Stocks & Shares ISAs

Alexland

jicms said:

If I used Vanguard instead of a robo I believe I would need to make my own decisions which I'm not capable of doing?
Isn't Vanguard LifeStrategy heavily weighted towards the UK which I wouldn't be confident about?

Why are you not capable of doing that? The stock market proportion of the VLS series has around 25% home bias. I just checked the Nutmeg fixed allocation risk level 4 of 5 and the top holding is over 20% in a FTSE100 tracker so about the same. If you don't want the UK bias try the HSBC Global Strategy fund series:

https://www.hsbc.co.uk/investments/isas/hsbc-global-strategy-portfolios/

DragonQ

masonic said:

Yes, that's right. If you were to go with iWeb, you'd want to minimise how often you topped-up. My approach has been to use a few 12 month regular saver accounts to build up a lump sum to invest when they matures - the lack of good regular savers around at the moment makes that a less attractive option.

Yeah that seems sensible, although regular savers are rather pants right now!

I think I'll go with iWeb, for two reasons:

1) If another cashback offer pops up in April for a monthly ISA investment then it'll be far more beneficial to go for that than to invest a fund (since cashback works out as a 30-35% return typically). This means I'd be able to make 0 investments into the iWeb/Vanguard ISA anyway.

2) I have a good grasp on our money situation so I'm happy to make fewer, larger deposits per year rather than monthly deposits.

Now I suppose I just need to convince my wife to transfer her Nutmeg ISA (which she makes zero contributions to currently) to iWeb too, since the £25 would pay for itself in under 2 years.

jicms

Alexland said:

jicms said:

If I used Vanguard instead of a robo I believe I would need to make my own decisions which I'm not capable of doing?
Isn't Vanguard LifeStrategy heavily weighted towards the UK which I wouldn't be confident about?

Why are you not capable of doing that? The stock market proportion of the VLS series has around 25% home bias. I just checked the Nutmeg fixed allocation risk level 4 of 5 and the top holding is over 20% in a FTSE100 tracker so about the same. If you don't want the UK bias try the HSBC Global Strategy fund series:

https://www.hsbc.co.uk/investments/isas/hsbc-global-strategy-portfolios/

Thanks for your help.

 My Nutmeg risk is 7/10 with 31% UK holding so Vanguard LS is less. 

 However I don’t have any knowledge of stock market investing and a robo is the only reason I’ve got into it in my senior years.

DragonQ

If I transfer an existing S&S ISA into iWeb, should I choose to transfer it as cash or stocks, given it's all probably going into a fund anyway?

masonic

DragonQ said:

If I transfer an existing S&S ISA into iWeb, should I choose to transfer it as cash or stocks, given it's all probably going into a fund anyway?

In your situation you'd choose cash because you won't be able to keep your existing investments. Transfers in cash are generally a lot quicker, but you spend some time out of the market while your new provider waits to receive the cash. Those who hold mainstream investments can transfer stocks so they keep exactly what they are currently holding, but this is a much slower process since the fund managers need to re-register the investments to the new platform and don't put a lot of resource into dealing with such requests.

Alexland

jicms said:

 My Nutmeg risk is 7/10 with 31% UK holding so Vanguard LS is less. 

 However I don’t have any knowledge of stock market investing and a robo is the only reason I’ve got into it in my senior years.

So if you are 7 measured out of 10 (not 5 for 'fixed allocation' portfolios) then you are in a more expensive 'fully managed' portfolio which is nearly 70% equities (company shares) and 30% other (mostly fixed income bonds) and for that the total costs are over 1% pa (0.75% Nutmeg, 0.19% fund manager and 0.07% market spread).

70% equities is a mid point between balanced (c60%) and adventurous (c80%) multi asset funds. Similarly if you switched to the less expensive Nutmeg fixed allocation portfolios you would have to chose between being risk level 3 (60%) and risk level 4 (80%) invested. Nutmeg haven't offered any statistically significant evidence to say their 'fully managed' portfolios perform better and the user interface is exactly the same just add money and watch it go up and down.

It's really not very hard opening an investment account and putting your money into a multi-asset fund (at either 60% or 80% risk profiles) or you could even do a 2 fund portfolio putting 70% into a global stock market tracker and 30% into a global bond tracker fund. But if you are happy with Nutmeg (even though many of us would consider them very expensive) then you can carry on but there are better options. Unfortunately transferring your ISA out of Nutmeg would involve time out of the market.

