Stocks and Shares ISA

Jack160991Jack160991 Forumite
3 Posts
MoneySaving Newbie
What are peoples opinions on using Plum for their Stocks and Shares ISA? Are they a reliable company or is it a safer bet to use a more well known company such as Hargreaves Landsdown?

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  • edited 29 December 2020 at 1:02PM
    tacpot12tacpot12 Forumite
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    edited 29 December 2020 at 1:02PM
    Feels risky to me. What does Plum offer that Hargreaves Landsdown and the other established providers do not? 
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.
  • dunstonhdunstonh Forumite
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    What are peoples opinions on using Plum for their Stocks and Shares ISA? Are they a reliable company or is it a safer bet to use a more well known company such as Hargreaves Landsdown?
    Plum is a very different investment option to HL.  They are not comparable.
    It's a bit like asking us whether you should buy tomatoes or eggs for the dish you are making without telling us what you are making.

    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • edited 29 December 2020 at 3:11PM
    bowlhead99bowlhead99 Forumite
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    edited 29 December 2020 at 3:11PM
    I've no doubt that some people who are already using Plum will think it is fine. But the fund range is limited and not really cheaper than buying elsewhere from longer running or better established businesses which offer greater options.

    For example, if you buy the 'slow and steady', 'balanced bundle', or 'growth stack' fund, you are just investing in the Vanguard LifeStrategy 20, 60 or 80% Equity fund respectively, being exposed to the same management and operating costs of running those funds as anyone who bought those funds through any other platform (including Vanguard's own). On top you will need to pay 0.15% a year to Gaudi Regulated Services as a platform administration fee (same price as Vanguard's own), and will need to pay £1 a month to Plum for the premium 'Plum plus' product that allows you to get access to any of the investing options in the first place (a fixed monthly fee for just having the account is not something you would pay if using Vanguard's own investment platform.

    So if you wanted those multi-asset funds (or the more specialist single sector funds such as 'Rising Stars' fund which is Vanguard Emerging Markets, or 'American Dream' which is Vanguard US Equity Index, or 'Best of British' or 'European Essentials' which are the Vanguard UK index or Developed Europe ex-UK index funds respectively) it would be cheaper to just open your ISA with Vanguardinvestor.co.uk and fund it by direct debit and have the exact same management fee and 0.15% admin/platform fee. You would have access to a wider range of funds, albeit without the cool nicknames.

    If you were trying to build your own asset mix from geographic-focused single-sector funds at Plum (e.g. UK, Europe, US etc) you would come unstuck as they don't bother to offer a Japan fund or Developed Asia ex-Japan; if you wanted 100% equities across all sectors, Plum don't offer anything like a global tracker - only a tech company tracker or a healthcare tracker or the specialist regional funds or the mixed asset (equity and bond) funds. So if you want to 'build your own' portfolio they are not a great place to do it.

    Though if you were really at the 'invest from only £1' end of the scale, there is no way you need specialist portfolio choices anyway. One fund is fine.   And while 'invest from only £1' sounds great and flexible for people who are not investing much, Plum charge you £1 a month for the service. So if you did put £2 into their product during the month, you'd have paid 50% of it as a fee before you got to invest the remaining pound.  So not as attractive as it initially sounds for people trying to invest the odd fiver.

    Plum do offer a couple of other non-Vanguard funds which Vanguard don't retail on their own platform - the L&G technology trust, the L&G health and pharma tracker, and an Aberdeen Standard UK Ethical fund.  So if you wanted to invest in a Vanguard mixed asset fund and a UK ethical fund and a tech fund, you couldn't use Vanguard's own platform for your ISA and would need to use a more comprehensive platform which covers all the major investment managers - like Hargreaves Lansdown, AJ Bell or IWeb etc,. They all have their own pricing structures, but are better than Plum by having have a huge array of other funds to choose from if you are the type of investor who is investing significant amounts and actually wants to research funds rather than sticking with a 'Lifestrategy 80' type fund.

