If you know that you want to put some of your cash into a Stocks & Shares ISA, you still might be unsure which provider to choose. It can be a bit of a minefield as there’s a lot of choice out there. This article compares the performance of Stocks & Shares ISAs from a number of popular robo-advisers to help you make the right decision, looking especially at 2020 returns for which we provide an easy-to-read summary table at the bottom of this article. However, we do also look at performance over longer time frames, where a product has a sufficient track record to allow us to do so, throughout this article.
What is a Stocks & Shares ISA?
First a quick reminder of what a Stocks & Shares ISA does. It’s a type of savings vehicle that allows you to invest in funds or stocks while protecting any investment returns you make within a tax wrapper meaning you don’t pay capital gains tax or income tax on any profits earned. The ISA allowance for the current and upcoming tax year (starting on 6 April 2021) is £20,000.
There are different types depending on how involved you want to be in investment selection, and these will each come with different charges. You can choose a true DIY ISA, a part-managed ISA or a fully-managed one where the investment management is done for you, but you will pay a higher management fee for this. This article focuses on fully-managed ISAs so that we can compare performance. For more information on the different types of ISA available, read our article "Where should you invest you ISA allowance?"
You can transfer money held in other types of ISA (a Cash ISA, for example) into a Stocks & Shares ISA and it won’t count towards your annual ISA allowance if you paid into the existing ISA during a previous tax year. You can find more details on this in our article "ISA transfers explained".
For a more general discussion on whether a Stocks & Shares ISA is worth holding, we summarise in our article "Are stocks and Shares ISA's worth it?"
Which is the best performing Stocks & Shares ISA?
For the purpose of this article, we are looking at fully-managed ISAs from five of the most popular UK robo-advisers. We will compare the performance of the model portfolios on offer to try to find the best performing Stocks & Shares ISAs on the market currently (but note past performance is not a guide to future returns).
Wealthify operates in a similar way to the other robo-advice services, using an automated process to construct portfolios that match clients’ risk tolerance, and it also uses cheap mutual funds and ETFs to keep costs down. Its investment team continuously monitors and rebalances client portfolios to keep them in line with risk tolerance. It had quite a cautious approach in the past, with a lower weighting to equities than you might expect for its medium risk offering, but more recently it has brought its asset allocation more closely into line with other robo-advisers. It has five 'original' Stocks & Shares ISA portfolios as well as five 'ethical' Stocks & Shares ISA portfolios. Its 'Confident' portfolio sits in the middle of this risk-graded range. Wealthify’s 2020 performance on this portfolio was a gain of approximately 4.87% after fees and the equivalent ethical portfolio returned 9.04% in 2020. Its Adventurous portfolio returned approximately 5.06% in 2020 and its equivalent SRI portfolio returned 13.43%.
Wealthify charges a management fee 0.6%. It also has a refer a friend scheme in which you can earn £50 for every friend you refer and you can read more in our article "Wealthify review - Is it the right investment choice for you?".
Moneyfarm is the closest comparable alternative to Nutmeg (see below), which is the most well-known of the UK robo-advisers. The digital wealth manager uses a questionnaire to assess your investing experience, risk tolerance and investment goals, and then recommends a portfolio tailored to you, which is classed as regulated financial advice (Nutmeg recently began offering financial advice as a standalone service for which you pay £575 plus VAT). Moneyfarm constructs a portfolio of ETFs based on its own investment research, and uses volatility targeting when doing your asset allocation, It rebalances portfolios about every three months. As it is giving advice, every year Moneyfarm has to review your portfolio to make sure it is still suitable.
If you had invested £25,000 in Moneyfarm's medium risk portfolio with Risk Level 6 (out of 7), you would have made a return of 50.3% between January 2016 (when Moneyfarm launched) and 1st January 2021 (the date of the latest available performance data). In 2020, the same portfolio would have returned 6.1%, which is the same return as Nutmeg's equivalent portfolio, as we demonstrate in our performance comparison table later in this article. Moneyfarm charges a management fee of between 0.35% and 0.75% depending on the size of your investment, and it says a £25,000 pot would set you back about £140-£170 a year in fees. However, Money to the Masses readers can take advantage of an exclusive Moneyfarm offer where your portfolio could be managed for FREE FOR THE FIRST YEAR*.
