UKC

I’ve never done this before but I now have some money I want to invest for my dotage/kids. I have a public sector pension so not looking for that. I want a stocks and shares ISA.  I want to invest in some ‘ethical’ funds and have spoken to an IFA who will sort it all, but the fees just keep stacking up (startup fee, ongoing management fee…) and look excessive for essentially buying some funds with my money.. (which then have their own fees anyway). Has anyone used any of the low fee diy platforms? Any recommendations/avoids/pitfalls? Other advice? 
 

thx, mm

We have a couple of Vanguard funds which track global markets and do pretty well for us. They're easy to set up, need very little management and don't cost much. 

Have a look at Peer to Peer platforms. Look at what useful information they provide and understand risk.

I would say understanding risk is one of the most important things to think about, also your capacity for loss.

some will allow ISA funds to be invested/lent.

I do run a crowdfund and peer to peer platform.

And their index ESG option allows you to opt out of companies you don't want to invest in.

I use Freetrade. It's not as fully featured as other platforms and they're working hard to monetize at the moment with premium features, but there are zero trade fees or platform fees, including for US stocks etc, so is a good option. They also have an ISA account built in. Main downside it is it currently app only, but they have a web interface in Beta. 

I've heard fairly good reviews about trading 212 as well, who also have low/no fees. 

AJBell is a decent platform for various ISA, share dealing etc

There are lots of places that will provide a standard ISA or Junior ISA with very little cost. So I'm curious of these fees, you mention. Are they for the platform, the funds, ETF's (which are different from funds) or the IFA?

Interactive Investor fees start from £5 per month. AJ Bell charge a capped percentage of how much you hold with them. The Vanguard sp500 (US stock market) changes 0.07% annually. So that's 7p per £100 invested. Hardly ruinous. Some funds, will charge you to enter, leave and an ongoing fee. It used to be the case that financial advisors got commission for recommending certain funds, though I believe that has been stopped. But they may want you to invest via their platform.

Its not rocket science, if you do your research. You dont need an IFA to manage it for you. Ask then to suggest some ETF's and then buy them yourself. You'll be holding onto them for he long run. Dont get carried away with some crazy image about buying and selling in quick succession, every day, like some city trader.

Ok, now I’m out of my depth.. WTF is an ETF?

I’m don’t know what the fees were for but they came to about 3% initially and 1.5% per annum of the capital invested, which is a lot, on a projected return of (say) 5-7%!

I sat down with an IFA last Friday. I paid him £200 for just over an hour.

I mainly did this to validate my plans and to make sure I'm not missing an opportunity and to make sure I'm not doing anything silly.

I would recommend a similar session. No on-going fees and it allows you to invest with something like Vanguard where fees are minimal.

All in all my proposals were inline with his recommendations (not formal advice) so I have some confidence in sharing this.

I don't know how much money you earn, how much tax you pay, how much money you received, when you plan to retire extra so adjust as required.

On the basis you want to put some money away so it can grow a reasonable amount without too much excessive risk over a long period (say at least 20 years), in your position I would invest in a World Wide Index Fund like this: https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-ucit...

The cost is a little high at 0.22% (+ 0.15% platform fee, from memory) but you could reduce this yourself by splitting it between the S&P (which I think costs about 0.07% and is 65% of the fund), Europe index etc, and you'd probably get the fee down to about (0.1% + platform fee).

If you like free money and don't mind being locked out of your investment for a while, open a SIPP where if earning you'll get either 25% top up automatically, and 67% if a higher rate earner via tax return form. Just check the limits, may need to drip feed it in (whether SIPP or ISA).

As for returns, here are the last 20 years:

https://curvo.eu/backtest/en/market-index/ftse-all-world?currency=eur

Averages around 10% pa.

If you subtract inflation for those years, and fees, your looking at a real terms return of 6.5%, in todays money, which seems too good to be true, but those are the figures. An IFA will likely recommend assuming something much lower. Mine said 2% above inflation which I'm still scratching my head over.

If the future is similar to the past, using the 6.5% figure then you'd may triple your money in 20 years (big If, plenty risk, pay attention!)

If you can get it into a SIPP and are a lower rate tax payer then you have a guaranteed uplift of 25%.

Or capitalism might end, who knows.

If you already own a house, you say you have a DB, in your position, subject to how much you received, this is what I would do, seems like a great spread of risk with good potential for returns.

I'd suggest you get a written list of these so you can compare, 4.5% is really high. Or, you can give me your money to invest for you. My fees are entirely reasonable, but lets not talk about those

As to your other question, an ETF is an index (list of shares). Like the FT100, which are the 100 biggest companies on the UK stock exchange. Your eggs are in a lot of baskets, which reduces risk. If the economy does well, then generally most the companies will go up. Even if a few go down in value, it should be offset by the ones that go up. These lists can be managed by computers, so their annual costs are very low, 0.07% for example.