    What I don't like about Plum is the way they advertise their fund investment service to naive investors (really, the service is simply reselling other peoples funds through their app for a higher cost admin to pay for the convenience)  as being such a great deal compared to not investing it, using recent 'average' results from the funds they offer:

    On the homepage of their investments section they have a customisable infographic (allowing you to change the number of years and amount per month invested but not the rates of return) which compares cash in a bank at 0.01% AER with investment returns at 11.7%, allowing you to visualise that if you had put £250 a month into a bank you would have a small block on the bar chart representing £30,015 from your £30,000 deposit after a decade versus a big block of £54704 from your equivalent 'deposit' with Plum.

    Or £220k from £60k invested if you did it for 20 years - almost quadrupling your money even though on average each pound of your money drip-fed would only have been at work for 10 years. Is that really what a wide-eyed young investor should expect from their product?!

    It's disingenuous to pretend that anyone should expect 11.7% a year compounded over the next ten years from typical equity investments. The 'average' figures their funds got over the last five years included the tech fund which has done a spectactular 29% a year compound return over last five years, but no rational person would expect a fund to get 29% compounding over the next ten years from that fund, nor 17% from a US equity tracker measured in pounds. If you were receiving a pension projection the FCA would demand the provider show a range of potential returns or a modest estimate, probably 5-7% makes sense as a modest growth expectation for a blended portfolio from now to a millenial's retirement, and with a shorter timescale like 2-5-10 years it is more of a crapshoot. Clearly investment will do better than cash in the long long term but people should be realistic about what they are offering.

    If you click through to the link that shows their performance history they start up front with the sage warning about how "past performance is not a reliable indicator of future performance" is sound advice, and all too true... and then say that it's ironic that most investors really do only have historic performance on which to make their decision, when what matters is how they will perform in future... and then follow up with a cop-out along the lines of, 'heh, unfortunately we can't predict the future so it's only natural to look at how these funds performed recently' before showing you how the tech fund got 29% and US index got x% and UK index got y% etc.

    If they really cared about you knowing the risk and volatility of the funds they would have given you 20-year charts of the various indexes so you could watch the L&G Technology Trust that they offer plummet over 75% between its launch in late 2000 and when it bottomed out in October 2002; or  you could see the S&P tumble 55% from 2007.

    This kind of advertising by app-based investment services is terrible IMHO. 

    "Yes of course investments can go down as well as up, but just look at how much more you'd have after two years if you invest into our service at 11.7% instead of using a bank at 0.01% AER!   The 11.7% isn't guaranteed of course, but you can't customise the illustration to show you investing £10,000 in our equity funds and have it fall at 25-50% a year for a couple of years instead, as might happen... Just focus on what that loverly 11.7% could buy you! And if you later feel you were swindled because the investment didn't grow at that rate, remember we did tell you all along that past performance is not a reliable indicator of future performance!"

    As an aside, they describe the American Dream Fund as being composed of "Shares of the 500 largest public companies in the USA, also known as the S&P 500" and the Best of British Fund as having the composition of "Shares of the 100 largest public companies in the UK, also known as the FTSE 100".  A look at the underlying fund in each case will show that it's actually Vanguard's US and UK indexes (the former being S&P total market, efficiently represented in the Vanguard product by 3500 stocks rather than 500 stocks, and UK All-Share being 600 stocks rather than just FTSE100. The UK FTSE100 is only just under 80% by value of the UK All-Share). 

    So what they are offering in those specialist funds (not that newbie investors should buy specialist funds anyway...) is actually a better product than what they are say they're offering.  However, they know that millennials will be on the lookout for buzzwords they've heard of, so offering 'S&P500' and 'FTSE100' is easier for lazy advertising copywriters than trying to explain what the 'US total Market' actually covers and why you would want to look beyond the Apples and Teslas if taking exposure to a country's market. 
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