You’ve made the smart decision that you are going to take advantage of your annual ISA allowance. You’ve decided to open a Stocks & Shares ISA which is going to allow you to invest money for your future in a tax efficient way. Perhaps you have saved up the full allowance for the year or have done your sums and know you can save a meaningful amount each month, which you will pay into your ISA. At this point you’re left with the important task of finding the best Stocks & Shares ISA. The biggest part of your decision comes down to how you want that money to be invested.
As a retail investor opening a Stocks & Shares ISA you essentially have three options; DIY (everything from selecting individual stocks to picking actively managed funds), a Financial Advisor, or an Online Investment Manager (also called “robo advisor”). Here’s how those options shape up when investigated on different criteria.
Increasingly retail clients choose to use DIY platforms and make their own investment decisions. This was a good way to lower costs and take greater control over their investments when the only alternative was advice. Nowadays retail clients can also access online investment managers who provide discretionary investment services at a much lower cost and entry point than previously available. This means you no longer have to make the investment decisions yourself and can still keep costs at a minimum while benefitting from the professional expertise of an investment manager. Advice remains a good option for clients who have a complex financial situation but might be unnecessary if it is only an investment solution that you require.
The best Stocks & Shares ISA for your particular situation will have to be perfectly in line with your risk tolerance, as the capital markets inevitably go through periods of ups and down. An advisor and an online investment manager will both carry out a risk assessment of their clients. In general, the advisor will provide this service in person and explain the results. An online investment manager will use technology to help with this process. What’s important either way is to make sure that on completing the process, you have a genuine understanding of the risks you are taking, i.e., what kinds of losses could you suffer in a bad year. For DIY investors when it comes to risk selection you are on your own. There are online tools to help you and this should be where you spend a lot of time researching different investments and understanding their level of risk.
Finding the best Stocks & Shares ISA for your needs also requires you to take a very careful look at the fees being charged by the provider. Online investment managers now provide discretionary investment management at the same price that you’d pay if you had to do all the work yourself. Advisors typically don’t come up well when focusing solely on fees as they would tend to offer a broader service than just investment advice.
DIY platforms and online investment managers now provide clients real-time access to their investments, showing them up-to-date valuations and allowing clients to make changes to their accounts at the touch of a button. Financial Advisors are improving this area but often still rely on old systems to provide data for their clients which is often not accessible directly by the client.
Investing into capital markets has become increasingly complex over the years as different types of investments, different account types and different products have emerged. Whilst DIY platforms try to provide clients with all of the information around their investments, it isn’t easy given the multiple layers between the client and the underlying securities being invested into. Online investment managers solve this problem by offering all-in fees for their service and, by taking the decision process away from the client, they can provide full details around the makeup of the investments and all fees involved.
A Stocks & Shares ISA with Scalable Capital is also protected by the Financial Services Compensation Scheme (FSCS) up to £50,000 per person, and all your securities are kept separately from our custodian bank’s assets. The bank never lends your assets to a third party or mixes them with their own assets, meaning that if either party went out of business your securities would be safe (read more about security).
Image: Matthäus Windhausen/ Unsplash.com
Find out everything you need to know about investing into an ISA with our free ISA guide.
Risk Warning – With investment comes risk. The value of your investment can go down as well as up and you may get back less than you invest. Past performance or future projections are not indicative of future performance. We do not provide any investment, legal and/or tax advice. If this website contains information regarding capital markets, financial instruments and/or other topics relevant for investments of assets, the exclusive purpose of this information is to give general guidance on investment management services provided by members of our group. A Stocks and Shares ISA or a SIPP may not be right for everyone and tax rules may change in the future. Please note our Risk Warning and the Website Terms.
Join over 100,000 subscribers to keep up to date with our investment insights. Be the first to know about new features, downloadable guides, as well as our regular webinars.