The best stocks and shares investment ISA (& the cheapest fund platform)
Readers and journalists often ask me which is the best stocks and shares ISA. The answer depends on your circumstances and whether you want to buy shares, buy investment trusts, buy exchange traded funds or simply buy unit trusts. This guide will show you how to find the best stocks and shares ISA as well as those ISA providers that can offer advice on where to invest your ISA allowance. I will also highlight the best stocks and shares ISA for tools and functionality as well as the best & cheapest stocks and shares ISA for beginners. If you are simply concerned with cost we also cover the cheapest stocks and shares ISA as well as the cheapest robo-adviser. The full amount you can invest in a stocks and shares ISA is now £20,000 (2017/18 tax year) and that can be split between shares, ISA funds and cash.
Jump straight to:
- Best Stocks and Shares ISA if you want someone to invest your money for you
- Best Stocks and Shares ISA if you want to do the investing yourself
- Best Cash ISA
Comparing stocks & shares ISAs
Under the current ISA rules you can choose to invest some of your ISA allowance in a cash ISA and the balance of your ISA allowance in a stocks and shares ISA. However, for the remainder of this article I will assume you are going to invest the full ISA allowance of £20,000 into a stocks and shares ISA (also called a NISA)
Step 1 - Do you want to choose your investments or let someone run it for you
There are two options when it comes to investing in a Stocks and Shares ISA. You can choose to pick the underlying investments (funds or shares) yourself or let someone take care of picking and running the investments for you. If you want to have control over how your money is invested then jump to step 2 below. If you'd rather let someone run your money for you at low cost while optimising performance then you would be better off choosing what the press has coined a robo-advisor. Robo-advisers will put your money in a diversified portfolio based on the amount of risk you want to take. They will then manage the investment for you which you can view and monitor online. The 'Best Managed Stocks and Shares for beginners' shown below is a robo-advisor which has manage to combine strong investment performance with low costs. If you just want to pick the cheapest robo-advisor then you can jump to our robo- advisor comparison table using this link.
Steps 2 and 3 below provide further advice for those investors wanting to invest their own money themselves (so called DIY investors).
Step 2- Decide how you want to invest your stocks and shares ISA
If you plan to invest your ISA allowance yourself then when you compare stocks and shares ISAs the cheapest ISA provider or platform for you will depend on what you want to invest in. When you invest in a stocks and shares ISA there are a range of charges. Firstly there is the charge of the underlying fund or asset you are investing in. Then there are the charges levied by the broker or fund platform (often called a fund supermarket). Every stocks and shares investment ISA provider levies different charges based on what you invest in and how much you have invested with them. For example there may be additional charges levied for investing in shares or investment trusts. So what might you invest in?
Most DIY investors will invest in funds which in turn buy shares and other assets, such as corporate bonds. Funds (a term which includes investment trust. unit trusts and ETFs) are called collective investments. They pool investors money together to benefit from economies of scale and then invest that money in assets such as shares or bonds. Actively managed investment funds have a fund manager who chooses the underlying investments. Meanwhile passive investments simply track an index such as the FTSE 100 index using computers. If you are considering investing in funds then I recommend downloading this FREE guide to investing in funds. It's the best guide I've come across on the topic and tells you all you need to know including how to get started with buying funds.
If you want to buy shares within your stocks and shares ISA this limits your choices in terms of which would be the best stocks and shares ISA provider for you. Some stocks and shares ISA providers do not offer the stockbroking facility required to buy shares directly. Investing directly in shares is a riskier investment strategy as while it can be profitable it increases the chances of a potential loss.
Step 3 - More things to check when choosing the best stocks and shares ISA
Once you know what type of investments you wish to buy that makes life a lot easier. If you want to buy shares and investment trusts your options are much more limited. If, like most investors, you want to just invest in stocks and shares ISA funds then you need to consider other factors to screen down your choices. For now we will set cost to one side and come back to it later. Competition among funds supermarkets and online brokers is growing increasingly fierce so costs are falling all the time.
