Introduction to Open Money Club's guide to Managed Stocks and Shares Accounts

Have some extra cash that you’d like to save over a long time horizon and happy to take more risk than a cash account? So, thinking that a stocks and shares account might be for you? Knowing what to do with your hard earned savings can be confusing and tough to navigate and once we start talking stocks and shares, things get even more complicated. But, alas, do not fear! We are here to help.

There are a bunch of “stocks and shares” accounts out there. These accounts are often designed to hold ISAs, taxable savings and some even allow you to hold your pension there. We know that this can be a whole new confusing world for people and not knowing whether to pick Google or Apple in your portfolio, whether to buy gold, or whether you should stick to UK government bonds can render people too scared to take the next step. Happily, there are a bunch of managed services out there which will help you to build a portfolio based on your personal circumstances and risk tolerance. The good ones will be nice and diversified and as cheap as possible. Use the comparison table below to see what managed services are out there designed for stocks and shares saving.

In our guide to managed stocks and shares investment accounts we aim to give you the tools you need to compare the best accounts, let you know our favourites and give you a few explainers. You might also be interested in our guide to cash savings or our guide to easy access savings accounts.

3 things you should probably consider

1

Use your ISA allowance. If you haven’t already done so, you should definitely consider using your ISA allowance. Latest rules mean that you can save a maximum of £20,000 in an ISA every year in either cash or stocks and shares tax-free. However, if you know for sure that you are withdrawing your money after a short period, it may not be the right move for you. Check out our ISAs explainer for more info.

2

Fees. If you have picked up any financial press recently, it’s hard to avoid the loud debate on fees on investment accounts. An important thing to know about investing - the only thing you can be sure will give you better returns is lowering your fees. So... be critical and pay as little as you possibly can to achieve your investment objectives.

3

Investment Risk. Deciding what your investment risk tolerance is can be tricky. How long are you planning on investing for? How old are you? How much are you willing to lose in any one year? Managed stocks and shares portfolio services will generally allow you to fill out a simple questionnaire to help you to decide how much risk you are willing to take in your portfolio. Remember the matra: you may lose money on your investment. If you are uncomfortable taking that risk, you should stick to cash savings instead. Check out our risk explainer for more info.

Our Picks

Vanguard Life Strategy Funds

Vanguard are a global leader in low-cost investing and if you're looking for something simple their Vanguarg Life Strategy Funds could be a good solution for your general investment account or stocks and shares ISA. You'll pay a total 0.37% per year.

Wealthsimple Investment Portfolios

Wealthsimple's investment portfolios have zero minimum investment and offer simple, personalise solutions. Usually charge 0.7% per year (+0.2% in product fees), but offer your first £5,000 for free for your first year.

Nutmeg Investment Portfolio

Nutmeg overs 10 investment portfolio for your general investments, ISAs or SIPPs, which you select through their online questionnaire. We like their static portfolios which charge just 0.45% per year (+ 0.19% in product fees).

Compare the short list of managed stocks and shares accounts

Vanguard Life Strategy Funds

Minimum
Investment:

£500


ISA?


Pensions?

Management
Fees:

0.22%

Other
Fees:

0.15%

Vanguard may be fairly new to the UK market, but they are a global giant - managing more than $4trillion in assets for more than 20 million people. They are also the Kings of low-cost investing. Vanguard offer a range of products, but if you are looking for something simple their Life Strategy Funds could be a great option. The range includes five ready-made portfolios, each with different levels of risk and return. The Funds charge a simple, super cheap 0.22% per year + 0.15% platform charge.

Wealthsimple Investment Portfolios

Minimum
Investment:

£0


ISA?


Pensions?

Management
Fees:

0.7%

Other
Fees:

0.2%

Wealthsimple is an online investment manager or "robo-advisor". Wealthsimple offers pre-build portfolios that are tailored to your own personal risk profile. Portfolios are diversified with a static asset allocation. Wealthsimple don't have a minimum investment and are offering FREE management on your first £5,000 for your first year to try the service out. After that, Wealthsimple charge 0.7% management fee for accounts under £100,000 and there will be an additional 0.2% in underlying product fees. Accounts include general investment accounts, ISAs and JISAs (Junior ISAs).

Nutmeg Investment Portfolio

Minimum
Investment:

£500


ISA?


Pensions?

Management
Fees:

0.45%

Other
Fees:

0.19%

Nutmeg is a an online investment manager. Nutmeg offers ten portfolios, which range from "cautious" to "adventurous", which you can chose through an online risk profile questionnaire. They have two strategies you can select from - static portfolio (cheaper, 0.45% management fee) or "fully managed" (investment professionals adjust your portfolio dynamically to respond to changing market conditions). Nutmeg's fees for portfolio under £100k are 0.45% for static and 0.75% for managed portfolios. You will also pay around 0.19% per year in other fees.

Scalable Investment Portfolios

Minimum
Investment:

£10,000


ISA?


Pensions?

