Robo-advice market outperformed FTSE 100

Robo-advice market outperformed FTSE 100

Investors in more aggressive robo-advice portfolios outperformed the FTSE 100 during 2017, according to research by Boring Money.

Boring Money's analysis showed on average the robo-advisers' higher-risk diversified portfolios outperformed the FTSE 100 at a lower risk.

The top performing portfolios analysed were Netwealth's Risk Level 7 (which returned 12.12 per cent), Nutmeg's Portfolio 10 (which returned 13.41 per cent), followed by Evestor's Portfolio Three (which returned 12.72 per cent).

Holly Mackay, chief executive of Boring Money, said: "One of the main benefits of a robo-adviser is to serve up a diversified dish of investments to less-confident investors who might otherwise show a home bias and have a smaller collection of largely British shares.

"At the same time risk is mitigated and volatility smoothed – on average those customers investing in a robo would have seen less volatility than those simply tracking the FTSE 100."

Mild   Medium   Spicy  
evestor Portfolio 1£5,2344.68% evestor Portfolio 2£5,4599.18% evestor Portfolio 3£5,63612.72%
Netwealth Risk Level 2£5,1533.07% Netwealth Risk Level 4£5,3687.36% Netwealth Risk Level 7£5,60612.12%
Nutmeg Portfolio 2£5,1202.40% Nutmeg Portfolio 5£5,3507.00% Nutmeg Portfolio 10£5,67013.41%
MoneyFarm Portfolio 1£5,0290.58% MoneyFarm Portfolio 4£5,2975.95% MoneyFarm Portfolio 6£5,4789.57%
Wealthify Cautious£5,1112.22% Wealthify Ambitious£5,3276.55% Wealthify Adventurous£5,4138.25%
Scalable Capital 5%£5,0531.07% Scalable Capital 13%£5,2014.03% Scalable Capital 25%£5,4649.27%

From an initial £5,000 investment at the start of 2017, the average aggressive portfolio returned £562 while the FTSE 100 returned £597 over the same period, but with more volatility.

Meanwhile the average medium risk robo-advice portfolio returned 6.9 per cent and the average mild risk portfolio returned 2.1 per cent.

As part of its research Boring Money included fees and charges.

For the FTSE 100 it used a total return index and deducted charges of 0.31 per cent to allow a like-for-like comparison.

Factoring in this charge, the return Boring Money allocated to the FTSE 100 was 11.95 per cent.

Boring Money has estimated that the UK robo-advice industry has assets of £1.8bn as of the end of 2017.

Susan Hill, a chartered financial planner with Susan Hill Financial Planning, questioned whether robo-advisers would be able to sustain this performance during a period when the stock market was performing badly.

She said: "I see a lot of people make mistakes and when the market is performing badly people on their own tend to come out of that asset and they are out of it when it recovers.

"That is part of the advice process. Sometimes when the client is on their own they can make costly mistakes."

This article has been amended post-publication after Boring Money informed FTAdviser the figures it supplied relating to Scalable Capital were incorrect.