Nutmeg ‘SRI’ JISA advice

bpk101

I’m wanting to open a Junior S&S ISA for my 2 year old son and after doing a fair bit of research on available products from the likes of Fidelity, Vanguard, Nutmeg etc. i’m leaning towards one of Nutmegs fully managed ‘Socially Responsible’ JISA’s. At £56 per annum it’s not the cheapest option but seems very easy to manage which I like. 

A few questions...

Given I’ll be saving over a 16 year period before the money is accessible by my son, would a smart strategy in terms of risk be to split the term into 3 starting high risk (6 years), moving to medium risk (5 years), then low risk (last 5 years)?

Both myself and my spouse are keen to invest in socially responsible funds, but are we forfeiting much bigger returns by doing so?

Finally, any thoughts on using Nutmeg vs. the much talked about Fidelity and Vanguard products available?

Thanks 

Alexland

Nutmeg are not £56 pa their total cost for SRI portfolios is 1.12% which is what people paid to invest 20 years ago.

£56 is just their example of what 1.12% would be each year on a hypothetical static £5k investment.

If you are going to go higher risk to start with consider accepting Fidelity's very kind offer to run child accounts for free (provided you stick to traditional funds) and perhaps invest in something like the Vanguard ESG Developed World fund which only costs 0.20%. Our kids are with Fidelity for both their JISAs and SIPPs.

My view is that SRI /ESG investing can deliver equivalent or even better performance provided that you keep costs under control and you are aware that it slightly damages the diversification by filtering out the bad stuff.

In terms of reducing risk or just moving to a cash product as the withdrawal date approaches yes but it depends if they will really be spending it at 18 or keep investing for a house deposit at age 30, etc. Judge that closer to the time in the 5-7 years before withdrawal.

dunstonh

Finally, any thoughts on using Nutmeg vs. the much talked about Fidelity and Vanguard products available?

Basically different propositions.    Nutmeg is not a platform but retails it's own pre-built portfolios   Fidelity is a whole of market platform.   Vanguard is a restricted platform offering only own brand investments.

Normally, people wanting an ESG investment strategy are more focused on the ESG criteria of the investments and not a few pounds here and there of costs.   So, which ESG options do you find more favourable?

kuratowski

bpk101 said:

Both myself and my spouse are keen to invest in socially responsible funds, but are we forfeiting much bigger returns by doing so?

I take the view that my objectives are not purely financial, the environmental and social impacts of my investments also matters to me.  If that means sacrificing a bit of growth and incurring higher costs, then so be it.  (It's a luxury to be in a position that you can make that choice.)  It's a bit hard to judge how it will play out over the long term, especially as so many ESG funds were launched comparatively recently.

As above, Vanguard and Nutmeg only provide a tiny range of investments, whereas Fidelity would give you a lot more options.  However, the usual advice is to pick the investment before you decide on the platform.  Morningstar has a list of funds sorted by 'sustainability' rating, with the obvious caveat that the rating is not the only thing you need to consider: also look at the sector, investment style, costs, etc.
https://www.morningstar.co.uk/uk/funds/esg.aspx

I should also point out that there's a discussion thread on ethical investing on another board here
https://forums.moneysavingexpert.com/categories/green-ethical-moneysaving

bpk101

Does Fidelity offer a fully managed service in the same way Nutmeg does? 

Whilst I’d like my child’s investments to help responsible organisations with positive goals, I don’t know anywhere near enough about investing to feel comfortable choosing one ethical investment or fund over another and managing it myself ongoing. 

I suppose I’m feeling anxious about biting the bullet, irreversibly signing up for an account only to hit a wall of complex choices and pressing decisions on exactly where I want to invest before I can start depositing any money. 

Is it an easier process than I’m anticipating? Does Fidelity help you choose the best fund once you’ve signed up?

In a nutshell, what is waiting for me on the other side of the ‘Sign Up Now’ button and is it novice friendly? 

Albermarle

Firstly you can access the Fidelity website and see all the investment options, without signing up , so I suggest you do that.


Once you pick a fund (with any provider ) you do not have to manage it . The fund manager does that .

The difference is that Nutmeg have a much smaller range of funds and guide you towards one if them. Fidelity has a much bigger range of funds and other investments but they do not guide you in the same way . However it is easy enough to filter down to the types of funds you might be interested in .

Plus of course Nutmeg are relatively expensive.

dunstonh

Does Fidelity offer a fully managed service in the same way Nutmeg does? 