Management
Fees:

0.75%

Other
Fees:

0.19%

Scalable is a "robo-advisor" which uses technology and risk-based models to build investment portfolios based on your individual risk profile, determined through an online questionnaire. Portfolios will be diversified, built using low-cost products and automatically adjusted to respond to market conditions. They have a flat fee structure of 0.75% per year in management fees and around 0.19% per year in underlying investment costs.

Hargreaves Lansdown Ready-made portfolios

Minimum
Investment:

£1,000


ISA?


Pensions?

Management
Fees:

1.35%

Other
Fees:

0.45%

Hargreaves is a platform which lets you design and trade your own investment portfolios, but they do have some "ready-made" portfolios. There are a number of these you can chose from, based on whether you want "growth" or "income" and whether you want a "conservative", "balanced" or "adventurous" portfolio. You will generally pay a platform fee to open an account with HL (tiered, depending on size of account, starting at 0.45% up to £250,000) and also a management fee between 1.35% and 1.46% for the actual portfolio.

Our summary table in a non-exhaustive list of just some of the major products out there. We’ve tried to keep the column headers to a minimum, while providing you with the information we think you will care about the most. Before opening any bank or savings account, you should be sure that you do a full review of the product on its website and thoroughly read the terms and conditions. None of the information in this table is designed to provide advice, but only to empower you to help make your own decision. If you have any suggestions on how we can improve our table, please drop us a mail.

Vanguard Life Strategy Funds


Vanguard may be fairly new to the UK market, but they are a global giant - managing more than $4trillion in assets for more than 20 million people. They are also the Kings of low-cost investing. Vanguard offer a range of products, but if you are looking for something simple their Life Strategy Funds could be a great option. The range includes five ready-made portfolios, each with different levels of risk and return. The Funds charge a simple, super cheap 0.22% per year + 0.15% platform charge.


Minimum Investment: £500
ISA?
Pension?
Management Fees: 0.22%
Other Fees: 0.15%


Apply


Wealthsimple Investment Portfolios


Wealthsimple is an online investment manager or "robo-advisor". Wealthsimple offers pre-build portfolios that are tailored to your own personal risk profile. Portfolios are diversified with a static asset allocation. Wealthsimple don't have a minimum investment and are offering FREE management on your first £5,000 for your first year to try the service out. After that, Wealthsimple charge 0.7% management fee for accounts under £100,000 and there will be an additional 0.2% in underlying product fees. Accounts include general investment accounts, ISAs and JISAs (Junior ISAs).


Minimum Investment: £0
ISA?
Pension?
Management Fees: 0.7%
Other Fees: 0.2%


Apply


Nutmeg Investment Portfolio


Nutmeg is a an online investment manager. Nutmeg offers ten portfolios, which range from "cautious" to "adventurous", which you can chose through an online risk profile questionnaire. They have two strategies you can select from - static portfolio (cheaper, 0.45% management fee) or "fully managed" (investment professionals adjust your portfolio dynamically to respond to changing market conditions). Nutmeg's fees for portfolio under £100k are 0.45% for static and 0.75% for managed portfolios. You will also pay around 0.19% per year in other fees.


Minimum Investment: £500
ISA?
Pension?
Management Fees: 0.45%
Other Fees: 0.19%


Apply


Scalable Investment Portfolios


Scalable is a "robo-advisor" which uses technology and risk-based models to build investment portfolios based on your individual risk profile, determined through an online questionnaire. Portfolios will be diversified, built using low-cost products and automatically adjusted to respond to market conditions. They have a flat fee structure of 0.75% per year in management fees and around 0.19% per year in underlying investment costs.


Minimum Investment: £10,000
ISA?
Pension?
Management Fees: 0.75%
Other Fees: 0.19%


Apply


Hargreaves Lansdown Ready-made portfolios


Hargreaves is a platform which lets you design and trade your own investment portfolios, but they do have some "ready-made" portfolios. There are a number of these you can chose from, based on whether you want "growth" or "income" and whether you want a "conservative", "balanced" or "adventurous" portfolio. You will generally pay a platform fee to open an account with HL (tiered, depending on size of account, starting at 0.45% up to £250,000) and also a management fee between 1.35% and 1.46% for the actual portfolio.


Minimum Investment: £1,000
ISA?
Pension?
Management Fees: 1.35%
Other Fees: 0.45%


Apply


Explainers for Managed Stocks and Shares Accounts

Managed Stocks and Shares Accounts

What is a managed stocks and shares account?
Stocks and shares accounts are exactly that - they are investment accounts which let you invest in "stocks and shares". Essentially, you are able to invest your money however you like (within the boundaries of UK regulation). Most online platforms will allow you to invest in listed securities such as company shares, passive investment funds (funds which aim to replicate a certain market - for example the UK stock market) or active investment funds (funds managed by an investment professional who are trying to beat the returns of the market).

This page focusses on "managed" stocks and shares accounts. These are accounts that make it easy for you to invest your money across a broad, diversified portfolio, without you having to make specific investment decisions. Typically, you will select a portfolio based on your return requirements and risk tolerance and off it goes.

