Home Top

How to choose the best (and cheapest) DIY investing Isa - and our pick of the platforms

By Simon Lambert Updated: 03:44 EST, 13 April 2015

116

View
comments

The rise of DIY investing has delivered a revolution in the way investors buy shares and funds - offering them huge savings and a big boost to their returns.

Not so long ago, investing typically required a stockbroker or financial adviser and the willingness to hand over a big chunk of commission. Now armed with a computer - or in some cases even just a smartphone - investors can use a DIY investing platform and the wealth of research at their fingertips to hopefully build their fortune.

But picking the right DIY platform is crucial and the array of different options has left many investors scratching their heads.

We explain how to decide on a DIY investment platform to invest in the full range of options: from shares, funds and investment trusts, to ETFs and direct retail corporate bonds.

We also pick a selection of the best and cheapest in this regularly updated round-up.

DIY investing: If you want to invest across shares, funds, investment trusts and ETFs, picking the right platform can save you a substantial amount.

Why does an Isa or investing platform matter?

The right Isa wrapper or investing account has the power boost your investments, limiting how your hard-won returns are eaten into by fees.

DIY investing platforms act as a place to buy, sell and hold all your investments and a tax-efficient wrapper around them if you choose to invest in an Isa.

One of the biggest places a platform can make an impact compared to going direct to a fund manager is on initial charges.

These are an old-fashioned levy many fund managers still hit investors for, which take a big percentage chunk out of the money they invest - potentially as much as 5.5 per cent.

Good DIY platforms get rid of these fees altogether on most funds.

Beyond that you need to look at administration charges and dealing fees, plus any other extra costs.

We highlight Isa and non-Isa charges, but don't forget that investing in an Isa makes sense, as it should protect your hopefully growing investments from as much tax as possible.

The good news is that costs are consistently being trimmed and being made more transparent.

Something that complicates picking a platform is that DIY investors can hold a variety of assets in their Isa - not just one fund or a handful of them.

Charges vary for those Isa investors choosing to hold investment trusts, ETFs, shares and directly traded corporate bonds, alongside traditional managed funds in the form of OEICs and unit trusts.

Bearing all of this in mind we've busted the charges of what we consider some of the best (and cheapest) DIY investing platforms. We would advise considering the points below first.

FLAT FEE VS PERCENTAGE CHARGE: WHICH SHOULD YOU CHOOSE?

DIY investing platform prices can be chiefly be split into two camps. Some charge a flat administration charge, while others charge a percentage of investors' holdings.

The former tend to charge for buying and selling investment funds, while the latter tend to have bundled this cost into their admin fees and offer free fund dealing.

All charge for buying and selling shares, investment trusts and other products that are not funds, but the dealing fees on these vary from as low as £2.50 to £15.

If you are a buy and hold investor putting away a large sum of money then you may benefit from a flat fee rather than percentage-based charging, which can mount up to a hefty amount. But if you plan on buying and selling regularly watch our for dealing charges, as these can also add up substantially and easily erode the gain from a flat fee.

Five things to consider when picking a platform

1. Cheapest is not always best: You need to think about a combination of price and service - it is worth paying for quality but make sure you are actually getting that.

2. What will you invest in: Different dealing fees for shares, investment trusts and funds mean you need to think about how you will invest and tailor your choice accordingly.

3. Tools and information: What level of useful portfolio building tools and information does a platform offer?

4. Overall charges: Don't just look at the admin fee or dealing charges. You need to combine both to get a true cost, along with costs such as dividend reinvestment and regular dealing charges. A low admin fee might look good but if you are an active investor who buys and sells a lot, then dealing charges will soon rack up and send costs soaring.

5. Extra fees: Check for regular monthly investing discounts, dividend reinvestment fees, transfer charges and other elements

How we choose the best DIY investing platforms

We have focused on two vital aspects, cost and quality. This is not a collection of all of the absolute cheapest platforms, these are some we think stand out and that also compete keenly on price.

All discount fund initial trust charges down to zero in most cases. Some funds can still carry a charge though - platforms should provide you with a list to check.

