It was interesting to read Ben Pollard's experience of launching a start-up (The Actuary, March, What’s the big idea?).
The article also gives us the chance to look at Smarter Investment's offering and see what we think of the benefits to private investors that are claimed.
From the company's website, it seems that the general offer is a platform of funds that the investor usually chooses for himself but guided by "the same sophisticated actuarial technology as the big financial services companies use". This technology allows for the customer's level of risk tolerance and provides diversification to avoid volatility. It would be interesting to learn how this technology enables one to project a most likely return of 3.27% on one medium risk fund against 3.24% on another, especially as the fund with the higher projected return has the slightly higher level of charges.
An asset liability management review is run for every customer every night, but an email alert is only sent to the customer if one of seven triggers is breached - for example, if there is a 60% or more chance that the investment will not achieve the predetermined target.
The charges for these services are significant. I tried the system with a Vanguard fund with a standard charge of 0.24% pa. After adding 0.50% for Smarter Investment's charge and 0.29% for CoFunds (the platform provider), the total charge became 1.03% pa. I suspect that Ben will have to work a lot harder to persuade his fellow actuaries that this is a good deal.
Roy Colbran 13 March
