The new breed of DIY investors
New rules introduced this year have stopped the payment of commission to financial advisers directly from most investment products which they recommend. This means that those seeking investment advice now have to pay an upfront fee of around £100-200 per hour for the services of an independent financial adviser. The comprehensive services offered by an independent financial adviser are invaluable when seeking guidance for a range of financial needs. However, there will be some people who can't afford these upfront payments and others who are quite capable of arranging their finances themselves without recourse to advice.
Aimed at the group of people who want to be DIY investors there are a number of new online investment services that provide guidance, rather than advice, without explicitly charging for the advice upfront. These services will guide users in choosing investments according to their attitude to risk and other investment criteria. Any transactions are considered 'execution only' meaning that the client will have to make the final investment decision.
The best DIY investment websites
There are number of DIY investment sites/platforms, each with their own unique selling points. Here is a round-up of the leading sites.
Wealthsimple - if you want to keep costs low yet have someone else run your money for you and make strategic investment decisions then Wealthsimple will be of interest. They will build a portfolio for you once you've completed a short online questionnaire. They remain the cheapest online discretionary manager and will even manage the first £10,000 of your investments for free for the first year. No one else in the market offers this.
Hargreaves Lansdown - one of the UK's leading independent financial services providers and asset management specialists. Provide a wealth of information on various areas of investment and communicate this information through regular emails and a newsletter.
Fidelity FundsNetwork - Thousands of funds to select from with innovative and easy-to-use tools to aid investment choice. Comprehensive investment tutorial with sections on investing basics, building a portfolio and understanding stock market performance. Further tutorials on Isas, investing for children and planning for retirement complete the set of guides
Bestinvest - leading private client investment advisers looking after over £4 billion of assets. Extensive research available including face to face interviews with over 400 fund managers each year.
The Share Centre - one of the UK's leading retail stockbrokers offering an extensive range of tools to help you select and monitor your investments.
Interactive Investor - the UK's leading community of traders and investors offering a staggering amount of information on all areas of investing with comprehensive sections on research, analysis and opinion.
Nutmeg - the UK's first online discretionary investment management company. Through a 10 minute survey Nutmeg can give you guidance on the best investment choices to complement your financial goals and risk profile. Nutmeg will even manage your investments for free for the first 12 months which makes it the cheapest way to invest via any robo-advice firm or investment platform in the UK.
How much does it cost to DIY invest?
Whilst there is usually no advice charge upfront, providers will still charge customers for administering these services, usually by means of an annual charge (typically around 0.5% of the value of the investment).
Annual management fees, initial charges and platform fees are typical charges that can be deducted from you investment. These fees are discounted by some providers or not charged at all by others, so it's important investors read the small print when carrying out their research. Theses charges look fairly insignificant when investing small amounts of money but can become a sizeable amount on larger investments.
However, deciphering and comparing the charges applied by different DIY investment platforms is not a simple task. So in my article "which is the cheapest platform?" I compare the overall costs of investing with each platform/broker to make things easy for you.
How to be a DIY investor
If you do decide to go it alone then you must ensure that you enter into any financial arrangements fully understanding the risks involved.
Here are a few tips that will help you protect and grow your wealth:
- Decide how much risk you are prepared to take, most providers will help you assess your attitude to risk
- Always aim for a balanced portfolio, don't put all your eggs in one basket and retain some cash for immediate needs
- Choose your investment funds - read our guide 12 things to look for in an investment fund
- Check out the small print to understand all the charges involved before you invest
- Do plenty of research, the internet is full of quality investment advice so make use of this
- Investing is a long term game, if you want quick a return have a bet on the 3.30 at Ascot instead
- Make the most of tax advantages by using your annual ISA allowance and understanding the tax advantages of pension contributions
- Think about drip feeding your investments so that you take advantage of the ups and downs in the market
Looking for a financial adviser near you?
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