Read our detailed independent Moneyfarm Review.
Nutmeg offers a range of 10 risk-graded model portfolios to choose from, depending on how much risk you are willing to take. Nutmeg establishes your risk tolerance by asking you a series of questions and then recommends a portfolio it thinks will suit you, from ‘cautious’ to ‘aggressive’. The portfolios contain low-cost exchange-traded funds (ETFs) diversified across assets, countries and sectors and Nutmeg regularly reviews asset allocation on its fully managed products to keep them in line with your goals and risk profile.
Let’s say you went for portfolio number six, in the middle of the pack, offering ‘moderate growth without extreme volatility’. If you had invested In 2020, you would have returned 6.1%, which is on a par with Moneyfarm and slightly more than the 4.3% from the average return of the rest of its competitors. Nutmeg also has a range of Socially Responsible Investment (SRI) portfolios, often referred to as 'ethical' or 'sustainable' investment portfolios and the equivalent ethical portfolio returned 9.3% in 2020.
Nutmeg’s investment performance figures are based on an account size of £25,000, and are calculated after fees, using data from actual trades rather than averages. The weighted average management fee paid by Nutmeg customers is 0.64%-0.82% per year, depending on the date of investment.
Nutmeg calculates the performance of its competitors using averages, after fees, from a range of discretionary investment managers including Coutts, UBS and Rathbones (rather than the other robo-advisers we refer to in this article).
Over a longer timescale, the portfolio has delivered 31.4% over five years and 57.1% since Nutmeg launched in 2012, outperforming its competitors' average return of 30.6% over five years and 50.9% since 2012. On an annualised basis, Nutmeg has marginally outperformed its rivals, delivering 5.6%, compared to 5.1% a year since launch.
Looking across Nutmeg’s whole range, comparative performance is better at the higher end, so it could be a good option for those looking to invest in higher risk portfolios. Its riskiest offering, portfolio number ten, made 8.3% in 2020 compared to 6.5% from the competition and has also outperformed since 2012, up 100.2% versus 86.6%, or 8.7% versus 7.8% annualised.
In terms of fees, you pay between 0.35% and 0.75% for the fully managed and socially responsible portfolios, depending on the amount you have to invest, and between 0.25% and 0.45% for Nutmeg's fixed allocation portfolios.
There are also fees charged by the underlying funds in robo portfolios (that goes for all of the propositions mentioned in this article and not just Nutmeg), usually of around 0.2%. We don’t explore these in detail in this article in order to keep it concise however we do provide a full comparison in our article 'How does Wealthsimple's fees compare to other robo-advisers?'
Money to the Masses readers can also take our advantage of our exclusive offer where Nutmeg will waive all management fees for the first 12 months. For more details read our independent "Nutmeg review" which also explains more about their overall offering, including investment performance.
With no minimum investment and a low fee strategy, Weathsimple has proved popular with investors since its UK launch. You are given a similar questionnaire to that of its competitors but with a slightly more streamlined approach asking about your income, outgoings and investment goals. Then you get a recommended portfolio made up of ETFs and mutual funds. Its investment strategy is to focus on “fees, diversification and emotions” and let the stock market take care of returns over the long term. But has this approach paid off?
Wealthsimple’s Balanced portfolio (risk level 4, for investors with low to medium risk tolerance) has returned 23.33% from when it was launched on 6th July 2017 to 1st January 2021. Looking over one year, Wealthsimple’s 2020 performance was 7.12% for this portfolio, which is slightly more than the equivalent portfolio from Moneyfarm. Wealthsimple also has a range of Socially Responsible Investment (SRI) portfolios and the equivalent ethical portfolio returned 8.27% in 2020.
For a detailed independent analysis of Wealthsimple, read our "Wealthsimple Review".
Vanguard is one of the largest players in the fund space, offering both active and passive funds, although it made its name offering low-cost index tracker funds. Of interest to us here are its LifeStrategy funds, available through its Vanguard Investor platform. LifeStrategy funds are ready-made portfolios of Vanguard index tracker funds, and they tend to have a US equity focus. They come in five different mixes of stocks and bonds, labelled according to their equity allocations.
