Tuesday, 22 August 2017

Mirco finance

I like the idea of micro-finance. I would sign up to a clever little app which rounds up purchases to the nearest pound and then either invests or adds the difference to a savings account. It appeals to me as I like to think I'm hitting a lot of the targets of being financially conservative but if there's something else which can help me along the road, then I'm open to it.

From top tier priorities such as overpaying the mortgage, maxing out the company pension contribution or ISA's. Mid-table staples like reviewing all household costs to keep regular spending to a minimum to the small fry of making a note of what I spend day to day. 

I round up to the nearest pound on my spreadsheet. So when I saw an advert for the Moneybox app I looked into it as it seemed that it did everything I wanted. The good news is that it does, it rounds purchases up to the nearest pound and invests that into an ISA for you. The bad news is that the fees to do so aren't great at the fractional level I was thinking about.

To give them their due the website provides a sliding scale showing the total fee percentage you would pay depending on how much you invest, but all it does for me is completely turn me off the idea. You need to have £1,000 or more in there to get the fees less than 2% and the amount that I would be interested in, a couple of hundred, the fees are c6%. No thank you.

As I'm already watching fees levels on a lot larger sums than £1,000 there is no way I would use this app. I would go further to say I hope those its targeted at, mid twenties 'Millenials', ignore it too. If they are struggling to save as much as the media portrays then something like would be actively harmful. Equally, if you had £20k to invest you should sign up to an online dealing platform, go direct to Vanguard, do not pass Go and do not pay any more fees than you have to.

I appreciate that they have to earn some money somehow, but I feel this is a missing market - no point at the low end, vaguely worth it between £1.5k - £3k, but above that you should be moving on to a platform which provides more transparency and offers a wider more involved service.

As you may have guessed I won't be signing up, so I haven't gone through the whole process. On the main page of the website you only get the choice of adventurous, balanced or cautious. I can't see if there's any discretion within these choices once you sign up.

As I write this I realise the similarity to the Funding Circle where shortly, only two options will be available. Good point. However, the differences here are the fees and the fact that it's a different investment vehicle. The fees on FC are lower and you are gaining access to a market, lending money to smaller businesses, which isn't readily available elsewhere. This app invests in Vanguard, Henderson and Blackrock - all of which are available from a free / no fees based investing platform.

I don't think I'm being unfair, if I've missed anything, let me know!

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