We have picked DIY Isa platforms to suit different investors and focus on those that offer a choice of investments - not just funds. Each one will be better for some investors than others and you should choose depending on your needs. Remember there are plenty of others available too.

This list is in no particular order.

Hargreaves Lansdown - Vantage Isa

Hargreaves Lansdown is the big gun of DIY investing. The website is packed with information from its advisers and analysts, the shares and fund data is comprehensive and there is a very handy app.

Investors pay a 0.45 per cent fee on their total fund investments up to £250,000; 0.25 per cent to £1m, 0.1 per cent to £2m and nothing above that. Shares and investment trusts also incur a 0.45 per cent charge on the entire holding, capped at £45.

Hargreaves has negotiated some reduced annual management charges from fund managers.

Fund dealing is free. Share, investment trust, corporate bond and ETF dealing costs £11.95 per trade. If you trade more than 10 times per month share-dealing costs step down. Regular monthly share and some investment trust investing is £1.50, dividend reinvesting is 1 per cent, with a £1 minimum charge and £10 maximum.

Standard non-Isa dealing: Hargreaves' non-Isa Vantage account carries the same charges except for removing the fee for holding shares and trusts.

Who is it good for? Those looking for an advice-rich service that is price-competitive but not the cheapest around. It does come with lots of bells and whistles, including a very good app. It offers a proven popular service weighted towards funds but with access to investment trusts, ETFs, shares and the corporate bond market under one roof. [More details on Hargeaves Lansdown]

Interactive Investor

Interactive Investor customers must pay an admin fee of £20 per quarter, adding up to £80 per year, BUT you get that back in free trades spread evenly over four quarters.

Standard charges are £10 to buy or sell funds, shares, investment trusts or ETFs, or £1.50 for regular monthly investing. Make ten standard trades in the previous month and a frequent trader rate of £5 kicks in.

The rebated admin fee works out at £20 per quarter, which gives you two free trades every three months, or regular investing up to that value at £1.50 each time. So invest into four funds or trusts per month at £1.50 each = £6 x three months = £18, so you are within your £20 allowance.

If you were planning on investing every month by direct debit into four investments you would therefore all but get your £80 back.

Dividend reinvestment is 1 per cent of the sum reinvested up to a maximum of £10.

Who is it good for? Interactive Investor's pricing structure is good if you play it right, getting all of your admin fee back in free trades. It is definitely worth a look for those with larger sums to invest.

It offers a wide range of investments along with solid research and is good for those regularly investing. [More details on Interactive Investor]

Alliance Trust Savings

Alliance Trust investors pay a flat fee of £18.75 per quarter or £75 per year.

It charges a flat £12.50 per trade for buying funds, shares, ETFs and investment trusts. However, doing this as regular monthly online direct debit investing slashes the charge to £1.50 per deal, while dividend reinvestment costs £5.

It offers access to the full run of investment trusts, shares, ETFs and direct bonds available. Investors using it can access research and tools from Morningstar with their portfolio.

Standard non-Isa dealing: Charges are the same for standard share dealing, including the administration fee.

Who is it good for? Buy-and-hold investors with large sums invested will do well here as there is a flat fee rather than a percentage charge, however, they need to weigh up the dealing costs, as Alliance Trust charges £12.50 to buy and sell funds.

Investors can buy trusts, shares, corporate bonds and ETFs and it is good for monthly regular investors in these too, although dividend reinvestment is pricey. [More details on Alliance Trust Savings]

Frequent Trader (Club Finance)

Frequent Trader is a very interesting proposition to DIY Isa investors. It cuts the cost of buying and selling shares, investment trusts and funds for investors to just £2.50 – if they pay an annual fee of at least £120.

Its annual administration fee is a flat 0.24 per cent, with a minimum of £120. Those with portfolios above £250,000 see share-dealing fall to £1 and above £500,000 it falls to 50p.

Fund dealing is free and the platform takes initial charges on 1,700 funds out of 2,500 available and discounts most others down to 1 per cent to 2 per cent.

It is administered by a Blackpool stockbroker James Brearley & Sons.