Fidelity is near whole of market. They offer plenty of multi-asset funds.

Does Fidelity help you choose the best fund once you’ve signed up?

No. However, nor does Nutmeg.   Nutmeg is restricted to their own options and is not whole of market.   It has a flow chart style process to point you in the right direction but it won't be the best fund.  It will be what they think best matches your objectives from their product range.

In a nutshell, what is waiting for me on the other side of the ‘Sign Up Now’ button and is it novice friendly? 

Nutmeg will be simpler in process. Fidelity has the wider choice and for those that know what they are doing, they could end up closer to "best" than Nutmeg.  However, someone that doesn't know what they are doing could end up worse than nutmeg.

Alexland

bpk101 said:

In a nutshell, what is waiting for me on the other side of the ‘Sign Up Now’ button and is it novice friendly?

Fidelity have produced PDF guides with screenshots, for example they have a guide on how to buy a fund.

https://help.fidelity.co.uk/resources/fidelity/how-to-guides/how-to-buy-a-fund.pdf

They also have a guide on how to setup a regular savings (investment) plan

https://help.fidelity.co.uk/resources/fidelity/how-to-guides/how-to-create-an-rsp.pdf

bpk101

Alexland said:

perhaps invest in something like the Vanguard ESG Developed World fund which only costs 0.20%.

I’ve taken a look at the Vanguard ESG fund and was surprised to find it contains companies that I feel are doing the most damage to society, especially the younger generations e.g. Nestle, Facebook, Coca Cola, McDonalds etc. 

Whilst they might tick a few boxes that fulfil some sort of ESG criteria, they’re definitely not companies that I consider helpful or with society’s best interests at heart. 

grumiofoundation

bpk101 said:

Alexland said:

perhaps invest in something like the Vanguard ESG Developed World fund which only costs 0.20%.

I’ve taken a look at the Vanguard ESG fund and was surprised to find it contains companies that I feel are doing the most damage to society, especially the younger generations e.g. Nestle, Facebook, Coca Cola, McDonalds etc. 

Whilst they might tick a few boxes that fulfil some sort of ESG criteria, they’re definitely not companies that I consider helpful or with society’s best interests at heart. 

As has been said earlier you need to look at the ESG criteria of the investments and decide if they aren't are for you and what compromises you are happy to make. 

Vanguard ESG fund is a passive fund, tracks index that has certain companies omitted. To invest with more specific ESG criteria you may have to look at actively managed funds (more expensive than passive). (Note nutmeg doesn't invest in actively managed funds). 

Even if you are happy for Nutmeg to do the choosing (both in terms of ESG and in terms of investments)
probably worth looking at nutmeg's choice of investments to make sure you are happy. 


For socially responsible fund (10/10) the 3 biggest holdings are 

UBS MSCI ACWI Socially Responsible UCITS ETF (28.7%)

iShares MSCI USA SRI UCITS ETF (27.9%)

UBS MSCI United Kingdom IMI Socially Responsible UCITS ETF (18.9%) 

E.g. of the companies you have listed above only can Coca cola in the top ten holdings on the first 2. 


https://www.ubs.com/uk/en/asset-management/etf-private/etf-products/etf-product-detail.gb.en.ie00bdr55927.fundholdings.html
https://www.ishares.com/uk/individual/en/products/283565/ishares-sustainable-msci-usa-sri-ucits-etf
https://www.ubs.com/uk/en/asset-management/etf-private/etf-products/etf-product-detail.gb.en.ie00bynqmk61.fundholdings.html

Alexland

I'd argue that McDonalds have done a lot to reduce the use of plastics in recent years and the activities of Google are probably just as bad as Facebook but they tend to avoid the bad publicity better. Anyway it looks like the OP has a desire to go beyond SRI or ESG filtering so how about the small portfolio of companies within the Triodos Global Equity Impact fund? You can download the list from their website.

https://www.triodos.co.uk/impact-investments/global-equities-impact-fund/LU0785617266

They have a direct S&S ISA offering at 1.4% ongoing (1% fund plus 0.4% account charge) but sadly don't offer S&S Junior ISAs and the fund is not avaialbe on Fidelity (or HL) but you can get it via AJ Bell YouInvest where it also costs 1% plus the 0.25% platform account and £1.50 per trade.

https://www.youinvest.co.uk/investing-for-children/junior-isa

https://www.youinvest.co.uk/market-research/FUND:BYYJD56