Nutmeg Lifetime ISA Fixed Allocation Portfolios vs Hargreaves Lansdown Mutual Fund
05 June 2023
Question by Finlay
Would you be able to help provide me with a comparison between Nutmeg Lifetime ISA Fixed Allocation portfolios and the Hargreaves Lansdown Mutual fund in terms in terms of fees on the full £4000 (+£1000 government contribution), the rates of return and any differences between the two companies services?
Answered by Boring Money
Just to clarify at the offset, the fundamental difference in this comparison between Hargreaves Lansdown (HL) and Nutmeg is the investment choice. HL allows you to choose from thousands of funds and shares to invest in, while Nutmeg restricts you to a few different investment styles, such as their fixed allocation portfolios or their fully-managed investments. This means that HL's total fee can vary significantly, depending on the actual investment you pick. For example, a low-cost index fund could cost as little as 0.05% per year, whilst a more expensive Hargreaves Lansdown fund could have a charge of over 1% per year.
Fixed allocation portfolio charge, inclusive of all costs, is 0.69% per year. On a £5,000 LISA portfolio, that is a charge of £34.50 per year.
Hargreaves Lansdown fees
Platform charge: 0.25%
This is a fee for HL's platform and services, which you will pay regardless of which investment you purchase.
Fund charge: 0.92% - HL Balanced Managed fund
This is the cost of a HL mutual fund. You are not obligated to pick a HL fund when you open a LISA with HL; you can pick a fund from any other company and there are much cheaper options available.
Total cost on a £5,000 LISA portfolio with a HL mutual fund - £58.50 per year.
Total cost on a £5,000 LISA portfolio with a cheap index fund that costs 0.10% - £17.50 per year.
As shown above, the price of the fund is the main contributor to the cost of investing your LISA.
Both companies have good customer service and a strong user experience. The main difference between the two is that investing with Nutmeg is a more hands-off approach as they do all the work for you. With HL, they do offer simple solutions and help, but you need to actually buy your investments. This can be a good or bad thing, depending on what you are after. With HL, you can buy multiple types of investments, you can invest in shares of companies like HSBC and Tesla, but you'll be doing all that decision-making yourself.
Rates of return
Returns vary depending on the fund you pick and the risk level you go into for Nutmeg's portfolios. You can find the return of the fund you're interested in buying on the HL website, and the Nutmeg fixed allocation returns for each risk level towards the bottom of this page.
Hope this helps!