Even stuffy old finance is not immune to the technology revolution. There are now dozens of decent options for investors to set up and manage both investments and pensions online. There are two basic approaches to running a do-it-yourself investment or pension.
You can select the shares or funds to put into your Isas or pensions. This will suit more confident investors who enjoy researching stock markets and individual investment funds.
Alternatively, you can pick an option which does the investment heavy-lifting for you.
Brave new world: Even stuffy old finance is not immune to the technology revolution
This minimises the decisions you need to take and gives you the comfort of having an expert on your side. Think of it as an online investment personal shopper. I have personal accounts with more than 25 online investment and pension providers so I can see what they are like from a customer’s perspective.
Behind the glossy web pages, the reality of using a service online, transacting, calling them up and tracking investment returns can be less than slick.
Here are my suggestions.
There is a vast array of options. These are the five main questions I think you need to ask when making a choice.
Mobile: Keep updated by using platforms such as The Share Centre
- Is the website easy to use?
- Do I trust the brand and does it seem safe?
No one wants to pay over the odds for investing. When assessing fees you have to factor in two basic charges.
First, the fees we pay a fund manager if we use funds rather than selecting our own individual shares.
Secondly, the administration fee – sometimes called a platform fee – that we pay the service provider.
I would expect to pay a fund manager around 0.75 per cent and a platform up to 0.4 per cent. Any more and you need to feel sure you are getting value for money.
As for the actual service and ease of use, there is a huge disparity in what goes on behind the scenes on the secure trading websites.
Here is a tiny example. I am currently doing my tax return and need to dig out consolidated tax vouchers for the investment accounts.
They are simple to find on AJ Bell, Charles Stanley, Hargreaves Lansdown and Interactive Investor. But I need to make phone calls to Alliance Trust Savings, Barclays, Nutmeg and The Share Centre as I cannot find them despite trawling through the websites.
In general when it comes to service, Hargreaves Lansdown is the clear winner. Their people on the phones pick up quickly, they are human beings (how retro) and know their stuff.
As cyber-crime is on the rise, I also think there is comfort in dealing with a FTSE 100 company such as Hargreaves Lansdown with all its processes and protocols.
With a 0.45 per cent platform charge, they are slightly on the wrong side of an acceptable fee but many people grin and bear it for the stellar service. When chatting to people about the right investment platform for them, I do ask about their personal trade-off between time and fees charged.
Hobbyist investors may prefer to look for low charges and be happy to spend a bit more time on hold or working through a website which can be tricky to navigate.
Those less interested will value convenience and advice above everything. Finally, there are some dodgy firms out there. If you are considering a new brand, do check who the ‘custodian’ of your money is. This ringfences your investments if the firm you have invested with gets into trouble.
Also there is no such thing as a free lunch. Anyone promising ‘guaranteed’ returns is probably lying. So run a mile from those timber/car park/property investment schemes ‘guaranteeing’ double-digit returns. Good investments should be pedestrian.
Below I offer some suggestions for investment platforms.
Busy, or lazy? Pick the high-tech firm that’s right for you
- Confident? Enjoy investing and happy to sacrifice slick for low-cost? Have £50,000 or more in investments? ANSWER: Interactive Investor.
- Want the lowest fees for accounts up to £50,000 and a decent all-rounder? ANSWER: Charles Stanley.
- Looking for a simple, low-cost solution with minimal choice? ANSWER: Vanguard’s online Isa is about as cheap as it gets and the firm is a solid, tried-and-tested global powerhouse.
- Are you a busy person, want to deal with the biggest – and do not mind paying a touch more for the best service around? ANSWER: Hargreaves Lansdown.
- Would you rather watch paint dry than spend time reading up on investments? On the move? Live on your phone? ANSWER: Nutmeg.
There is still a bit of a weird ‘headmaster and pupil’ dynamic between pension providers and investors.
Many of us still think of pensions as something served up by authoritarian figures and that we have to just grin and bear them. To do as we are told.
But these days, an online pension (often known as a self-invested personal pension) looks just the same as an online investment account, just with its own set of tax rules.
I think of online pensions as a later-life investment drawer that we cannot open until we are 55. But we can choose what goes into this drawer and look at it online whenever we want. We no longer have to politely just accept whatever is served up to us.
It’s not like the old days – the internet lets you make your OWN decisions
Pensions can be simple in the saving phase but hellishly complicated at retirement stage. If you are in your 50s and want to start taking some of your pension in the next ten years, you should pick an online firm with a strong pensions heritage – and teams of skilled people who can tackle your more complicated questions.
Here, AJ Bell Youinvest and Hargreaves Lansdown lead the pack. In the main, you will talk to good people on the phone who know their stuff. Of the two, AJ Bell Youinvest has lower charges but a less slick online experience than Hargreaves Lansdown.
Many less enthusiastic savers will find these websites daunting. If you prefer to stick to bigger brands which offer simpler, more ‘vanilla’ services, then I think Aviva is worth a look. This huge brand will also offer comfort to those who want to deal with an old, solid and established firm. It offers a simple online journey and you just need to pick one of four investment choices, so it does not overwhelm.
As for charges, expect to pay an online pension provider between 0.3 and 0.4 per cent annually for administration and a further 0.75 per annum for the investment funds you choose to put into the pension.
Suggestions for online pensions
- Hesitant and unsure? ANSWER: Try Aviva or Standard Life for a big brand experience with limited decisions to make. Aviva will let you start with £50 a month to save.
- Do you value service? Happy to pay a bit more for an easy life? ANSWER: Hargreaves Lansdown. Just very good.
- Seeking low cost, but with some pedigree behind the brand? ANSWER: Charles Stanley can be a bit daunting for the novice but it is low cost and currently waiving the normal £100 annual pension fee for those with more than £30,000.
- Want an online firm which lives and breathes pensions? ANSWER: AJ Bell Youinvest has a good pedigree in pensions administration and provides a decently priced option offering a range of choices for all levels of investment knowledge.