Which actively managed portfolio do you recommend for a £10k investment?
19 July 2018
Question by Richard
I shall have £10k to invest shortly, and I want to use an actively managed portfolio in a quality company. How would you rate - Investec Click & Invest/True Potential Investor/Nutmeg on the basis of ROI/customer relationship/quality/risk factors etc? I would class myself as a mid-grade risk-taker/reasonably adventurous if appropriate, with a high quality company. I presently use Hargreaves Lansdown and Wealthify but feel the need to diversify. What do you recommend?
Answered by Holly Mackay
The first thing I’d do, is challenge the need to diversify.
Diversification is really important in terms of the actual investments themselves. So we don’t just buy a few blue-chip UK shares, for example.
However this doesn’t apply to the actual service providers, platforms, ISA managers or robo advisers that we use. To put it more simply, we need a good spread of investments in our baskets but we don’t need to visit lots of different supermarkets or shops.
The risk you are presumably concerned about is any of these providers (or shops) going bust.
Investment companies need to have capital so they can cover administration costs if they stop trading. But if the administrator can’t recover fees from company assets, it’s legally allowed to do so from client assets instead. But this is just the fees for the administrator.
In this instance, from April 2019 we’re also all covered to the tune of £85,000 by the Financial Services Compensation Scheme.
Client money is held separately and can't be used by an investment company to pay their debts or to pay any creditors.
This link from Hargreaves Lansdown explains it well - www.hl.co.uk/security-centre/how-safe-is-your-investment
So my sense is that you are over-complicating your administration life here more than you need to.
However if that’s what you want to do, then let’s have a look at the three options you suggest...
Investec is a big global bank and assets manager - them of the zebra!
Click & Invest has a minimum of £10k, so I haven’t tested it personally. It’s actively managed as you say, so not as cheap as some but could deliver more. Costs will be about 1.4% in total every year. From Jan 17 – June 18 their middle portfolio did 10.6%. To me it looks like a good and solid option.
True Potential Investor is a firm of financial advisers which have built out tech solutions and gone direct to clients.
I have a test account there – there’s an average annual fee of 1.16%. Their mid portfolio did 4.2% from Oct 17 – Sep 18. And 7.9% the year before that. I like the app and I think it’s quite easy to use.
And Nutmeg is the oldest standing of the UK robos, which is well reviewed by clients and does well enough in performance charts.
But this is a passive choice, so the investments are managed a bit differently and it’s correspondingly cheaper with all-in costs of about 0.95%. To be honest, if you’re already with Wealthify, I'm not sure what else you’d get from coming here.
I don’t know if that’s been helpful. All three options you mention are solid, I think.
They’re also all quite new, so it’s hard to look back at long track records and make definitive calls about who runs the money best. And comparing like with like is very hard!
My sense is that if you really are keen to diversify providers, then I would pick either True Potential Investor or Investec Click & Invest depending on their customer reviews, and also which website and app you find the best.