Bestinvest review – is it the best SIPP and ISA provider?
Tilney Bestinvest is an award-winning online investment service providing a range of support services for the DIY investor.
Tilney Bestinvest is part of the Tilney Group which offers a broad range of financial planning, investment planning and investment advice services. The Tilney Group was launched in January 2017 following the integration of Tilney Bestinvest & Towry and has over 300 financial planners, investment managers and advisers supporting over 100,000 clients from a UK network of 300 offices.
What services and products do Bestinvest offer?
Investments held within the Bestinvest Stocks and Shares ISA can be managed either by Bestinvest via one of the Bestinvest Ready-made portfolios or you can run your money yourself. The latter means choosing the underlying funds yourself to invest in just as you would with other platforms such as Hargreaves Lansdown, Fidelity, Charles Stanley or AJ Bell. Bestinvest was named the Best Stocks & Shares ISA Provider at the Shares Awards in 2017.
Bestinvest Junior ISA
The Bestinvest Junior ISA allows parents or grandparents to start investing for their children's future in a tax-free environment. The usual annual contribution limits apply which for the 2018/2019 tax year equates to £4,260. For the 2019/20 tax year you will be able to save a total of £4,368. The advantage of investing via a Junior ISA is that any income produced by the investments belongs to the child and therefore does not form part of the parent's taxable income or capital gains. However, once the child reaches the age of 18 the money is legally theirs to do with as they wish and they do not require the consent of their parent or guardian to access the money.
The Bestinvest SIPP offers tiered service fees, which we look at in more detail later, and no set-up charges. Just like the Bestinvest ISA and Junior ISAs you can choose to invest in a Ready-made portfolio or you can choose to manage the investment selection yourself. The Bestinvest SIPP now accepts transfers-in (a change since we last reviewed Bestinvest in 2018) and they will pay up to £500 towards your exit fee charges.
Bestinvest Investment Account
In addition to the above tax-efficient structures, Bestinvest offers the Bestinvest Investment account. It works in the same way as the aforementioned products (with the ability to invest in shares ETFs, unit trusts and investment trusts), but without the contribution restrictions or the tax-free status. That means that any income or capital gains produced by your investments held in the Bestinvest Investment Account will be liable to income tax and CGT (capital gains tax).
Bestinvest investment performance and choices
As an investor, you have a few choices, you either invest via the Bestinvest multi-asset portfolio (or ready-made portfolios as Bestinvest calls them) or choose your funds yourself, possibly with the aid of Bestinvest's onsite research. Let's first of all look at the Bestinvest ready-made portfolio performance and options
Bestinvest multi-asset portfolio (robo-advice)
Bestinvest offers the following four multi-asset portfolios, with varying levels of risk, if you want them to run your money for you.
The portfolios are:
Aggressive growth - a portfolio of higher risk investments for investors with a longer-term view (over 5 years), most investments are held in shares so there is a prospect of higher volatility in the short-term.
Growth - a portfolio focussed on investment growth and aimed at investors comfortable with taking moderate risks when investing, two-thirds of the portfolio is made up of shares.
Defensive - a portfolio for the more cautious investor with the aim of providing more growth than would be achieved through cash savings.
Income - a portfolio focussed on income-producing investments with income paid out four times a year, a significant proportion of the portfolio is made up of shares.
Investments can be made with a minimum of £500 and all portfolios can be used for ISA, Junior ISA or SIPP investments.
Other platforms such as Hargreaves Lansdown provide comparable ready-made portfolios as do the new breed of robo-advice firms. Robo-advisers are online wealth managers that provide low-cost investment portfolios, usually using ETF (exchange-traded funds). They are increasing in popularity and are encroaching on the large investment platforms' dominance in the ready-made portfolio market. These firms include firms such as Moneyfarm, Nutmeg, Wealthsimple, Wealthify and Scalable Capital. So how does the Bestinvest Ready-made portfolios performance compare?
The table below shows the three-year performance of the equivalent medium risk ready-made 'Growth' portfolio of Bestinvest vs Hargreaves Lansdown, as well as the 'Aggressive Growth' portfolio for comparison. I have also compared the performance to the peer group average. The portfolios typically have around 60% invested in equities with the rest invested in bonds and other low-risk assets. All performance figures are net of charges.
