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Which ISA suits you?

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An abridged version of this article appeared in the Mail On Sunday on 19thMarch.  This can be read here. We suggest which ISAs might suit 4 different types of (less confident) investors.

1.    Busy Saver – I’m busy. On-the-go. And need something straightforward.

“I have around £1,000 to invest in shares, over let’s say 5 years. I’d like to be able to do this on line, to save some money on fees, and I’d like a recommendation on what on-line trading platform would be the best for me? It needs to be secure, straight forward and come highly recommended by other investors”.

NUTMEG: Nutmeg is a nice, straightforward option and offers investors easy, low-cost access to the markets. By answering a small number of questions you will be allocated a collection of investments which map to your so-called ‘risk profile’. You don’t need to be an expert or choose any individual stocks and shares. However, as with all of these newer brands, it arguably doesn’t come with the same security and peace of mind that a bigger brand carries.

This option does come recommended by other investors and they came second overall in our recent user results, scoring 4.1 out of 5 for Overall Service. We’ve given it one of our Gold Best Buy 2017 ratings. For portfolios of less than £5,000 you do need to contribute at least £100 a month. 

For a £1,000 investment you’ll pay £9.40 / 0.94% all-in.  

WEALTHIFY: Wealthify typically appeals to a younger than average investor, with an average age of 41 today. The website or mobile experience is pretty user-friendly and our testers liked it. There is no quiz to allocate you a portfolio – you have to choose from one of 5 risk profiles, which sums up how spicy you are prepared to be.  The company has recently reduced minimum amounts to £1 so you can test this out with very, very little downside!

In 2017, we’ve given this a Silver Best Buy rating although it’s still a newcomer and earning its stripes.

You’ll pay circa £8.70 / 0.87% for your £1,000 investment all-in.

2.    Rookie investor – but interested in learning more.

“I’ve made a few investments and am quite interested to learn a bit more. But I want someone to watch my back. I’ve got about £8,000 to start.”

FIDELITY PATHFINDER: A safe, solid global player which has recently improved its online journey for investors. It’s still really a funds-only option and won’t suit people with shares.

For less confident investors, you can start with their ‘PathFinder’ range and get them to pick all the funds for you. You’ll just need to identify how much risk you are prepared to take. Or how much volatility you can stomach. And then as you learn and develop confidence, you might like to start adding a few funds which are in sectors or areas you like.  There’s a flat fee of £45 for accounts of less than £7,500 so not one for smaller accounts.

We gave Fidelity a Gold Best Buy in our 2017 ratings, although we note that their customer base we tested with doesn’t score them as well on usability and service. One to watch.

You’ll pay circa £88 or 1.1% on your £8,000 investment – less if you use their ‘passive’ PathFinder option.

HARGREAVES LANSDOWN: The biggest and most established online investment broker, Hargreaves Lansdown looks after about £60bn of investors’ money.

Providing a one-stop shop for shares, funds, Junior ISAs, ISAs, pensions and (coming soon) cash, these guys know their stuff. However, it can baffle newer investors and a recent investor told me the service feels “arrogant and stuffy”.

Hargreaves topped the charts in our recent user results for Overall Service, scoring 4.2 out of 5. It isn’t the cheapest but I use it for some of my accounts because it just works and I like the feeling of security and slickness the operation gives. Hargreaves is a Gold Best Buy although it falls down on Value For Money ratings with its users today.

You’ll pay circa £96 or 1.2% for your £8,000 investment. If you pick their own range funds where their experts blend all the ingredients for you, you’ll pay nearer 1.8% or £144 all-in.

3.    Nervous Newcomer – I just want someone to tell me what to do. I have £10,000 in cash I could convert.

“I have a cash ISA with the Leeds with about £9,500 in it (no contributions made in the current tax year) which I’m wanting to transfer across to a stocks & shares ISA. Help!”

TD DIRECT INVESTING: Although this service comes from a traditional stockbroking background, they have done a good job on the language and content and users tell us this feels more approachable than many online financial sites. The information and graphics are relatively clear. Their Quick Start Funds journey helps less confident investors find their way into a suitable investment product, in relatively few steps, providing some validation about what you’re up to.

As for costs, users rate Value for Money, scoring this 4 out of 5. We’ve given the service one of our 2017 Silver Best Buy ratings.

If you use the Quick Start Funds journey, you pay £52 / 0.52% for this £10,000 ‘passive’ investment. 

AVIVA: A big household name, this multi-tasking insurer also has a DIY stocks & shares ISA offer. Although it’s arguably a bit on the dull side compared to the newer digital plays in town, it does offer a clearly signposted journey for would-be investors, with four ready-made ‘growth’ funds at different risk levels.  As one of our less confident testers said, “It’s on my sort of level.” If you want to branch out and access some other investments, there is a broader range of other investment brands accessible here too.

The fees are fair and we’ve given Aviva a 2017 Silver Best Buy rating for ISAs.

You’ll pay £75 / 0.75% for a portfolio, including the ready-made funds.

4.    Cost-conscious investor – I want something simple and low-cost

“I am 75, a totally retired teacher wanting to invest in a low charges fund. I have about £50,000 to invest for say 3-6 years, medium risk appetite.” 

Cost-conscious investors will value the certain low-fees of so-called passive investments (or ‘tracker’ funds which just buy all the shares in any one index such as the FTSE 100) over the potentially higher returns of the so-called ‘active’ funds, where expensive experts try to pick the winners.

One of the lowest cost ways to access passive investments with a £50,000 lump sum is to use the Charles Stanley Direct investment service.

CHARLES STANLEY DIRECT: Charles Stanley Direct is the online offer from this established stockbroker. Although all the supporting research and product information can make this feel a little overwhelming, it’s a decent low-cost way to take out a stocks and shares ISA.  With an administration fee of just 0.25% for ISAs, it’s always at the lower-end of any charges comparisons.

Charles Stanley and Interactive Investor top our user poll for Value For Money, scoring 4.2 and 4.3 out of 5 respectively.

The Vanguard LifeStrategy range is a fully outsourced investment option where the managers choose the regions and investments for you – all you need to do is indicate how spicy the investment mix should be, from a range of 5 different choices.

Investing £50,000 using Charles Stanley as the ‘shop’ and the Vanguard LifeStrategy 60% Equity fund as the investment would cost £235 / 0.47%.

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