Funds are managed by a nice man, in a very nice suit, in a very nice office, in London. You pay them because they 'know' the markets and can beat the indexes. Overtime they tend to underperform the indexes. But they still charge your for the privilege.

I read it as 3% for a new customer, reducing to 1.5%.

We seem to have fairly similar views on investing.

Any thoughts on why global markets typically return 6.5% real terms growth, but IFA's assume just 2%?

I asked if the 2% is a deliberate safe return, and I was told that it's inline with long term market pas performance.

I've tried looking at S&P and FTSE100, and can't find any way to get it as low as 2%.

Ok so basically you want to determine what you are buying (Fund / ETF / individual shares / bonds) and how often you are buying it, then you use the following comparison site to dermine the cheapest broker.

https://monevator.com/compare-uk-cheapest-online-brokers/

Flat fee brokers are usually better for larger holdings, percentage fee brokers better for smaller.

Just go with the cheapest, put the cash in and just check how it is doing once a year.

Sorry but your definitions are incorrect, you are conflating how a product is managed with what it is. An ETF is an Exchange Traded Fund, an ETF can be an index tracker / passive fund or an actively managed fund and has fees that will vary acordingly, similarly a fund can be managed actively and passively, for example the following are roughly the same:

ETF - VWRL

Fund - VAFTGAG

The only diffence is an ETF can be traded like a stock at any time, whilst a fund can only be traded once daily.

It might be that they underestimate, so you are not supprised if it doesn't go up, or are pleasantly surprised if it goes up a lot. Markets respond to shocks more than good news. It is likely that there will be a surprise war, famine, drought, trade dispute, ship stuck in a canal that will affect returns. A bumper harvest, peace or change of leadership may not move the needle much.

Good points.

As the OP is at the start of their journey, I thought I'd keep it simple. But, you are correct, there is some overlap between funds and ETF's.

I see we both agree on how well dressed the fund manager is

I use Freetrade. Small fee for S&S ISA. Other services are free.

For the ethical side I also have some money in funds via The Big Exchange. Can't fault them and I like the model but admittedly returns have been pretty poor on the modest investment I have.

Maybe that 2% is what the suited and booted fund managers achieve after sartorial costs??

thanks everyone, this makes so much more sense. I think I want some kind of cheap tracking ETFs in a low fees ISA? I’ll have to put it in over more than on year (20k limit?) but that’s ok. I guess I can invest the remains in a non-ISA version of the same and just get taxed on it until it’s in the ISA?

Absolutely, go as cheap as possible!

Yep pretty much, for index linked ETF's that have a low fee probably Vanguard are your best bet. If you are buying your whole ISA limit as a lump sum you might want to investigate flat fee brokers off the bat (some will charge you per trade, others won't but generally for larger one off trades flat fee is cheaper).

If you are interested in further reading, Tim Hale's - Smarter investing is the gold standard or Lars Kroijers - investing demystified which is a little more accessible

I've always just done it myself. It's not difficult. There are lots of platforms providing these facilities. Until recently I was on Interactive Investor, now I'm with iWeb. Which platform is best for you will depend upon how much you want to invest, how often you want to trade etc. There are comparison web sites to help you choose - for example comparefundplatforms.com.

Stupid Q.. if I buy some funds or etf or whatever on platform X and the platform (not the fund) goes under/vanishes, what happens?

I used interactive investor.  Cheap, straightforward, wide choice, transparent and v.good customer service responsiveness 

I think you're somewhat covered against that as long as the platform is FCA-regulated.

https://www.which.co.uk/money/investing/learn-how-investing-works/your-righ...

The cheapest for you will depend on how much you invest. Some are a %, some are a flat fee, price per trade varies. I'd go with one of the popular ones rather than the fly by night cheapy or fee-free app only things. Compare what it would cost for you using HL, vanguard, Halifax, ii, AJ bell etc. to put your money into what you want it in and keep it there. For example last time I looked HL charged 0.5%, whereas Halifax was £36.

ETFs are funds that are traded like stocks. Just another vehicle. 

If you just want to put money away and get whatever returns the markets get and not fuss over it, then like everyone says a low fee index fund or two will do that.

Yes. And you'll have to consider capital gains tax when you sell to move it in, so you'll need to use your political crystal ball to factor that in.

So I don’t actually still own the shares of the funds if the platform dies?!