The Bestinvest Growth Portfolio performance has been pretty poor. However, the Hargreaves Lansdown Multi Manager Balanced Managed fund currently has around 70% of its assets in equities which is more than the current 56% equity content of the Bestinvest Growth portfolio. However, if we compare it to the Bestinvest Aggressive Growth Portfolio (which has a 70% equity content) the results are considerably better and more on a par with the Hargreaves Lansdown Multi Manager Balanced fund.
|Manager||3 year performance %|
|Hargreaves Lansdown Multi Manager Balanced Managed||23.94%|
|Peer group average||23.37%|
|Bestinvest Aggressive Growth||22.77%|
|Bestinvest Growth Portfolio||18.22%|
If you look at the details of what is in the Hargreaves portfolio vs Bestinvest portfolio, both predominantly invest in actively managed funds (i.e not in passive tracking funds or ETFs). The chart below shows the performance of the robo-adviser Moneyfarm (which favours passive trackers and ETFs) since it was launched in January 2016 versus Bestinvest and Hargreaves Lansdown. The table also shows the typical annual charge for investing £50,000 into each portfolio.
|Manager||Performance since January 2016||Annual platform fee||Ongoing charge||Total approx annual cost|
|Hargreaves Lansdown Multi Manager Balanced Managed||24.29%||0.45%||1.38%||1.83%|
|Bestinvest Aggressive Growth||22.84%||0.40%||1.50%||1.90%|
|Bestinvest Growth Portfolio||18.77%||0.40%||1.47%||1.87%|
It is perhaps little wonder that the likes of Moneyfarm are gaining popularity with their combination of low charges and strong investment performance. Read our full Moneyfarm review for more information.
However, as a Bestinvest customer you don't have to use Bestinvest's ready-made portfolios, instead, you can just use them as an investment platform through which to invest in funds of your choice. As a fund platform, rather than investment manager, Bestinvest is a pretty decent proposition. It has won numerous industry awards for its online service including being voted the Best Investment Platform 2017 by investors chronicle. So before we look at its ISA and SIPP products in more detail what can investors expect if they plan to run their money themselves on Bestinvest.
Bestinvest Platform review - if you want to invest the money yourself
Bestinvest is a comprehensive investment platform where investors can purchase a variety of funds, investment trusts, ETFs and shares. Assuming you don't want one of the ready-made portfolios discussed above investors can use the Bestinvest 'Investment Selector' which allows them to research and compare a range of funds prior to selecting where to invest. This, together with the Bestinvest investment guides and research, provides a fairly comprehensive package for most investors.
Bestinvest Investment Selector
A key element of the Bestinvest platform is the Bestinvest Investment Selector which allows investors to research and purchase a wide range of funds, investment trusts ETFs and shares. Just like other platforms such as Hargreaves Lansdown, Fidelity or AJ Bell, by using the search facility investment choices can be quickly narrowed down to match your criteria. However, there are one or two notable differences in how Bestinvest's Selector works compared to other platforms.
The Bestinvest Investment Selector allows you to search for specific funds, providers or sector. Filters can be also be applied that can focus the search to specific investment options, charges and yields. Once the search criteria have been selected the investment options are listed in a table and sorted alphabetically by the provider. This table shows the ongoing charges, yield and the Bestinvest star rating for each fund together with a 'compare' option and 'buy' button. From a usability perspective, the ability to research funds is far easier than on Fidelity. From your search results you can quickly produce a pop-up window that compares the Bestinvest star rating and comments on funds that you choose. You can also choose to compare the assets that the funds invest in. The screen isn't busy and the options to explore further only appear as you start making choices. One big differentiator for Bestinvest is its fund star ratings which have their pros and cons. Below is a brief explanation of what the star ratings mean.
