 2014 and received Financial Conduct Authority (FCA) authorisation in 2016. In 2016, it also launched its online platform. Today, it has over 7,000 customers.
WiseAlpha’s key products include a corporate bond-focused investment account and a Self-Invested Personal Pension (SIPP) account. It also offers an automated investment service called ‘Robowise.’
How Does WiseAlpha Work?
WiseAlpha’s platform allows private investors to buy fractional corporate bonds. These are bonds that the company has purchased from issuers and split into smaller investments. Investors do not hold the underlying corporate bonds directly.
The minimum investment amount for each fractional bond is £100 or €100 depending on the currency of the bond. This is a small minimum investment compared to other investment providers. Hargreaves Lansdown, for example, has a minimum investment size of £1,000 for corporate bonds.
Like all investments, corporate bonds and fractional corporate bonds carry an element of risk. Most corporate bonds are rated independently by rating agencies and are assigned a credit rating based on the risk of default. The higher the rating, the less chance there is of a default.
WiseAlpha's products and services are ideal for those looking to gain exposure to corporate bonds. However, the platform is only available to investors that have significant financial experience. These include high-net-worth investors, self-certified sophisticated investors, advised investors, investment professionals, and institutional investors.
WiseAlpha Bond Investing
A corporate bond is an interest-bearing debt instrument issued by a company. Bonds pay the holder (buyer) an interest rate known as a coupon rate.
Through WiseAlpha, it’s possible to gain exposure to corporate bonds issued by well-known UK companies such as Barclays Bank, Aviva, Ocado, and John Lewis via its fractional corporate bonds. It’s also possible to gain exposure to bonds issued by international companies such as Deutsche Bank, Netflix, and Burger King. In total, there are around 130 bonds on the platform at present. Most bond prospectuses are available on the WiseAlpha platform for investors.
There are other investment platforms in the UK that offer access to corporate bonds. Examples include Hargreaves Lansdown, AJ Bell Youinvest, and Saxo Markets. Some of these providers offer access to more bonds than WiseAlpha does. The key difference between WiseAlpha and these companies, however, is that WiseAlpha enables investors to invest small amounts in bonds via its fractional bonds. WiseAlpha also enables investors to diversify their bond portfolios easily with its Robowise feature.
WiseAlpha Mobile App
WiseAlpha offers a mobile app, however, it is only available to registered users. To download it, one must open an account with WiseAlpha and request access to the app.
All of WiseAlpha’s major features are available on the app. For example, an investor can deposit money and place trades through the app. However, the company is continually updating both the website and the app so there may be some differences in functionality from time to time.
WiseAlpha Pros
- WiseAlpha makes corporate bonds accessible to private investors through its fractional bonds
- The minimum investment size for corporate bonds is low
- Investors can diversify their bond portfolios easily with the Robowise feature
WiseAlpha Cons
- The platform is only available to experienced investors
- Fees can be high relative to other investment platforms depending on the amount invested
- There are less bonds available than on some other investment platforms
- You can lose all your money investing in fractional corporate bonds and there is no FSCS protection
WiseAlpha Pricing, Charges & Fees
WiseAlpha offers a simple tiered approach to fees. Customers pay a service fee of:
- 1% per year on the first £20,000 of assets
- 75% per year on assets between £20,000 and £50,000
- 5% per year on assets between £50,000 and £100,000
- 25% per year on assets over £100,000
So, for example, if you held £120,000 worth of fractional bonds on its platform, you would be charged 1% on the first £20,000, 0.75% on the next £30,000, 0.5% on the next £50,000, and 0.25% on the final £20,000, which would result in an annual fee of £725 (0.60%).
The custody fee and administration of all investments are included in the service fees. However, any amounts you invest in euro fractional bonds (euro fractional bonds have 0% service fees) are not counted in the service fee tiering calculation above. You only pay fees when your interest payments are received, which equates to no up-front additional costs.