I have a vanguard S&S ISA account but then stopped paying into it as I thought somebody with better financial knowledge would do a better job, even if i pay a bit more for it. Apparently as long as you don't pay into the old isa it can remain open. I didn't transfer the balance.

In terms of performance, over the last 2 years my vanguard account is significantly outperforming the professionally managed one. In my uneducated financial opinion the degree of risk regarding the investments is similar, just the fees take a big cut from the managed one. If you have a little financial know how then I think doing it yourself is the best option. As soon as my penalty period is up I shall stop the professionally managed one and go back to the DIY option.

According to vanguard your shares are kept separate so if vanguard go bust the shares are still your.

I suspect this is a requirement from the FCA

https://www.vanguardinvestor.co.uk/need-help/answer/what-happens-to-my-mone...

The fees point is key. many decades ago, someone wrote a book called ‘where are the customers’ yachts?’ about Wall Street.

The other relevant data point:  take a graph, mark the x axis ‘fund manager over/under return against the market in year 1, and the same for the y axis, but year 2.  You would expect to see most fund managers in the upper right quadrant (beat the market in both year 1 and year 2) with a few no-hopers in bottom left (underperformed the market in both years).  Instead , there is an evenly distributed scatter gram  

Or the regular announcement of building a fund from a monkey throwing darts at a listings page, which ends up beating more than half of the professionals. 
 

From memory, John Templeman was one of the few who consistently beat the market after fees. 

In common with some other replies, I use Interactive Investor. They have some very good info/idiot’s guides, which I found useful and recommend to understand some of the basics. I ended up choosing one of their beginners funds (a Vanguard one) as an ISA. Early days, but doing ok just now. For me, it’s simple and relatively low risk.

I use both Vanguard and A J Bell. They are both pretty good but I find the Vanguard web interface easier to navigate. 

Ethical fund  are generally a marketing con. When you look at them in more detail you quickly realise they are invested in the likes of meta etc etc and are in reality no different to most other funds. 
 

Take Warren Buffets advice just invest in an S&P 100 tracker fund with low fees. Sit back , do not sell when market falls and keep drip feeding money in for a  minimum of 10 years.

Much as I dislike Meta, they're not the most evil place you could invest your money. If the ethical funds largely avoid unscrupulous arms dealers, tobacco companies and fossil fuels, that's still a significant point in their favour.

Put 100 people in a room. Have them all flip a coin and leave if it comes up tails. Repeat until there's one person left. Is that person consistently good at flipping coins?

No and yes.  The shares/funds you buy are held on your behalf in trust by trustees who must act in your interests.  The platform cannot access those funds for its own purposes.  I believe that is true of all the major platforms.  The exception may be cash balances, but when a security has been purchased, it's yours.

Buy this book. Read it. Then invest yourself. IFAs just take 25%+ of any gain you can just as easily make yourself.

https://www.wob.com/en-gb/books/jason-butler/financial-times-guide-to-wealt...

The funds are.yours still. The practical timescale for untangling things might be extended I imagine.

What, what, what! You mean it could just be blind luck?!

I mean.. define ‘good at’. He’d have had a decent amount of practice and to be fair, it’s hard to get ‘wrong’ in the first place.

I thought his advice to beginners was a low cost index tracker on  the S&P 500 ?

Isn't Warren Buffet's main investment buyback in his own company after the Board changed the rules on when that could happen?

I don’t think that’s an accurate comparison, but I think we both agree that - in general- fund managers are not worth the fees they charge  

He has given these instructions to his wife for what she is to do when he dies and its his general advice to people when asked at open forums etc.

Of course what people expect him to say is invest in this particular share etc.

Interestingly the advice from Jordan Belfont of Wolf of Wall Street infamy is to do exactly the same.He then explains that this is why people lose money as they do not want to follow boring advice.

This I suppose is where the dilemma is about ESG, as an individuals have different views about what this actually means.So really as an investor you have to be very specific about what you are looking to do.

After all the principle in investing has been around for a couple of hundred years, and you can do this by joining the Quakers for example..

The average height of a group of people can't beat the average height of that group of people.

Is it the same for fund managers?

The average performance of fund managers can't beat the market average which is just the average performance of fund managers when fund managers are most of the market.

I thought we were discussing the performance of fund managers offering investment funds to individual investors, not also including pension plans as well as the many other firms that invest in the stock market(s) (but who do not sell their ‘expertise’ for more than it’s worth)  

Either way, still feels we are aligned on the main point and are quibbling around the edges.

I found this website very clear and helpful https://portfoliocharts.com/ . I agree with people here who are saying to fastidiously avoid fees. I just use a no-frills online execution-only broker for my ISA . It was no more hassle to set it up than say opening a bank current account or buying a climbing rope online or whatever.