Bestinvest star rating
Bestinvest gives funds a star rating from 1 to 5 stars:
Five star means EXCEPTIONAL funds that rate as the most likely in their sectors to achieve outperformance over the medium and longer term. Typically, these funds will be included in Multi-asset Portfolios
Four star means VERY HIGH QUALITY - these funds are felt to have strong performance potential
Three star means HIGH QUALITY funds expected to deliver above-average returns over the medium to longer term
Two star means HOLD/REVIEW, funds that have been reviewed by the research team that do not meet the criteria for a buy rating
One star means SWITCH, retaining these funds should be reconsidered
It is very unusual for fund platforms to venture opinions, especially negative ones, on a large number of funds. Usually, they prefer to opt for best-buy lists, for example, Hargreaves Lansdown has its Wealth 50 list. Such fund lists are apparently based on independent research, and although the funds contained often have discounted charges, no preferential treatment is given to fund providers that offer preferential terms. Such best-buy lists have been dogged by suspicious media stories calling into question their validity. Bestinvest attempts to circumnavigate this by having a top fund's list comprising of those funds that are 3 star rated or higher. However, they offer no clear explanation as to how they arrive at their ratings and what factors influence it. They also state that when it comes to new launches "our analysts review each new launch and select those that they think will be of interest to our clients. Some of these funds will qualify for our star ratings. Others may not be eligible for inclusion in our top ratings but are being highlighted because they may offer an interesting investment approach".
It would suggest that performance is a significant factor in Bestinvest's star ratings. However, Bestinvest does not manage to give every fund a rating and so many funds simply have no rating at all. From a user's point of view that will be a source of confusion. If a 1 star rating suggests that you sell an investment what does a no-star rating mean?
Other investment research offered by Bestinvest
Bestinvest does offer a couple of other ways to research funds that you might want to invest in or ones you may want to avoid.
Market sector insights - In this area of the website investors can find the latest news, articles, investment ideas and performance data from different sectors providing some good insight into the world of investment. It often includes weekly updates and market commentaries, however, all of this is readily available to anyone who visits the site and is not exclusive to Bestinvest clients.
Spot the Dog - The most widely known piece of research that Bestinvest produces is its 'Spot the Dog' guide which you can download for free. The guide uses statistical fund performance data to identify funds that have performed badly compared to their benchmark. These are referred to as 'dog funds' and are highlighted as funds for the investor to avoid. Whenever this guide is updated it features heavily in the national press money sections.
Top performing funds - in this area of the site Bestinvest provides the top performing funds and ranks them on their performance over one year. This table is interactive so the list can be refined using certain criteria such as charges.
Bestinvest ISA review
Bestinvest ISA received the Best Stocks & Shares ISA Provider at the Shares Awards in 2017. Opening an account is free and buying or selling funds is also free with the annual service fee capped at 0.4% making the Bestinvest ISA a competitively priced option for investors.
Bestinvest offers the option to consolidate existing ISAs under one roof making it easier to manage them. Consolidating ISAs can take as little as a week using electronic transfers which means less time spent out of the market.
Bestinvest ISA fees - how they compare
Bestinvest ISA fees are actually very competitive. When we carried out our analysis of the whole platform market, assuming that you just invest in unit trusts, it is one of the cheapest Stocks and Shares ISA providers for relatively small ISA portfolios, under £20,000. Beyond that, there are cheaper alternatives, as discussed at the end of this review. Overall Bestinvest's charges are on a par with Hargreaves Lansdown. The Bestinvest annual ISA management charge is tiered as follows and is payable on top of the underlying annual charges of the funds you invest in:
- £0 - £250,000 - 0.4%
- £250,000 - £1 million - 0.2%
- over £1 million - No charge
- Fund dealing is free with online share dealing costing £7.50 per trade.