Only one live Isa at a time

Remember, you can only pay new money into one Isa wrapper each year, but you can keep an old-tax-year's Isa wrapper open (with no new payments into it) and open a new-tax-year one, or transfer all your holdings onto the same platform (beware exit charges typically apply)

Standard non-Isa dealing: Charges are the same

Who is it good for? This is a fairly basic looking service when compared to Hargreaves etc but that share dealing is cheap.

In return for that cheap dealing you must pay a bigger annual charge, which is unfortunately regressive due to the £120 minimum.

For nimble DIY investors regularly dealing shares and investment trusts this can still be outweighed by the buying and selling fee at £2.50 per deal.

If you plan to build a portfolio of shares this is a cost effective way of doing it. Building a portfolio of 20 shares will cost you £50 here compared to £239 at Hargreaves.

Those who buy and sell more shares are most likely to benefit. The site is simple but cheap and effective. It does carry a fairly hefty £100 charge for holding US shares though and a £25 dealing fee for them. [More details on Frequent Trader]

The Share Centre - Self-Select Isa

The Share Centre offers investors a full DIY choice in its Self Select Stocks and Shares Isa. It allows investors to hold funds, investment trusts, shares, ETFs and corporate bonds, but charges a monthly fee of £4.80 (£4 + VAT) so £57.60 per year.

Fund, share, ETF, investment trust and corporate bond dealing costs 1 per cent (£7.50 min). Alternatively there is a flat £7.50 with its trader option, which comes with a £24 quarterly charge.

Regular monthly investing in funds shares, ETFs, trusts and bonds costs 0.5 per cent (minimum £1).

The Share Centre offers cost-effective share dividend reinvestment into individual stocks, trusts and ETFs at 0.5 per cent (min £1).

Standard non-Isa dealing: The full DIY Self Select dealing account has the same fees, but carries a £1.80 per month admin fee (£1.50 plus VAT) so £21.60 per year.

Who is it good for? The Share Centre's flat administration fee makes it a good option for those with more than modest sums - anyone with with just over £12,500 invested will pay less annually here than at Hargreaves Lansdown. That needs to be weighed up against fund dealing charges, however.

For those with large sums invested it could prove good value compared to percentage-based charges even when dealing fees are taken into account.

It's good for stock pickers who reinvest dividend shares, trusts or ETFs and investors looking for a variety of investments, with some good analysis, tips and advice. [More details on Share Centre]

iWeb - Self Select Stocks and Shares Isa

iWeb run by Halifax sharedealing offers a competitively priced service. Its stocks and shares Isa offers the chance to invest across shares, investment trusts, funds and ETFs, with a one-off set-up charge and no annual or quarterly admin charge beyond that.

Unfortunately, that set-up fee recently rocketed from £25 to £200.

It costs just £5 to buy or sell funds, shares, investment trusts or ETFs

Standard non-Isa dealing: Charges are the same

Who is it good for? iWeb is keenly priced for those looking to regularly buy investment trusts, shares or ETFs thanks to its low £5 dealing fee but that set-up charge rather than a regular admin fee has shot up to £200 - a massive jump on before. [More details on iWeb]

BestInvest - Select Isa

Bestinvest Isa and standard investors pay annual charge of 0.40 per cent a year on their portfolios up to £250,000, and 0.2 per cent above that to £1million. No extra charges are added above £1m.

Bestinvest has no dealing charges for funds, similar to giants Hargreaves Lansdown and Fidelity, but standard share and investment trust dealing is cheaper at £7.50.

Unfortunately, however, there are no reduced regular monthly investing charges for shares and trusts, nor is there cheap dividend reinvesting.

In an unusual step those who invest through a Sipp, as self invested personal pensions are know, see their charges cut to 0.3 per cent and 0.2 per cent, respectively.

Standard non-Isa dealing: Charges are the same.

Who is it good for? BestInvest is a good option for fund investors looking to take advantage of its research and lack of dealing charges.

Those buying shares, investment trusts and ETFs benefit from a £7.50 dealing fee, which is lower than most.

It's also an interesting offer if you have a small Sipp and want to manage all your investments under one roof, as the Sipp charge is competitive. [More details on BestInvest ].

