As financial advisers start to charge by the hour, new automated services have sprung up to undercut them.
Meet your new financial adviser: rather than a shiny-suited salesman armed with a spreadsheet, you may soon be getting investment advice from an online robot or digital pensions wizard.
In just a month there will be a revolution in the way customers receive financial advice. Those recommending pensions, Isas or other investments will no longer be able to take commission payments from providers, but will have to charge a fee instead.
While this will make charges far more transparent, there are concerns that many investors simply will not pay for independent financial advice once they see exactly what it will cost them.
To this end the high street banks have all but pulled out of this market, and many traditional advisers are expected to concentrate on wealthier clients, with portfolios worth £100,000 or more, who can justify the expense of face-to-face meetings and more tailored investment and tax advice.
However, there are a number of new services that have recently been launched to plug this "advice gap". Many are internet-based services that, thanks to a lower cost base, can effectively undercut the fees charged by the average financial adviser.
These new services certainly sound different, with names such as Money on Toast, Wake up Your Wealth, RPlan and MoneyVista. But investors should keep their eyes open when using these websites. Not all offer regulated advice; most simply offer guidance, investment tools and information for do-it-yourself investors. Anyone taking their suggestions won't have any grounds for complaint if they later decide that this wasn't the right course.
Even the sites that do offer advisory services generally specialise in just one product area. And while the marketing might sound slicker than your average "Harbinger Fossil & Bung" financial adviser, some of these services are simply an online shopfront for a larger advisory chain.
The majority of the services use online questionnaires to assess an individual's primary goals (are you investing for growth or income, for example), investment horizons and tolerance to risk. Typically investors are asked between five and 12 questions to determine their risk level; the information you give will shape the recommendations you receive.
This is perhaps one of the potential drawbacks of these sites: investors don't always know how to answer such questions accurately. For example, would you agree, disagree, strongly agree or strongly disagree with the statement "Others see me as cautious"?
Some of the distinctions seem a question of semantics, with the recommendation for "balanced" or "moderate" varying significantly, although both may sound as though they would take a similar approach to risk.
However, defenders of this approach point out that face-to-face advisers are now increasingly using such mechanical "risk-based" assessments to determine investment portfolios and fund choice.
Below we look at some of the new digital advisory services that have sprung up.
= WAKE UP YOUR WEALTH =
This site is currently aimed at pension investors, although it plans to add Isas next year. Unlike most of its rivals it does not focus on active funds but instead aims to build a model portfolio based on low-cost passive funds, such as ETFs (exchange-traded funds) and trackers. It has two services: a "pension wizard" and a "pension tidy-up" tool.
The wizard allows investors to get a free snapshot of what their ideal pension portfolio should look like. This gives a detailed breakdown of how much should be in US equities, UK equities, Japanese and emerging markets, bonds and gilts and so on.
In order to see this, investors complete a short online questionnaire. As I had a balanced risk tolerance, 25 years to retirement and moderate financial resilience, it suggested that I have 95pc of my pension in equities, with the remainder in gilts. If I said I had a "measured" approach to risk this fell to 47pc in equities.
Investors then have to pay a £24 fee to get specific investment recommendations on which passive funds could deliver this investment strategy through a low-cost Sipp (self-invested personal pension) wrapper. On top of this, they will also pay their annual Sipp charges and the underlying costs on the ETF.
"However, these should be fairly cost-effective. Most investors should be paying no more than 0.3pc a year," said Andrew Firth of Wake Up Your Wealth.
The site's "pension tidy-up" service is for those who have other personal pensions or occupational pensions that don't have access to low-cost passive funds.
Customers pay between £99 and £499 to get their pension reviewed (it will depend what type of holdings they have at present). They will be given advice on whether to consolidate them in a low-cost Sipp instead.
Mr Firth said: "If your employer offers a pension scheme, that's where you should be. But as people get into their forties and fifties, they can find they have several older pensions. We offer a cost-effective way to review these holdings." The company employs a chartered financial planner who is available to those who need more detailed consultations.