There is a fee for selling bonds prior to maturity on WiseAlpha. This is 0.25%.
Other brokers have different approaches to fees. Hargreaves Lansdown, for example, charges normal share dealing charges (£11.95 is the standard fee) for bonds that can be bought online and 1% per bond deal (£20 minimum, £50 maximum) for bonds bought over the phone. Hargreaves then charges a 0.45% annual charge (£45 maximum) to hold bonds in an account.
In some cases, WiseAlpha’s fees are cost-effective relative to other brokers. However, in other cases, they are not.
For example, if you were to invest £20,000 and split this over five bonds, WiseAlpha’s fee for the year would be £200 while Hargreaves Lansdown’s fee would be £245 (5 x £40 to buy the bonds plus an annual custody charge of £45.)
However, if you were to invest £100,000 and split this over five bonds, WiseAlpha’s fee would be £675 while Hargreaves Lansdown’s fee would be £295.
These calculations assume the bonds were purchased over the phone with Hargreaves Lansdown as many of its bonds are only available over the phone.
WiseAlpha also offers a ‘Share and Earn’ deal. There are more details on this below.
WiseAlpha Investment Account
WiseAlpha’s investment account is an account that offers exposure to fractional corporate bonds. Currently, it offers access to around 130 bonds.
One key feature of the investment account is its user-friendly dashboard. This displays an investor’s:
- Wallet: this is cash that you can use to make further investments or withdraw from WiseAlpha into your bank account.
- Portfolio Value: this is the estimated value of your account if you were to sell all your investments on WiseAlpha’s secondary market. The estimate includes interest earned and the price gain/loss of your investments, but does not include the sales fees due for selling securities.
- Gain/Loss: this is the difference between the portfolio value and cost of your investments, inclusive of any cash payments and paid fees.
- Lifetime Interest Earned: this is the interest earned by your bonds since you bought them. It includes interest that has been earned and paid as well as interest that has not yet been paid (accrued). This figure is net of paid service fees.
- Projected Annual Interest: this is the interest your account is expected to earn in the upcoming year. This projection is gross of any service fees.
Service fees for WiseAlpha’s investment account are:
- 1% per year on the first £20,000 of assets
- 0.75% per year on assets between £20,000 and £50,000
- 0.5% per year on assets between £50,000 and £100,000
- 0.25% per year on assets over £100,000
There is also a 0.25% charge for selling bonds before maturity.
The key benefit of this account, relative to those offered by other providers, is that the minimum investment size for fractional corporate bonds is low. Additionally, the account is quite cost effective for those with smaller account balances. One drawback of this account, however, is that it only provides access to fractional bonds. It does not provide exposure to other asset classes such as shares, funds, and real estate.
WiseAlpha SIPP
WiseAlpha’s SIPP (Self-Invested Personal Pension) is a pension product that enables investors to allocate capital to fractional corporate bonds. A SIPP is a flexible retirement product that allows you to choose how much to save and where you invest your pension savings.
Service fees for WiseAlpha’s SIPP account are:
- 1% per year on the first £20,000 of assets
- 75% per year on assets between £20,000 and £50,000
- 5% per year on assets between £50,000 and £100,000
- 25% per year on assets over £100,000
There is also a 0.25% charge for selling bonds before maturity.
The key advantage of this SIPP is that the minimum investment size for fractional corporate bonds is low. The disadvantage of this SIPP is that it only offers access to bonds. Other SIPPs such as those offered by Hargreaves Lansdown and AJ Bell Youinvest also offer access to shares and funds.
WiseAlpha Robowise Account
WiseAlpha’s Robowise feature is an automated investment service that enables you to automatically diversify your bond portfolio and rebalance it on an ongoing basis. Diversification is an important risk management tool that can help reduce overall portfolio risk. This service – which diversifies an investor’s capital across a range of fractional bonds on the market – is ideal for those looking to invest a lump sum but who don’t have the time to research every bond issuer.