Let’s look at Vanguard annual returns. The LifeStrategy 60% Equity fund sits in the middle of the range, aiming for long-term returns with controlled risk. In 2020 it made 7.84%, while the slightly lower risk LifeStrategy 40% Equity fund made 7.71%. Both portfolios are in the top quartile over one, three and five years compared to peers in the Investment Association Mixed Investment 40-85% Shares sector, according to FE data, so Vanguard fund performance tends to be strong in the medium to long term.
In terms of fees, the total charge including platform fee on a £20,000 ISA investment would be 0.37% if you bought LifeStrategy through Vanguard’s own platform, Vanguard Investor. It is worth mentioning that if you have more than £80,000 to invest, one of the cheapest ways to buy Vanguard funds is via the Interactive Investor* platform, not directly through Vanguard Investor. For more on this tip and for detailed information about Vanguard and its product range and pricing read our full independent "Vanguard Investor UK review".
2020 was a tricky year for investors, with the FTSE 100 falling 14.3%, its biggest decline since 2008 and an almost complete reversal of the 12.1% gain experienced in 2019. Looking across the providers we have considered, we have provided a summary of their relative performance for 2020 and 2019. With ethical portfolios faring particularly well in 2020, we thought it useful to provide the returns of the equivalent ethical portfolios for the providers that offer them.
The performance figures for 2020 and 2019 should be viewed in the wider context of the longer-term performance figures mentioned above and on each provider's website.
Robo advisors performance comparison table 2020 and 2019
|Provider's portfolio||% return in 2020 (after fees deducted)||% return in 2019 (after fees deducted)||Portfolio's exposure to equities %||Platform fees per annum (not including fund costs)|
|Wealthify SRI (Ambitious Portfolio)*||13.43%||14.04%||75.00%||£120|
|Nutmeg SRI (Portfolio 6)||9.30%||15.10%||62.24%||£150|
|Nutmeg SRI (Portfolio 7)||9.20%||17.20%||72.36%||£150|
|Wealthify SRI (Confident Portfolio)*||9.04%||11.73%||55.00%||£120|
|Wealthsimple Balanced SRI portfolio (risk level 4)||8.27%||16.61%||60.00%||£140|
|Vanguard LifeStrategy 60% Equity||7.84%||15.24%||60.00%||£30|
|Wealthsimple Balanced portfolio (risk level 4)||7.12%||15.70%||60.00%||£140|
|Nutmeg (Portfolio 7)||6.30%||15.00%||72.77%||£150|
|Moneyfarm risk (level 6)*||6.10%||16.50%||63.00%||£136|
|Nutmeg (Portfolio 6)||6.10%||12.70%||62.56%||£150|
|Wealthify (Ambitious Portfolio)*||5.06%||14.33%||64.24%||£120|
|Wealthify (Confident Portfolio)*||4.87%||11.89%||47.79%||£120|
|Moneyfarm risk (level 5)*||4.50%||14.40%||54.00%||£136|
You can see that Wealthify came out on top as the standout performer with its Ambitious SRI portfolio returning 13.43% in 2020 while Moneyfarm trailed with a return of 4.50%.
Bear in mind that investing comes with risk and markets can move quickly, as has played out in recent months, so there is no guarantee that the top performers in 2020 will remain so in years to come. Plus, the risk level of the portfolio you choose will depend on how much focus there is on protecting your capital from losses rather than making as much as possible in rising markets.
While you may be looking for the best-performing Stocks & Shares ISA, there are other factors that you should consider when selecting a product. This might include factors such as price, asset mix, minimum investment, quality of customer service, investment and product choice, and the options to view and manage your portfolio – whether through an app or a user-friendly website. Check out our article "The best stocks and shares ISA (& the cheapest fund platform)".
If a link has an * beside it this means that it is an affiliated link. If you go via the link Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. But as you can clearly see this has in no way influenced the above editorial. The following links can be used if you do not wish to help Money to the Masses or take advantage of the exclusive Money to the Masses offers - Moneyfarm, Wealthify and Interactive Investor.
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