Customisation is going to be the biggest fashion trend of the year, according to a recent BBC Radio 4 show. But rather than sitting down to a sewing machine or hanging t-shirts above buckets of dye, technology has enabled something called “mass customisation”, where clothing companies offer a multitude of customisation options to create totally unique handbags, jumpers and shirts, which you can design yourself online, without having to actually make it yourself (for about £300 – ouch).
Which brings me neatly onto money.
So far, the fintech revolution has enabled the opposite of customisation – the generalisation, if you like, of personal finance, through technology.
Arguably it’s biggest impact has been to create “robo” advice investment platforms, which, for a much lower fee than you would pay a financial adviser, create portfolios that are “customised” to your personal profile, which is really just your age, income and risk appetite. However by putting all of their customers into fairly generic, low cost tracker funds, robo-advice platforms are also homogenising portfolios. Stereotyping, rather than customising, would perhaps be more appropriate.
Are you being herded?
It’s a trend that some advisers and economists are a bit worried about. Mark Carney, governor of the Bank of England, is also a bit concerned that this “herding” of investors en masse into certain asset classes, could even destabilise the entire global economy, because there’s a danger that everyone is exposed to the same companies and markets to the same extent, and will all be equally affected by knocks, when they come. Whereas normally, if people are invested in a range of different things, by a range of different fund managers, only some people would be affected by the knocks. A large proportion of our investments and pensions, particularly those managed through robo platforms, end up passing through either Blackrock, Vanguard or State Street – the US firms that have become the leaders of the low-cost fund brigade.
In this way, the creation of robo advice platforms, with their lovely, fair, low fees and easy user interfaces, are solving one problem – that of high charges and high barriers to entry to the investment market for normal folk, but creating a totally new one – higher risk, through identikit investment strategies that load the entire retail investment sector into the same asset classes and companies.
Understandably, the robo platforms do not like this accusation, pointing out that the problem of fund managers charging fat fees for not doing very much is a bigger one for the industry right now. Adam French, CEO of Scalable Capital, said in an open letter to the Governor of the Bank of England today: “The recent FCA Asset Management Study has highlighted many worrying concerns about the practices of incumbent asset management firms that need to be addressed. Issues that are impacting a far greater number of investors than the robo advice sector is currently serving; issues that robo-advisors can actually help fixing.”
I like lots about what the robo platforms do – they’re trimming off the unnecessary fat in the investment industry, democratising investment by reducing the minimum investment requirements and offering customers a far better experience and level of engagement with their money than they had before (now is a good time to disclose that we have commercial partnerships with both Nutmeg and Moneyfarm, two of the biggest), but their approach necessitates a lack of interest in individual stocks or anything as nuanced as a sustainability theme from their investors, which is something Good With Money loudly champions.
The assumption that people aren’t bothered about the companies their money is invested in and are only concerned with their risk/ return profile does not sit so well with us – particularly in this mad, polarised world we currently find ourselves in. To invest in accordance with your values, like those snazzy jumpers up above, you need to be able to customise a bit. One size does not fit all. It doesn’t even fit half or a quarter, in fact.
Introducing: a moral money app
So how delightful to discover a new app – the Shape App – which has just been launched by two clever millennials with backgrounds in finance and technology.
The App gives investors who are interested in the impact their money is having clear, simple information on how well different stocks match up to Environmental Social Governance criteria.
At the moment, it’s a handy research tool to have alongside you when you are investing somewhere else in funds and stocks of your own choosing, such as Charles Stanley, Hargreaves Lansdown or Selftrade – all traditional investment platforms that let you decide where to put your money all by yourself, but there’s always a chance it could become an “execution” platform too, meaning eventually, app downloaders would be able to buy the responsible stocks and shares it analyses on the app itself – for 0% commission. Bingo. Democratised investing that is also responsible.
Will, 29, one of the Shape founders, said he and his co-founder launched the app partly as an antidote to the shift (mostly in the US) towards low-cost, share-buying apps that do not give much information on the companies people are investing in, such as Robin Hood and Bux, aside from price: “Low cost investing is huge, particularly in the US where some apps let you trade for 0% commission, but it’s also a minefield, people are going in blind. It’s a bit like shopping on eBay, there is a lot of risk.
“At the same time, there is this huge push in institutional investing towards corporate governance. Our generation, the one that grew up mostly after the financial crisis of 2008, are bothered about Environmental Social Governance. We want to know what a company is like on an ethical level. And if you are serious about investing in line with your morals, you can’t invest in an index, because you don’t have that control.”
So Shape curates a list of stocks based on their ESG records, such as a company’s history of pollution, corruption, that kind of thing, and gives you this information FOR FREE. No heavy research, no financial advice. Just an app.
That IFISA is so you
Another way to gain more control of where your money goes is to get into peer-to-peer lending, via sites such as Abundance Investments, Crowd2Fund and Downing. These platforms list specific projects or businesses looking to raise money. In return, they agree to pay funders a rate of interest over an agreed term. These three platforms are offering investments in the new Innovative Finance ISA, meaning gains will be tax-free.
Funds for all values
If you are browsing stocks and shares ISA options in the coming months and like the idea of investing in stuff you actually think makes the world a better place (more important now than ever, no?) Then take a gander at Alliance Trust Sustainable Futures, Impax Environmental Markets, and WHEB Sustainability, for starters.