Digital Investment Adviser (DIA) is the name of the robo-adviser launched by high street bank Santander joining the likes of Barclays and HSBC. Santander are pitching this at existing bank customers, as well as brand new ones who may bank elsewhere. The TV advert nicely reinforces the point that investing is for all and not just city types — the voice-over describes investing being for old boys’ clubs, city slickers and traders while showing scenes of a barber shop, runners and market traders — it’s nicely done.
Santander developed the robo out of its existing direct-to-consumer (D2C) platform which launched in February 2016 and has avoided the widely reported technology problems encountered by Barclays Smart Investor. The DIA sits neatly between the Investment Hub for direct investors confident enough to do without advice and its Financial Planning Service offering face-to-face advice for those with more than £20,000 to invest. Santander’s research found that there are 1.8m first-time investors with an average of £247 per month available to invest and it’s this segment of the market that the DIA robo-adviser is going after and not the wealthy sophisticates treasured by other robos in the market.
From what we have seen, this isn’t a bad effort for an established conservative bank. The create account process was immediate and there were short videos that made it easy to learn how to use DIA, but they were nowhere near as engaging as Nutmeg’s. Despite appearing to be a fully digital process, a few days after registering paperwork arrived in the post requiring a signature to allow future withdrawals for security reasons. Changing the password was also cumbersome.
There’s a £20 flat fee for the suitability report which is pretty affordable compared to bog standard face-to-face advice that usually costs a hundred times more, comes with glass and marble interiors and espressos delivered by well-spoken, fawning, flicky-haired advisers called Hugo or Rupert. (If £20 is too much and it really isn’t, note that Natwest only charges £10 for its report.)
Santander’s suitability questions are engaging, visual and take about half an hour. The bank partnered with Be-IQ, a behavioural risk-profiling fintech firm, to produce a tool that takes into account people’s tendencies to over or under-estimate their risk tolerance and other cognitive biases (robo-speak for check-and-balance questions to mitigate over and underconfidence). But it’s not clear how Santander will make sure that customer investments remain suitable — will they be charged £20 or more again? We wait with bated breath to find out.
The robo also directs clients to other options such as paying down debt and putting money in a savings account if it finds that investing is not the right option for the customer. This is laudable and obviously done to keep the regulator happy, but irritating —it’s a bit like going to the barber and asking if they need a haircut.
The nitty gritty
The charges are tiered meaning the lower the investment, the higher the cost of investing. They start at 0.35% for £50k (£175), 0.2% for the next £450K (£900) and 0.1% on anything above that. Santander uses funds rather than exchange-traded funds which means that their fund charges are marginally higher, but as the table below shows the total cost of investing is competitively priced compared to other robos. The range of funds is restricted to Santander Asset Management’s in-house risk-managed funds called Multi Index 1, 2, 3 and 4.
|Provider||Platform Charge %||Fund Charge %||Total Cost %|
|*Tiered platform charge 0.6%@£15k, 0.5%@£50k, 0.4%@£100k|
**Market spread as these providers use ETFs
|Santander DIA||0.35 (or less)||0.34 to 0.49||0.84 to 0.69|
|Wealthify||0.7 (or less) *||0.21 + 0.12**||1.03 to 0.73|
|Moneyfarm||0.7||0.3 + 0.09**||1.09|
|Nutmeg Fully Managed||0.75||0.21 + 0.08**||1.04|
|Nutmeg Fixed allocation||0.45||0.18 + 0.08**||0.71|
Thankfully cash isn’t subject to platform charges and interest is currently paid at 0.2%. The low initial minimum monthly investment of £20 or £100 for a single investment makes the Santander DIA very accessible to budding savers starting out. Wealthify accepts a minimum lump sum investment of just £1 to open an account while Moneyfarm requires a high minimum of £500. Like all banks, Santander knows the value of catching them young and creating a loyal lifetime customer hence it’s available on PC, tablet and smart phone (the financial services industry needs to listen and learn) .
In terms of available products and wrappers there’s an ISA, a General Investment Account and a Cash Account but no pension as yet. As well as a pension, a junior ISA would also appeal to its customer base. Both are probably in the pipeline.
Overall, this is a nice, easy-to-use proposition that has been priced to suit all tastes. A strong marketing campaign could reap significant benefits and customer numbers. We like the fact that it’s targeted at ordinary investors and we look forward to seeing how they do.