Robowise gives investors the choice of two portfolios: Balanced or Adventurous. For the Balanced portfolio, capital is split across investments on WiseAlpha’s Main Market. For the Adventurous portfolio, 50% of capital is allocated to investments listed on the Main Market and 50% of capital is allocated to investments on the High Yield Market.
Fees for Robowise include a 1% annual service fee based on all amounts invested. This is taken only when interest payments are made. A 0.25% sale fee is taken if you liquidate all or part of your portfolio. Transactions employed by Robowise in order to diversify and maintain your portfolio do not incur sales fees.
This service is similar to automated ‘robo’ services offered by other investment providers such as Hargreaves Lansdown’s ‘Portfolio+’ feature or AJ Bell Youinvest’s ‘Ready-Made Portfolios.’ These services make it easier for investors to put together a portfolio.
WiseAlpha Market
WiseAlpha’s Market is where investors can find a range of fractional corporate bonds to invest in. This page allows investors to easily view the full list of bonds available on the platform and ensures that all important information is at customers’ fingertips. Currently, there are around 130 different bonds on the Market.
WiseAlpha says that its Market feature has been designed around the needs of clients to help them make the most informed investing decisions and find the right investments.
WiseAlpha Main Market Bonds
WiseAlpha’s Main Market is where you can find regular ‘investment grade’ fractional corporate bonds. These are bonds that have a lower risk of default.
There are two main types of fractional bonds that can be purchased on the Main Market – secured and unsecured. Secured bonds are those that are secured by a specific asset owned by the issuer. Unsecured bonds are those that are not secured by a specific asset.
On WiseAlpha’s Main Market, there are bonds issued by companies such as HSBC Holdings, Rolls-Royce Holdings, Legal & General Group, and Iceland. The yields vary depending on the issuer and the duration of the bond.
Risks also vary depending on the issuer. Corporate bonds are rated on a scale by credit agencies according to the strengths or weaknesses of the company and how risky it is to lend the company money. At the least-risky end of the scale is the AAA rating (on the Standard & Poor's scale). Bonds rated AAA, AA, A or BBB are considered investment grade.
WiseAlpha High Yield Bond Market
High yield bonds are those that are rated BB, B, CCC, CC or C (on the Standard & Poor's scale). These bonds tend to offer a higher level of interest to the buyer than investment grade bonds, however, they are considered riskier. Often, the company issuing the bond is not in a position of financial strength. This means that the possibility that the firm could miss interest payments or default on the loan is higher than with investment-grade bond issuers. The long-term default rate of European high yield bonds since 2002 is 3.1%, according to Standard & Poor’s.
On WiseAlpha, it’s possible to invest in fractional high yield bonds. These bonds can offer yields of 10% or more. To locate fractional high yield bonds, simply go to the Market page and use the filter function or scroll down to the High Yield area. Here, you will find the fractional high yield bonds that are available and the yields on offer from these securities. These fractional bonds are deemed to be higher risk.
Examples of fractional high yield bonds are shown below.
WiseAlpha Special Situation Bond Market
In investing, a ‘special situation’ is an atypical event that has the potential to alter the future course of a business and materially impact the company's value and its securities. To take advantage of a special situation, an investor must identify an upcoming event that will increase or decrease the value of the company's securities in advance, and position themselves for the event. Special situations tend to be risky and require specialised expertise.
It’s possible to invest in fractional special situation bonds through WiseAlpha. To locate fractional special situation bonds, simply go to the Market page and use the filter function or scroll down to the Special Situations area. Here, you will find the fractional special situations bonds that are available and the yields on offer from these securities. These fractional bonds are deemed to be higher risk.
Examples of fractional special situation bonds are shown below.
WiseAlpha Perpetual Bonds
A perpetual bond, also known as a ‘perpetual’ or just a ‘perp’, is a bond with no maturity date. Issuers pay coupons on perpetual bonds forever, and they do not have to redeem the principal.