DragonQ

masonic said:

DragonQ said:

If I transfer an existing S&S ISA into iWeb, should I choose to transfer it as cash or stocks, given it's all probably going into a fund anyway?

In your situation you'd choose cash because you won't be able to keep your existing investments. Transfers in cash are generally a lot quicker, but you spend some time out of the market while your new provider waits to receive the cash. Those who hold mainstream investments can transfer stocks so they keep exactly what they are currently holding, but this is a much slower process since the fund managers need to re-register the investments to the new platform and don't put a lot of resource into dealing with such requests.

I see. Is the reason I won't be able to keep the stocks because Moneyfarm is a robo-investor?

If I transfer it as cash and then put that cash into a fund, that doesn't count as using my ISA allowance because the cash was already in an "ISA wrapper", correct?

masonic

DragonQ said:

masonic said:

DragonQ said:

If I transfer an existing S&S ISA into iWeb, should I choose to transfer it as cash or stocks, given it's all probably going into a fund anyway?

In your situation you'd choose cash because you won't be able to keep your existing investments. Transfers in cash are generally a lot quicker, but you spend some time out of the market while your new provider waits to receive the cash. Those who hold mainstream investments can transfer stocks so they keep exactly what they are currently holding, but this is a much slower process since the fund managers need to re-register the investments to the new platform and don't put a lot of resource into dealing with such requests.

I see. Is the reason I won't be able to keep the stocks because Moneyfarm is a robo-investor?

Yes, technically it might be possible that the underlying investments Moneyfarm has used to build your robo-portfolio could be transferred, but this would not be useful to you because you will want to move into a simpler one fund solution

It might be helpful for you to know some timescales, as I've done about half a dozen transfers to iWeb over the last 12 months (emptying out the last of my P2P investments ahead of Covid/Brexit chaos). Old provider normally acknowledges receipt of transfer form within ~5 working days (investments would be sold at this point), money credited to iWeb account 3-5 working days later. Was a lot slower during the original lockdown, but much improved once office working resumed.

DragonQ said:

If I transfer it as cash and then put that cash into a fund, that doesn't count as using my ISA allowance because the cash was already in an "ISA wrapper", correct?

That's right, transfers do not count towards your allowance.

DragonQ

masonic said:

DragonQ said:

I see. Is the reason I won't be able to keep the stocks because Moneyfarm is a robo-investor?

Yes, technically it might be possible that the underlying investments Moneyfarm has used to build your robo-portfolio could be transferred, but this would not be useful to you because you will want to move into a simpler one fund solution

It might be helpful for you to know some timescales, as I've done about half a dozen transfers to iWeb over the last 12 months (emptying out the last of my P2P investments ahead of Covid/Brexit chaos). Old provider normally acknowledges receipt of transfer form within ~5 working days (investments would be sold at this point), money credited to iWeb account 3-5 working days later. Was a lot slower during the original lockdown, but much improved once office working resumed.

DragonQ said:

If I transfer it as cash and then put that cash into a fund, that doesn't count as using my ISA allowance because the cash was already in an "ISA wrapper", correct?

That's right, transfers do not count towards your allowance.

Thanks a lot for all the help, ISA transfer form is in the post. No more ~£7 per month fees from Moneyfarm!

bowlhead99

jicms said:

Alexland said:

jicms said:

I have held a S&S ISA account with Nutmeg for the past year.  I now want to invest this year's ISA entitlement.  Is there any advantage opening a different provider's "do it for me" account over depositing into a new pot with Nutmeg?  

You pay higher ongoing charges for the convenience of using robos such as Nutmeg, Wealthify, Moneyfarm, etc. You can get roughly the same underlying asset allocation using a multi-asset fund series such as Vanguard LifeStrategy or HSBC Global Strategy which can be held on Vanguard Investor, HSBC Investment Centre or iWeb (for larger amounts). As a rule of thumb you should be able to cut your total investment costs by at least 50%.

If I used Vanguard instead of a robo I believe I would need to make my own decisions which I'm not capable of doing?

If you use an investment platform with lots of choice, you need to make a decision what you would like to choose. So yes you would choose which one of the various branded mixed asset investment portfolios you prefer to trust, e.g. HSBC Global Strategy Balanced or Vanguard Lifestrategy 60 equity or L&G Multi Index 5 or 6 or whatever.