There has been a mini-explosion in new stocks and shares ISA providers, after all it can be a lucrative market if providers get the proposition right. To many of the new online providers that means keeping their own costs low, by that I don't mean the costs you pay but how much time and money they have to spend administering your investments.
As such the level of service some provide is pretty minimal. You need to decide if being able to speak to someone on the phone if things go wrong is important to you. You need to decide whether you want a slick user experience with the ability to buy and sell investments quickly and easily. Would you like to be able to check your investments via your smartphone, if so do they have a smartphone app?
Does the stocks and shares ISA accept transfers in
If you already have an existing stock and shares ISA portfolio you might want to consolidate them all with one provider. If so check what their rules and charges for doing so are.
Tools and research
Some stocks and shares ISA providers offer tools and some research (albeit limited). However most don't. Would you like a tool that can help you to pick the best stocks and shares ISA funds for your objectives? If so check they offer these. I highlight some of the best stocks and shares ISA providers in the next section and detail what they offer.
As mentioned there are a host of charges that stocks and shares ISA providers can levy. They include:
- transfer charges bell
- dividend reinvestment fees
- buying charges
- selling charges
- fund switch charges
- bid/offer spread
- fund manager charges
- platform charges
- transfer out fees
We include a full comparison of the costs of each stocks and shares ISA provider at the end of this article so that you can find the cheapest stocks and shares ISA for you. However, you shouldn't just focus on cost but instead consider value for money as well as the level of service provided.
A roundup of the Stocks and Shares ISAs best buys
Best Managed stocks and shares ISA for beginners
- One of the cheapest discretionary investment services (robo-adviser) in the market. Moneyfarm will even manage £15,000 of your money free of charge for 1 year. Invest £20,000 or more and they will run your first £20,000 free for 2 years. No one else in the market offer this. Find out more details in our unbiased Moneyfarm review.
- Ideal for those who want to minimise costs but want someone else to manage the money.
- They run the portfolios on a discretionary basis using a wide range of low cost ETFs. I am particularly impressed by the fact they don’t constrain their asset allocation. Many investment managers say that they make tactical asset allocation decisions yet in reality don’t deviate much from their initial selection.
- Moneyfarm’s charges (on top of the ETF annual charges of course) are: 0.7% for under £20,000 invested, then 0.6% on the amount between £20,000 and £100,000, then 0.5% on the amount between £100,000 and £500,000. They charge 0.4% on anything over £500,000
- They choose the right portfolio for you with a simple online questionnaire.
Best Stocks and shares ISA for tools, functionality & investment choice
- Named as the best all round investment platform by investment consultancy the Lang Cat
- Not the cheapest available but represents good value for money as they provide excellent investor information and tools
- Winner of numerous 'Best Stocks & Shares ISA provider' awards
- Information rich website packed with information from their advisers and analysts
- Comprehensive shares and fund data
- Useful smartphone app
- Investors pay 0.45% annual fee on total fund investment up to £250,000, 0.25% up to £1m, 0.1% on the value of funds between £1m and £2m and no charge for investments over £2m
Allows you to invest in shares, bonds, Investment Trusts, ETFs or gilts although they incur a 0.45% annual charge on the entire holding, capped at £45
Cheapest stocks and shares ISA best buy
If you are simply focused on costs then jump to our fund platform Stocks and Shares ISA comparison to compare every ISA provider in order to find the cheapest stocks and shares ISA for you.