= MONEY ON TOAST =
This site, which dubs itself a "financial supersite", purports to offer advice on Isas, pensions, insurance and protection as well as mortgages. However, it primarily recommends different funds, which can be bought through an Isa or pension via its link to Fidelity's fund supermarket.
Depending on the answers, you may be redirected elsewhere: if Doughbot thinks you would be better off sticking with cash, it tells you it doesn't offer access to cash Isas at present, and refers you back to its offline advisory service.
At the end of this process you are given a fund recommendation. Although I tried to stick to similar answers (I was looking to beat cash, but was fairly risk-adverse), I was recommended Newton Managed Income. This seems significantly different from my 95pc equity pension but I imagine that, with an Isa, the time horizons are less.
I was surprised to get just one fund recommendation, rather than a slightly wider choice. Still, at this point I hadn't had to pay a penny.
Charlie Nicholls, Money On Toast's managing partner, said: "If investors then buy through us they will pay around 1pc a year in platform charges and management costs." This will be a fully advised sale, although it allows people to opt to buy a fund that has not been recommended on the site.
= FUND EXPERT =
This "funds hub" has been designed by Dennehy Weller, the advisory firm. It is aimed squarely at do-it-yourself investors, offering "guidance" on fund choices rather than authorised advice.
However, there are a range of tools to enable investors to compare fund performance; and each fund is also rated by the firm.
Customers can log on to review current holdings, and the prompts on the screen will give alternatives if the adviser thinks there are better-rated funds available in the same sector.
Brian Dennehy, managing director, said: "Our rating system is proven to deliver value. I wonder whether other sites can demonstrate this."
After I had completed the simplified questionnaire the site recommended three funds, including Artemis Strategic Bond and Insight's absolute return fund of funds. It recommended that I ditch my old L & G UK tracker and switch to Cazenove's UK Opportunities fund or Jupiter Undervalued Assets fund instead, which both have five-star ratings as opposed to L & G's three stars. However, both have higher annual management charges.
Mr Dennehy said: "Charges are important, but so is performance. If your fund manager delivers superior returns you will make more overall."
As this is an "execution-only" site it will not be as affected by the changes to financial advice (because technically it isn't giving any). Investors at present typically pay about 1.5pc a year to hold funds through this site. This cost includes the underlying management charges on the funds, which pay what is known as "trail commission" to the company through which they are bought.
Mr Dennehy said: "We are aiming to make these charges clear. The fund will have a 0.75pc charge, we would receive an additional 0.5pc charge and our underlying platform would also charge 0.25pc so investors will still pay about 1.5pc, but they can see who is getting this money.
= RPLAN =
This is another new site aimed at cutting the cost of investing for do-it-yourself savers. It is effectively a platform through which investors buy funds, but it will rebate half the trail commission.
It said this would make it far more competitive than larger players in the market, such as Hargreaves Lansdown and Fund Expert, particularly for those with significant holdings, as it will cap the commission at £15 per customer.
As well as research tools that compare the performance of different investment funds, it also allows users to screen out funds on cost.
Rather than starting with the investment funds, the site encourages investors to devise a financial plan whether it is saving enough for retirement or helping their children with university costs then look at what return they will need to deliver this goal, then think about the type of asset classes that could produce this return.
= MONEY VISTA =
This is a more general personal finance site that, for the time being at least, is free, although it looks likely to charge in future. It is backed by an insurance company, Royal London Group, but its main aim is to provide a series of guides and tools rather than recommend specific pension and Isa funds. There are a number of useful calculators on the site, though.
= MONEY ADVICE SERVICE =
This government-backed site, which has a range of budgeting, investment and tax tools, perhaps highlights the problems facing many consumers. It is called an advice site but in regulatory terms (and those regulations are set by the same Government) offers only information, not advice.
So you will get information on how much you should be saving into a pension, but not specifics on which pension you should buy, or where this money should be invested.