Whether you are 'capable' of doing this is perhaps a matter of semantics - presumably you feel you were quite 'capable' of choosing Nutmeg to use their modelling to build you a (e.g.) medium-risk investment over choosing Wealthify doing that or Moneyfarm doing that or HSBC's Global Strategy investment team doing that or Vanguard's Lifestrategy creators doing that, though now you are considering whether a different provider's robo account might produce better results. 

Some people prefer that the robo provider holds their hand through deciding whether they should invest at risk 1 out of 10, or 10 out of 10, or 7 out of 10. Once you are decided that 'in the middle of the extremes' is where you want to be, it is not too difficult to look at (e.g.) the HSBC range and decide that you would prefer their 'in the middle' with their 'Balanced' fund rather than be at the low end of risk and reward with 'Cautious' or 'Conservative' or the higher end with 'Dynamic' or 'Adventurous'. 

The Vanguard one is perhaps more complicated because you have to pick a percentage of equities you want, which requires you to know what equities are; and they are not going to shift any target allocations in response to changing economic conditions which means it is a cheap static model like Nutmeg's Static Portfolios rather than being a risk-targeted model like HSBC Global Strategy or L&G Multi Index or Nutmeg's Fully Managed portfolios (which would allow the allocations to slip around a bit as the fund managers see fit over the course of the economic cycle).

Isn't Vanguard LifeStrategy heavily weighted towards the UK which I wouldn't be confident about?

Lifestrategy is not extremely heavily weighted towards the UK, as 75% of its equity holdings are not listed on the UK stock exchanges and a large proportion of the UK allocation that it does have will be major FTSE100 companies which are multinational businesses operating globally. If you didn't like the UK allocation offered by Vanguard you could perhaps prefer the approach of HSBC Global Strategy which has a smaller UK allocation and larger international but then hedges the exchange rates on some of the international holdings to limit some of the natural volatility that comes with investing such a large proportion of the assets overseas.

If you think, "well, I wouldn't be confident with a high allocation to the UK because it might be wrong so I won't use Vanguard Lifestrategy, and I wouldn't be confident with a low allocation to the UK because it might be wrong so I won't use HSBC Global Strategy, so instead I should just reject those two professional portfolio builders and go with Nutmeg where I won't ask them how much they are going to allocate to the UK, and simply trust that whatever they think is best to do will work out just fine", it doesn't seem like you have solved the issue other than just putting your head in the sand and trusting that Nutmeg get it right. It's not particularly rational to suspect that they will get it more right than HSBC, for example. 

If you take a peek 'under the skin' at Nutmeg's managed portfolios you can see that they have over 20%+ of their equity investments in the  UK FTSE100 and FTSE250, particularly in the medium risk portfolios such as level 7 where the UK indexes make up 25-30% of the equities (because over 20% of the portfolio is UK equities, while equities overall are under 100% of the portfolio, so the UK share of total equities is going to be quite a bit more than 20%).

So if you are not confident about a 'high' weighting to the UK (bearing in mind the UK represents only about 5% of world stock market value and GDP) then you probably wouldn't use Nutmeg.  However, there is some sense in having a reasonable proportion of your assets exposed to the economy in which you live, and Nutmeg's portfolios don't look like complete garbage. They are probably fine. It's just that you pay more to use them (in ongoing management charges and fund costs) than you would get if you went on a mainstream investment platform and paid a platform fee and then the fund costs of (e.g.) HSBC Global Strategy, L&G Multi Index, Vanguard Lifestrategy, Liontrust MA, Blackrock MyMap, etc etc.

I'm not saying that going on an investment platform with thousands of options is a great choice for someone who is a self-confessed 'don't know what I'm doing' kind of person who prefers much more limited choice to protect themselves from making silly mistakes. However, as this is a moneysaving site, it's always worth pointing out that Nutmeg et al are effectively charging you a premium price for a cheap solution with the ostensible 'value add' being that they will remove choice. The guidance towards a suitable solution is what you are paying the premium for, even though it's not proper tailored advice like you would have from an IFA.

It amounts to 'if you would like to have bigger long term gains but risk the value going up and down in a more volatile way, we suggest you buy one of our higher risk portfolios, but if you are the other way round use one of the cautious ones, or if you are in the middle use an option in the middle'.  With a little research you could find oodles of fund management companies offering those sort of solutions directly on most of the mainstream ISA investment platforms - the aforementioned brands are just some of the more popular ones that have portfolios constructed similarly to Nutmeg.