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Investment app Wealthsimple has announced it is closing down its UK operations and transferring its existing clients over to rival service Moneyfarm. The Canadian-based investment service said it would instead be refocusing efforts on its Canadian clients.

Wealthsimple had been active in the UK offering low cost investment services for almost five years. The company said it had contacted all its UK customers today about the transfer to Moneyfarm. Eligible assets will be transferred over in cash and will be reinvested in Moneyfarm portfolios based on the client’s investment goals.

Investors who do not want to become clients of Moneyfarm have been told they can opt out and transfer their cash and any ISA accounts to another provider. See our list of ISA providers.

Too many investment apps in the UK?

The decision by Wealthsimple to pack its bags is being seen by some experts as evidence that the low cost money app game is getting a little overcrowded. Further withdrawals and collapses are anticipated next year, including some M&A activity. There just seem to be too many so-called robo-advisers operating in the UK market, and margins are very thin indeed.

“The difference between setting up an app-based investment service and full financial advice couldn’t be larger and the general public is clearly waking up to this,” said Adam Walkom, co-founder of IFA Permanent Wealth Partners in London. “Finance can be scary and intimidating and people can and will make mistakes. That’s unfortunate but there is no substitute for a real person to talk through your situation and help you. Yes, of course it costs more, but what price do you put on peace of mind and long-term wealth building?”

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The apps have succeeded in assisting many first time investors into the market in a cost-effective way, including helping them to benefit from the massive rally in stocks last year. But now it does look as if the UK market has become too crowded. Some pundits are wondering this morning whether Wealthsimple was getting distracted by the Canadian market.

Full service IFAs and mortgage brokers are of course much more expensive than many of the investment apps on the market and cannot compete on fees. The UK personal investment advice market has been shrinking in terms of the total numbers of IFAs serving investors, partly as a result of competition from low cost services, but also because regulatory changes have made it harder to win new customers when fees are charged to clients up front. This has led to it being dominated by a smaller number of high quality IFA firms.

Could other low fee services hit the wall?

“Unless you’ve got your full focus on the UK, it’s going to be hard to cut it, and I would expect Wealthsimple to be followed by others in the coming weeks and months, as the pecking order is more firmly established,” observed Rob Peters, director of Simple Fast Mortgage in Cheshire.

Investors are encouraged to do a little bit of due diligence on any new app-based low cost investment service they take on – some may not be around for much longer.

Related

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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