Which investment approach is best for me – App and hybrid investing explained

As an investor, there are essentially three ways to manage your money: via an app, via an Adviser or, a bit of both. Each approach has associated positives and negatives and investors at different points of their journey will gravitate to certain approaches based on their goals – by Tim Bennett

Benefits of app investing

 
Investment apps are often the best solution for someone who wants a simple way to invest relatively small amounts of money, often on a regular basis. As such less is more, in so far as all you may need is an app that links to a bank account and allows you to invest with minimum fuss, hassle and expense.

However, useful as they are, apps don’t cater to every situation, no matter how sophisticated the technology. Here are three examples.
 

• Uncertain markets
• At one of life’s “pivot points”
• As someone’s financial affairs get more complex

 
Let’s take each of these briefly in turn.
 

Uncertain markets

 
The past two years have thrown out plenty of uncertainty for investors after the best part of a decade where the economic backdrop was relatively stable. The result has been greater volatility in everything from stocks to bonds and even property prices.

The problem is that a bout of sudden uncertainty can trigger all sorts of investing errors – including panic and forced sales of long-term assets – and quite naturally makes otherwise independent people want to seek reassurance and guidance. Getting this through an app is possible but it isn’t necessarily enough by itself. In circumstances such as these, taking a hybrid approach and consulting an informed adviser who has experience dealing with periods of volatility would likely be your best bet.
 

Life’s “pivot points”

 
Whilst many people try to organise themselves so that they avoid too many shocks, life has a habit of throwing them our way anyway. Examples include;
 

• Marriage or divorce
• The arrival of children
• A change in employment status, whether good (a promotion) or bad (redundancy)
• Windfalls, in the form of a bonus, inheritance or perhaps a cash inflow associated with an asset, or business, sale
• Relocation, either within the UK or overseas

 
In all cases, an app will usually not cut the mustard because everyone’s experience of these big events differs, most are quite emotionally draining and all of them come with important related financial decisions. In a similar fashion to the previous point, speaking to an experienced financial planner who regularly guides clients through these vital pivot points can add a much needed human element.
 

Complexity

 
When we are young, life can be quite simple, and our financial requirements limited (e.g., to save for a property deposit). However, and linked to the previous point above, as we age, we tend to be faced with;
 

• Greater responsibility, perhaps for a partner, kids or older generations
• A bigger asset base, some of which may be based overseas
• Tax complications
• More choice in terms of where we live, how we work and when we may plan to stop
• Setbacks and disappointment – for example, we may never get a promotion we had been banking on

 
Whilst an app can arguably cope with some basic investment implications, when it comes to the big life decisions it lacks the human touch that is often necessary to navigate the complex decisions listed above. In pivotal times such as these, taking a holistic approach that combines the benefits of an app and an adviser can go a long way to offering you the full range of support needed.
 

The right approach

 
Given all of the above, most people find that a hybrid approach is the one that fits them best. So, for example, they might use a simple app when they are younger and continue to when they are older too, but alongside the input from a professional Adviser on life’s trickier decisions. Even in pure investment terms, an app may prove limiting as we gather more knowledge and experience – again, this can create the need for a human contact and a more sophisticated approach.

The bottom line is, however, that there is no “one size fits all” solution – the optimum strategy will be a function of every person’s
 

• Life stage
• Knowledge and experience
• Goals

 
The key is to stay open-minded and not get wedded to a single answer or approach.
 
Tim Bennett is Head of Education at Killik & Co