Who can open a stocks and shares account?
Most stocks and shares investment accounts in the UK are designed for UK investors. If you are from outside of the UK or pay taxes elsewhere, you should check the account terms and conditions.

Can I have more than one stocks and shares account?
Absolutely. You can have as many stocks and shares accounts as you like in most circumstances. You just need to be sure that you only use your ISA limit of £20,000 in total across all ISA accounts (including both cash ISAa and stocks and shares ISAs).

Will my stocks and shares account cost me anything?
The short answer is yes. You will be charged fees on your stocks and shares accounts. Usually, you will be charged fees as a percentage of how much money you have in the account. In addition, you will often pay fees on investment products and you may also be charged commissions on transactions that you do.



Managed Stocks and Shares Accounts - how safe are my savings?

The last thing you want is to lose your savings, so let’s go over how you are protected from the worst case scenario.

Are my savings protected in a stocks and shares account?
Whenever you open a stocks and shares account it's prudent to read the details on the provider's website about how safe your money is. Importantly, make sure you use a reputable provider. Many investment accounts will hold your funds in segregated accounts, which means that even if the account provider fails, your money will still be in tact (although it may take a little while to get your money back). In a really bad scenario the Financial Services Compensation Scheme will cover you for claims of up to £50,000 against each financial institution.

Could I lose money in my stocks and shares account?
Yes. You could. Investments go up and down and you shouldn't be surprised if you account declines 50% of the time. Investments can be volatile and so should generally be viewed over a longer time horizon. This means that while your investments will go up and down and zig zag around over the shorter term, you hope to capture the premium of being invested in the market over the longer term.

The nice thing about managed stocks and shares accounts is that you have a team of investment professions and some smart algorithms helping you to set-up your investment portfolio and manage it. You will be able to select a portfolio based on your return targets, risk tolerance and investment time horizon. The providers of these stocks and shares accounts will then show you how your portfolio is expected to perform in different scenarios.

It is incredibly important that you feel you fully understand the risks involved in a stocks and shares account and are comfortable with your portfolio. This will help you to stick with your investment strategy and ensure you have the best chance of achieving your long term objectives.

If you don't think you will be comfortable with a stocks and shares account, you may want to check out our guide to cash savings.



Stocks and Shares ISAs

Whenever you read about savings, you will probably hear a lot about ISAs. So what are they and why should you care?

What is an ISA?
ISA stands for Individual Savings Account, and they allow people to save or invest a certain amount of cash every year free of taxes.

How much can I save in an ISA?
It differs year on year, depending on government policies. At the moment, your annual ISA allowance is £20,000.

Your ISA allowance is per year. Once you’ve saved as much as your ISA allowance, that’s it, you can’t add anymore to the account. Also, if you withdraw the savings from your ISA at any point, you have lost your allowance, you can’t re-add until the new tax year. Your ISA allowance will not roll over year to year, so to get the maximum benefit you should always aim to save your entire allowance every year.

What kinds of ISAs are there?
An easy access ISA is just that… It’s an ISA that allows you to access your cash easily. This means you should be able to withdraw your savings instantly, preferably online, without paying a penalty fee.

To get slightly higher rates on your cash ISA savings, you may have to lock your money up for a certain period of time. Generally, the longer you commit to, the higher the rates you can benefit from. You technically can access your money at any time, but you will be hit with some sort of penalty fee. You can read more about what’s on offer in our guide to cash savings.

If you have an even longer time horizon and you can accept some more risk, you can also invest your ISA in a stocks and shares account, like those outlined on this page.

I can get higher rates in my current account. Should I still open an ISA?
If you are definitely only planning on saving for 12 months, and after that you are going to withdraw your money, then you should absolutely just go for the highest rate you can possibly get for that period of time.

If there’s a decent chance you are going to leave your ISA savings indefinately, then you should always try and use your allowance while you can. Even if rates are not good this year, they may be a lot more attractive in future years. If you don’t use your ISA allowance, you will lose it.

Can I switch my ISA provider?
Yes. You can definitely switch ISA providers. But you will have to check the policy of where you want to switch to, as they may only be offering certain rates on new ISA money and not accept transfers of previous years’ ISAs.

Should I just go with my bank’s online cash ISA?
Just because a certain bank is right for your everyday, personal banking, doesn’t mean it’s a good choice for your cash ISA savings. With central bank rates so low at the moment, many cash ISAs offer rates very close to zero, so just defaulting to your banks offering may not be a good choice.

We would always recommend that you review your ISA holdings at the start of every year. It’s a good time to review everything on offer from a fresh perspective and ensure you are using your ISA allowance where possible.

Don’t be scared of switching savings accounts. Providers want to attract you, and with online technology the whole process can be pretty pain free and quick. It’s definitely worth a little bit of effort.



Managed Stocks and Shares Accounts - Fees

Should I care about fees?
YES! Fees are incredibly important to think about in relation to an investment portfolio and the same is true for stocks and shares accounts. This is because fees have been shown to be the best indicator of investment performance (Morningstar research), which means the lower your fees are the higher returns you'll achieve if all else is equal.