Bestinvest ISA customer reviews
Overall Bestinvest customers echo the positives I've mentioned in my review
- 'Excellent website which is easy to navigate, excellent depth of research information and breadth of funds. excellent tools to assist in portfolio analysis and development' - MC
- 'Excellent range of investment products. Professional approach. Good customer support' - AD
- 'Super customer service on the odd occasion when I need to contact them,
great research tools and data analysis of portfolios' - GB
- 'Superb company they have plenty of patience explaining everything you need for investing for income and capital growth' - RG
- 'Bestinvest is a no-brainer for smaller portfolio's. It not the cheapest for larger portfolios, but what you get for paying a little extra is a quality service that is reliable and more conducive to peace of mind for your savings' - JM
Bestinvest SIPP review
Its SIPP has won Bestinvest the most plaudits and the Bestinvest Self Invested Personal Pension is a multi-award winning pension product. It has scooped industry awards not only for the best low-cost SIPP in 2017 but has previously won awards for the best SIPP for beginners. As well as a decent investment choice the Bestinvest SIPP also offers a pension drawdown option and the ability to purchase an annuity or transfer other pensions into it.
Bestinvest SIPP fees
Like its ISA product, the Bestinvest SIPP fees are very competitive for smaller portfolio sizes. In fact, if you have a pension of £50,000 or under and plan to invest in unit trusts then Bestinvest is one of the cheapest SIPP products in the entire market. It remains competitive up to a pension pot of £100,000 and is marginally more expensive than Hargreaves Lansdown. The normal Bestinvest annual SIPP management charges are as follows (remember that these are paid in addition to the underlying fund charges):
- £0 - £250,000 - 0.4%
- £250,000 - £1 million - 0.2%
- over £1 million - No charge
- Fund dealing is free with online share dealing costing £7.50 per trade.
Bestinvest SIPP - customer reviews
Here is what Bestinvest customers have been saying about its SIPP product:
- 'I use Bestinvest to run a self select SIPP. It's a cheap easy to use platform' - Rich
- 'Good internet platform making it easy to see gains and losses' - DC
- 'Online investment system is uncluttered and easy to use with reasonably helpful fund information' - LM
- 'Customer interface, research and commentary good. Very nice stuff on asset allocation and risk' -GB
- 'Very efficient and fast dealing service. Good value compared to other platforms' - WW
Summary - Bestinvest review - Should you use them?
Whilst not the largest investment platform in the UK, Hargreaves Lansdown holds that title, its combination of competitive charging, wide investment choice and online usability has cemented Bestinvest as a significant player. It remains a good investment platform especially for beginners or those with smaller portfolios (i.e ISA portfolio under £20,000 or a pension pot under £50,000). Its fund star rating system will prove useful for those who want the guidance of not only what funds to buy but when to sell them. However, all of this research can be accessed by those using other platforms. Overall Bestinvest's research does feel more of a marketing exercise rather than being overtly useful or groundbreaking. If you want better quality research then give Hargreaves Lansdown a look. Also, Bestinvest's ready-made portfolios have performed poorly against its peers (as shown above). If you want someone else to run your money for you there are better alternatives (see next section below). On the plus side, you can choose to have a Bestinvest adviser look at your money if it all becomes too much for you but it will be at an additional cost. If you are looking for an easy to use investment platform, especially if you want a SIPP, through which to buy a range of funds then Bestinvest is a good and popular choice.
From an ISA charges perspective, Hargreaves Lansdown and Bestinvest are on a par. In terms of SIPP charges then Charles Stanley Direct is pretty much the same cost-wise as Bestinvest. So it then comes down to which platform is easiest to use and has the best functionality. Hargreaves Lansdown's popularity is a testimony to its strength in those areas, even if it isn't the cheapest investment platform for everyone.
While Bestinvest is cost-effective at lower portfolio sizes it quickly becomes uncompetitive as you move up the portfolio scale. In fact, in terms of cost it If you plan on contributing significant amounts to your portfolio (so increasing it over time) and don't want to have to switch platforms at a later date then Charles Stanley Direct is a good alternative for ISAs with Interactive Investor also being a good alternative for sophisticated investors with larger SIPPs (worth £50,000 and above).
If you just want to invest in a ready-made portfolio then there are better alternatives than using Bestinvest's portfolios. While Hargreaves Lansdown Multi Manager funds have outperformed there are plenty of other cheaper alternatives form the robo-advisers world such as Moneyfarm, Wealthsimple or Nutmeg (especially if you want a pension). Or if you just want an index tracking fund then you could consider one of the Vanguard Lifestrategy funds bought via the Vanguard Investor platform.
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