AJ Bell Youinvest

AJ Bell Youinvest is the new name for AJ Bell's SIPP Deal platform, which rebranded with some highly competitive pricing.

It has a 0.2 per cent annual administration charge on fund holdings but this is capped at £50 per quarter, or £200 per year.

Fund dealing will set you back £4.95, while share and investment trust dealing is £9.95 - or £4.95 if you have traded ten times in the previous month.

Regular investing costs £1.50 into funds, FTSE 350 shares and a limited range of investment trusts.

Who is it good for? Youinvest scores with a low percentage admin charge that is also capped, but it does have fund dealing charges, albeit lower than some rivals.

There is cost effective regular monthly investing in funds, shares and selected investment trusts. [More details on Youinvest]

Charles Stanley Direct

Broker Charles Stanley arrived on the DIY investing scene with a bang. Its platform has a low 0.25 per cent annual charge on fund holdings, or 0.15 per cent above £500,000.

There is no charge on investment trust or share holdings if you trade at least six times in the current six-month period.

Fund dealing is free, but investment trust and share dealing will cost £10 and there is no regular investing option for this.

Investors holding individual bonds and overseas shares must pay £30 per year per holding.

Who is it good for? Active fund investors get a good deal at Charles Stanley with a low annual fee and no buying or selling charges.

Those buying and holding investment trusts and shares can also do well thanks to the lack of an annual fee if you deal six times in six months, but that needs to be weighed up against £10 dealing charges adding up and the lack of a cut-price regular monthly investing option. [More details on Charles Stanley Direct]

Fidelity

Fidelity is one of the big investing names and has a platform packed with useful information, guides, market commentary and videos. It comes with a big catch for Isa investors though, you can't put money into both funds and shares.

The difficulty for DIY investors using Fidelity wanting to buy both funds and shares and investment trusts, is that it still operates across two separate platforms, with funds on one and shares and investment trusts sitting on another, ShareNetwork (run by Charles Stanley.)

Although you can see shares alongside your Fidelity fund accounts, they count as two separate Isa accounts and so you can only pay money into one per tax year.

Investing in funds carries a 0.35 per cent charge on investments up to £250,000 and 0.20 per cent above that and 0 per cent above £1million. There are no fund dealing charges for buying and selling.

An eye-catching offer promises those who invest before 5 April their first year free of admin charges for holding funds, although fund managers' own annual management charges will still apply.

If you hold shares then you must pay £5.10 per month or £61.20 per year. Share dealing costs £9 per trade.

Who is it good for? Fidelity offers very useful service and regularly gets comments from happy customers in This is Money's platform articles. It is one of the big guns, has model portfolios, tools to help you decide how to invest and a wealth of information on offer.

The fact that you can't buy funds and shares in the same Isa will be a major drawback for many DIY investors though. [More details on Fidelity]

HOW TO INVEST YOUR ISA

Once you've decide on an investing Isa you also need to work out what to put in it.

You don't need to do that immediately, however. Good platforms will let you pay cash into the wrapper to use up your allowance and then take your time investing it. Don't leave it sitting around too long though, as you will be losing interest you could have earned in a savings account.

Here is some essential reading to help you decide how to invest:

1. Six simple steps for wiser investing

2. How to invest in funds, investment trusts and ETFs

3. How to invest in shares

4. Fund and investment trust ideas from the experts

5.The best and cheapest low-cost tracker funds

Funds-only platforms

Among the wealth of options for DIY investors, there are a number of funds only platforms. You will not be able to invest in shares, investment trusts, or ETFs (usually) here, but you can often benefit from free fund dealing and some keen pricing.

We highlight three below - for the reasons mentioned above Isa investors may want to consider Fidelity as also being funds-only.

Rplan

Rplan is an interesting funds-only option for DIY investors. Its positions itself as a technology-rich answer to help you invest better.

It charges a simple 0.35 per cent annual fee on your investments, with no other charges - so no dealing, exit, transfer fees etc. You can open a standard investing account, or an Isa, but it doesn't offer a Sipp.

Rplan's tools can help you compare funds on performance, risk and charges and you can try them all out on the site before you sign up. It also has quality fund research from Rayner Spencer Mills on offer.