Perpetual bonds are a niche area of the bond market. This type of bond is closer in risk to equities due to the bonds being unsecured and subordinated and having no maturity date.
WiseAlpha offers access to fractional perpetual bonds. To locate fractional perpetual bonds, simply go to the Market page and use the filter function or scroll down to the Perpetuals area. Here, you will find the fractional perpetual bonds that are available and the yields on offer from these securities. These fractional bonds are deemed to be higher risk.
Examples of fractional perpetual bonds are shown below.
WiseAlpha Coupon and Interest Payments
When a corporate bond is issued, the issuer promises to pay a fixed rate of interest or ‘coupon’ for a fixed period at regular intervals until maturity, upon which they will repay the original loan back to investors. Most bonds pay coupons semi-annually, while some pay quarterly, and others annually.
Each fractional bond on WiseAlpha has a different interest rate, maturity, and specific terms. When a company makes an interest payment on the underlying bond, it takes on average 2-3 business days from the date the company's agent bank receives payment for the payment to arrive at WiseAlpha. WiseAlpha distributes the proceeds to investors’ WiseAlpha accounts on the day of receipt.
If you are buying a fractional bond on WiseAlpha’s secondary market, the yield may be different to the bond’s coupon rate due to the fact that the bond’s price is different from its initial price.
WiseAlpha Education and Analysis
WiseAlpha offers a range of educational materials on its website.
Through its ‘Bond Academy,’ investors can learn about bond investing. This is a free feature aimed at those who want to learn more about investing in bonds. It features five units. Unit 1 covers the basics of bond investing while Unit 5 looks at more advanced topics such as credit analysis. This educational offering is more in depth than those offered by competitors. To take advantage of this feature, you need to have an account with WiseAlpha.
WiseAlpha also has a detailed FAQ section on its website. Here, there are answers to many questions in relation to WiseAlpha and bond investing.
WiseAlpha currently offers a referral programme known as the Share and Earn Offer. The way this works is that if you refer a friend and they open and fund an account, you get a £50 bonus.
Additionally, the friend will receive a welcome bonus after 12 months depending on how much they invest within the first 30 days. The bonus is as follows:
- £1,000 - £4,999 invested – £25
- £5,000 - £9,999 invested – £50
- £10,000 - £14,999 invested – £100
- £15,000 - £19,999 invested – £150
- £20,000 - £24,999 invested - £200
- £25,000+ – £250
The applicable amount of welcome bonus will be paid into the invited member’s WiseAlpha account 12 months from the date the invited member invests the minimum required amount of £1,000. Investments must be held for at least one year.
If an investment is repaid or sold in the first 12 months, the proceeds have to be reinvested within 10 business days to continue to count towards the welcome bonus.
WiseAlpha Alternatives
For those looking to invest in corporate bonds, there are a number of alternatives to WiseAlpha.
One alternative is the London Stock Exchange’s Order Book for Retail Bonds (ORB). This is a platform for investing in UK fixed income securities. More than 60 gilts and over 100 corporate bonds (tradable in denominations of £1,000 or similar) are available for trading on the electronic order book.
Another alternative is Hargreaves Lansdown. It currently offers access to several hundred corporate bonds issued by companies such as HSBC Holdings, Marks & Spencer Group, and National Grid. Many are only available over the phone, however. Saxo Markets is another broker that offers exposure to bonds. It currently offers access to more than 5,000 government and corporate bonds in Europe, US, Asia, Middle East and Latin America digitally.
Review by
Based in London, Edward is an investment writer whose clients include a broad range of financial services firms located all over the world. Prior to launching his own investment writing business, Edward spent 15 years working in private wealth management and institutional asset management, both in the UK and in Australia. Edward holds a Commerce degree from the University of Melbourne, as well as the Investment Management Certificate (IMC) and the highly-regarded Chartered Financial Analyst (CFA) qualification.