- Latest update – named as best investment platform by investment consultancy the lang cat for clients wanting to buy and hold smaller funds
Low annual charge of just 0.25% on fund holdings up to £250,000, 0.20% up to £500,00, 0.15% above £500,000, 0.05% up to £1m and free over £2m
All platform fees waived on their stocks & shares for the month if a chargeable trade is made within that month
Free fund dealing but investment trust and share dealing will cost £11.50
- Investors holding individual bonds and overseas shares must pay £30 per year holding
- Good for active investors due to low annual fee and no buying or selling charges
- Great for those who want the low costs associated with DIY investing but don’t want to select investments themselves
- An robo-advice alternative to Moneyfarm
- Provide a full discretionary investment service, usually reserved for wealthier individuals elsewhere, for sums as low as £500
- Annual fees for fully managed portfolios are 0.75% up to £100,000 invested and 0.35% for investments above £100,000
- Annual fees for fixed allocation portfolios (non-managed) are 0.45% up to £100,000 and 0.25% for investments above £100,000
- They manage this by buying low cost exchange traded funds
- They help you choose the right portfolio for you with simple online tools
They also offer their service via a pension as well as a Stocks and Shares ISA
- Typical service fee is just 0.35%
- Fund ongoing charges start from 0.06%
- Extra savings for larger portfolios
- Below £7,500 – £45 annual charge with no regular contribution, 0.35% with regular contribution
- £7,500 up to £250,000 – 0.35%
- £250,000 to £1m – 0.20%
- No further charge for assets over £1m
- No dealing charges
- Specialises in passive index trackers and remains the cheapest way to buy Vanguard funds – read our full review
- Annual account fee of 0.15% on investments up to £250,000
- For investments over £250,000 there is no account charge
- Ongoing fund charges range from 0.06% to 0.8%
- There are occasional fund entry charges of between 0.2% to 0.8%
- No transfer fees or fund switch charges
- Can only invest in Vanguard’s range of index funds
- Funds only platform (i.e you can’t buy shares) with very low charges
- Investors pay 0.25% annual fee (reduced to 0.20% for investments over £200,000) and no dealing charges, initial charges, or exit fees
- Does not offer the comprehensive information of some of its rivals
- Offers three model portfolios graded by risk
- Good option for investors interested only in funds and keeping costs low
- Funds only platform with a website full of investor tools
- Compare funds on performance, risk and charges available prior to signing up
- Can create different investment pots and goals
- Quality fund research
- Investors pay 0.35% annual fee on total investments with no further charges
- SIPP investment not available
- Offers a range of investments backed by solid research and is good for regular investors
- Charges a quarterly admin fee of £20 but you can get that back in free trades spread evenly over four quarters
- Standard charge of £10 to buy or sell funds, shares, investment trusts and ETF’s or £1.50 for regular monthly investing. Make ten standard trades in the previous month and a frequent trader rate of £5 kicks in
- Dividend reinvested charge of 1% of the sum reinvested up to a maximum of £10
Alliance Trust Savings
- Latest update – named as best investment platform by investment consultancy the land cat for clients wanting to buy and hold larger funds
- Offers full range of investment trusts, shares, ETFs and direct bonds
- Investment tools and research provided by Morningstar
- Charges a monthly fee of £10.00 which allows for 4 online trades per year
- Online transactions are charged at £9.99 per individual transactions, switching counts as 2 transactions (sell & buy) and incurs 2 charges
- Dividend reinvested costs a flat £5 fee
- Good for ‘buy and hold’ investors due to the flat fee structure
Frequent Trader (Club Finance)
- Administered by stockbroker James Brearley & Sons
- Basic looking service compared with some of the larger platforms but dealing is cheap
- No Annual charge
- £4.95 flat fee for buying or selling shares, investment trusts and funds
- Low activity fee of £15 per quarter if less than 3 trades a quarter are made
- Good for active investors looking to build a portfolio as this could be a cheaper option than the larger platforms
The Share Centre – Self-Select ISA
- Offers a full DIY choice in its Self-Select Stocks and Shares Isa
- Charges a monthly fee of £4.80
- Fund, share, ETF, investment trust and corporate dealing costs 1% (£7.50 min.) or a flat fee of £7.50 and a quarterly charge of £24
- Regular monthly investment costs 0.5% (£1 min.)
- Dividend reinvestment costs 0.5% of sum reinvested (£1 min.)