Who is it good for? Investors only interested in buying funds, you can't add any shares, investment trusts or bonds into the mix. The rplan system is about getting people to invest better, so you can create different investment pots and goals, check how funds measure up and use some clever tools.

[More details on rplan]

Cavendish Online

Cavendish Online is another funds only DIY investing platform and stands out with its very low percentage charges.

Investors pay just 0.25 per cent as a fee for using the platform and no dealing fees, initial charges, or exit fees if they decide to leave.

Cavendish has long been a low-cost investing option without some of the frills of its rivals. It offers a selection of three model portfolios graded by risk.

Who is it good for? This is cheap investing but it is only for buying funds, you can't add any shares, investment trusts or bonds too. This is a low-cost option for those who want to take charges to the bone and are happy to forgo the tools, tips and content others offer.

[More details on Cavendish]

Axa Self Investor

Axa is a big name in finance but its Self Investor is a relatively new kid on the DIY platform block.

It only offers funds, despite being badged with the official stocks and shares Isa tag, but carries some useful tools and advice. It offers all-in-one funds and expert's top picks, with some investing options designed to match your attitude to risk that can be passive-only, blended, or active-only.

Axa Self Investor charges 0.35 per cent up to £250,000 and 0.2 per cent above that with free fund dealing, albeit it warns some funds may carry entry or exit charges.

The eye-catching thing about Axa Self Investor is that it won't charge new investors and those transferring in before 30 April 2015 any fees until May 2016.

Who is it good for? Clean and simply laid out, Axa Self Investor offers an information-rich website to fund investors. But you will need to weigh that up against rival platforms that charge a similar amount and offer share and investment trusts

If you are tempted by the special offer consider it against Fidelity's similar offer, which is slightly shorter. Also remember you should be investing over a time horizon of many years , so don't get overly swayed by one year free of fees. [More details on Axa Self Investor]

SOME FINAL THOUGHTS ON DIY INVESTING PLATFORMS

Before you make a final decision, think about both the points above on picking the best platform, what you want to invest in: funds, ETFs, investment trusts etc, and how you want to do so: lump sum, buy-and-hold, regular investing or trading.

Don't forget that there is a delicate balancing act between administration fees and dealing charges.

Do your own research, sit down and work out how the DIY investing platforms you favour compare against each other. This homework will be worth it in the long run.

If you think you have a better investing DIY investing platform suggestion please tell us in reader comments below

Locked in: Watch out for transfer charges and other fees from investing platforms, as well as dealing and admin charges.

Why invest through an Isa

Investing in an Isa is one of the few opportunities we have for making money with very little tax but it doesn't offer complete tax-free status.

Each tax year investors get an Isa allowance. A Budget shake-up meant that from 1 July 2014 the Isa allowance was raised substantially to £15,000 per tax year and it can be shared however you like between saving and investing. It has been increased to £15,240 for the 2015/2016 tax year.

The reasons for investing in an Isa are their tax-friendly nature.

Any gains within an Isa are free from capital gains tax. Everyone has a CGT allowance of £11,000 per year (2014 to 2015) and many may feel they are unlikely to ever make more than this in profit each year from selling their assets.

However, those who invest consistently over time may one day be surprised at how much those investments are worth and holding them in a tax-free wrapper makes sense.

Income from investments is also treated in a tax-friendly way in an Isa. Corporate bonds and gilts income is tax-free. Dividends on shares involve an unnecessarily complicated 10 per cent tax credit system, but what you need to know is that if you hold shares, investment trusts or a fund in an Isa there is no tax to pay on that income.

Compared to investing outside of an Isa, basic rate taxpayers will not gain any extra benefit here, but higher rate taxpayers do not have to pay any extra tax.

And if you are a basic rate taxpayer you may hope to be a higher rate taxpayer one day, so putting your investments in a tax-free wrapper is a sound tactic.

Isa investing also means you don't have to fill in dividend income on a self-assessment form and removes the headache of tax returns.

It used to be that investing in an Isa was not always worthwhile, as charges were higher. In most cases charges are now exactly the same as for normal investing, so using the Isa wrapper makes sense.