AJ Bell Youinvest, MoneyFarm & Vanguard offer best performing investment solutions to ‘medium risk’ DIY investors over a 2 year period

An independent guide for consumers, January 2020
Trying to work out which investment providers have performed well after fees is no easy task. After much frustration and endless Excel spreadsheets, we decided that the easiest and least controversial way to measure who does well was simply to open an account, stick £500 in and see how they did.

We opened 19 accounts in the first week of January 2018, buying a ‘medium risk’ investment fund or portfolio with an initial investment of £500. Now of course in practice, interpretations of what is ‘medium risk’ differ. The closest we can come to comparing like with like is to measure collections of investments which have as close to 60% in shares as possible.

We bought ‘ready-made’ investments – these are either ‘funds’ or ‘portfolios’ which are mixed bags of lots of investments from all over the world, curated and managed for us, so we can just pick once and leave the experts to get on with the small print. The ‘playlists’ or albums of the investment world.

So how have they done?

After all fees on the £500 portfolios, the top 5 performers over the 2 year period were:

The numbers represent what is left in the investor account after performance and charges.

The lowest 5 performing investment options, net of all charges, of those investment platforms offering proprietary funds or portfolios were:

 Before you rush to judge, Barclays, Fidelity and The Share Centre all have minimum monthly fees or an element of fixed £ fees so it is not fair to look at the above without referencing this. These relatively high charges on our small £500 accounts will of course eat into the balance.

 

The chart below shows what we made or lost over the last 2 years, after all charges have been deducted.  

Notes: As this is a £500 account for illustrative purposes, those platforms with a fixed fee element or a monthly minimum look disproportionately poor and are highlighted here in grey. We include Interactive Investor for comparison – as they do not have proprietary funds, we used the Vanguard LifeStrategy 60% fund and bought this on the II platform.

 

The contributing factors to any relative and short-term underperformance were charging structures (Fidelity and Barclays both have minimum £ monthly charges which impacts a £500 account), fees (The Share Centre and Hargraves Lansdown have ongoing fund charges of 1.56% and 1.43% respectively which are much heftier than the ‘passive’ robo advisers ) and asset allocation (Charles Stanley Direct had just 44% in shares in a year when global stock markets typically did well. So a conservative chunk in shares gives the portfolio less oomph).

 

A fairer way to look at performance for those with total sums of £50,000 or more……

 

The below is arguably a fairer way of illustrating performance, removing the fixed fee versus the % fee argument from the table for a second. If we assume that the £500 fund or portfolio was held as part of a bigger £50,000 investment account, this of course dilutes the blow of any fixed fees or monthly minimums.

 

For example, Barclays has a £4 a month minimum fee which sounds pretty reasonable, but takes a huge bite out of a £500 account every month! Looking at this as part of a £50,000 portfolio, the impact of this minimum monthly charge disappears and we see the Barclays relative performance look much healthier.

 

Provider

Our £500 performance (assuming held in a larger £50,000 portfolio)

The Share Centre

504

Hargreaves Lansdown

506

Charles Stanley Direct

510

Santander Investment Hub

529

True Potential Investor

534

Fidelity

536

Wealthify

536

Aviva

537

Barclays Smart Investor

539

Interactive Investor

541

Nutmeg

544

Bestinvest

544

IG

547

Wealthsimple

547

Vanguard

548

MoneyFarm

551

AJ Bell Youinvest

554

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Forget all that being fair stuff, what actually happened to your £500?

 

Here’s what was left in the accounts after charges on our £500 investment.

 

We’ve also shown you how much these funds or portfolio had in shares too. The higher the % of shares, the more volatile you’d expect these portfolios to be. So also think about risk. Certain providers might have got you from A to B faster over the last few years, but if they’ve driven at 120 mph on the way, are you comfortable with that? If the shares %s creep up from 60%, some may find that too risky and this can of course backfire when global shares have a meltdown.

 

So don’t just pick on how providers have done over the last 2 years. Pick the blend of shares which feels right for you too. Lots of the options covered here have free ‘risk profilers’ online which will help you work out what your ideal % allocation to shares might be.

 

Provider

Account values Jan 2020

Shares (%)

Interactive Investor

321

59

Barclays Smart Investor

434

50

Fidelity

444

55

The Share Centre

459

52

Hargreaves Lansdown

506

74

Charles Stanley Direct

510

44

Santander Investment Hub

529

58

True Potential Investor

534

58

Wealthify

536

47

Aviva

537

40

Nutmeg

544

46

Bestinvest

544

66

IG

547

51

Wealthsimple

547

50

Vanguard

548

60

MoneyFarm

551

76

AJ Bell Youinvest

554

61

 

Huge difference in ‘medium risk’ solutions – you might get a Korma or a Vindaloo

A DIY investor selecting a ‘medium risk’ option will be offered a wide range of different options.

 

Two years ago, our investment funds or portfolios had 60% in shares- or as close as was available. Just two years on and the picture has changed. The lesson here is to check in at least once a year and make sure that the thing you bought still looks like the thing you have!             

 

And don’t assume they are all broadly the same. Hargreaves Lansdown’s portfolio had just 14% exposure to US markets compared to AJ Bell’s 41%. Aviva, Charles Stanley then Nutmeg had the lowest overall shares allocations with 40%, 44% and 46% respectively. The average % in shares of all 19 providers in the medium risk bracket was 53% as at January 2020 compared to a much higher 68% in January 2019. This tells us they collectively got spooked and moved en masse to safer pastures, holding less in shares, probably anticipating worse markets than we in fact saw.

 

That’s it for our 2020 summary for investors  - you can read more at boringmoney.co.uk or sign up for our weekly blog for ongoing tips, commentary and opinion! Alternatively our Best Buy tables will show you what we make of these providers when it comes to websites and service, along with what 1000s of their customers have to say as well.  Think of us as the investment lovechild of TripAdvisor and Which? !

 

Thanks for reading

 

Holly Mackay

CEO, Boring Money


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