- Some good analysis tips and advice
- Annual charge on portfolios of 0.4% up to £250,000 and 0.2 % up to £1m with no extra charge over £1m
- No dealing charges for funds
- No reduced charges for regular monthly investments in shares and trusts and no cheap dividend reinvesting
- Good for investors making regular trades due to the low dealing costs
- Annual charge of 0.25% on fund holdings up to £250,000, 0.10% £250,000 to £1 million, 0.05%, £1 million to £2 million, no annual charge over £2 million
- Fund dealing charge of £1.50 and share investment trust dealing at £9.95 (reduced to £4.95 if you have traded ten times in the previous month
- Regular monthly investment in funds costs £1.50
- Investing available FTSE 350 shares and a limited range of investment trusts
- Cost effective for monthly investments
The cheapest Stocks and Shares ISA provider
If you are only focused on getting the cheapest stocks and shares ISA below is a comparison of stocks and shares ISA charges from all the major providers.
The first table shows the cheapest stocks and shares for those wanting to choose their own underlying investments. The second table is a robo-advisor comparison table. Simply look at the column (on either table) that most closely matches the size of your stocks and shares ISA portfolio for an estimate of the annual cost if your investments were held with each fund platform. The table assumes that you only invest in funds and make 10 switches a year.
Cheapest stock and shares ISA if you want to pick your own funds
|Platform||Cost per fund transaction||£5,000 portfolio||£10,000 portfolio||£20,000 portfolio||£50,000 portfolio||£100,000 portfolio||£250,000 portfolio|
|AJ Bell Youinvest||£1.50||£43||£55||£80||£155||£280||£655|
|Alliance Trust Savings||£10.00||£280||£280||£280||£280||£280||£280|
|Charles Stanley Direct||Free||£13||£25||£50||£125||£250||£625|
|Halifax Share’s & Dealing Website||£12.50||£263||£263||£263||£263||£263||£263|
|TD Direct Investing||Free||£51||£30||£60||£150||£300||£750|
|The Share Centre (standard account)||1% or £7.50 min||£208||£208||£233||£383||£633||£1,383|
|The Telegraph Investor||Free||£20||£30||£60||£150||£300||£300|
Cheapest Robo-adviser (who invest your money for you)
Robo-advice is the term that’s been given to online investment managers which provide an investment product like an ISA where they invest your money for you. Technically robo-advisers don’t actually give you advice but instead they offer a limited number of portfolios (from low risk to high risk) from which you select one. They then invest your money and usually at low cost using exchange traded funds (ETFs). Picking the best robo-advisor isn’t just about picking the cheapest you need to also consider investment performance. That is why we selected Moneyfarm as the best robo-advice ISA. The table below gives the cost for each size of ISA portfolio for the list of UK robo-advisers. The cost quoted is the charge applied by the robo-advisor to run your money. There will also the cost of the underlying investments (ETFs) but these will be broadly the same in each case.
|Platform||£5,000 portfolio||£10,000 portfolio||£20,000 portfolio||£50,000 portfolio||£100,000 portfolio||£250,000 portfolio|
|Fiver a Day||£41||£82||£164||£410||£820||£2,050|
|Nutmeg fully managed||£38||£75||£150||£375||£750||£1,275|
|Nutmeg fixed allocation||£23||£45||£90||£225||£450||£825|
*Scalable Capital have a minimum investment of £10,000. **True Potential charges 0.83% for the underlying investments on top of the platform charges above. Most other robo-advice firms typically only charge between 0.1 and 0.2% for the underlying investments which therefore makes TruePotential very expensive overall
Best Cash ISA
If you do not have an investment timeframe of at least 5 years (i.e. you will need access to your cash within 5 years) then you would be better off placing your money in a cash ISA rather than in an investment ISA. That is because when you take out a stocks and shares ISA you will be Investing in shares, funds, bonds, investment trust or exchange traded funds (ETFs) all of which carry investment risk and the potential to lose money as well as make it. Below are links to our latest cash ISA best buy tables:
(image by Photo by worradmu. freedigitalphotos.net)