Independent financial advisers have a wide range of providers to choose from when deciding which stocks and shares ISA to recommend to clients. Selecting the right one will not only ensure you meet your client’s needs, but will also make your professional life much easier.
The advantage of an Investment ISA is it enables your client’s money to grow without attracting income tax or capital gains tax. Many ISAs are easily accessible, enabling your clients to make regular and one-off withdrawals.
Beyond this, however, the products on offer vary considerably. This makes comparing them quite tricky, but it also means there should be an ISA out there that suits your client’s individual needs – whether it’s from a large life and pensions corporation like Aviva or Prudential or an investment platform such as FundsNetwork.
One of the first points to consider is whether the provider offers a suitable investment range that meets your client’s needs now and in the future. For some clients, an ISA that enables you to pick individual assets yourself might be the best option, but for others an ISA with in-house risk-based funds, a model portfolio or a discretionary fund management solution could be the answer.
“When it comes to the ISA itself, advisers should look at the breadth of funds available and associated costs, considering how these align with their client’s risk appetite and objectives,” says Danny Wynn, head of proposition, growth and strategy at FundsNetwork. “Client behaviour and how they plan to use the ISA should also form part of the decision-making process.”
Cash options might be useful for clients who want to use their full annual ISA allowance without immediately committing their money to the equity or bond markets. Equally, a “Bed and ISA” service will enable clients to take advantage of their tax-free ISA allowance even if they don’t have any new money to invest. Through Bed and ISA, the client can sell their existing holdings and use the proceeds to open or top up an ISA.
How much input the client wants in their investment journey is another factor to think about. For those who want to engage with their portfolio, an ISA that provides online access and a decent mobile app is a must.
Beyond the ISA’s core features, the fees levied by providers require careful analysis. Excessive fees can eat away at portfolio growth over time, so advisers need to ensure clients are getting the best value for money. Some of the charges to compare include the cost of administering investments (often called a platform charge), dealing fees and the investment ongoing charge.
These fees will need to be weighed up against the ISA’s functionality as well as the financial stability and reputation of the provider.
“Advisers will want to recommend an ISA provider that has a good, long-standing reputation and can demonstrate it is financially strong,” says Laura Suter, personal finance analyst at AJ Bell. “ISAs are long-term investments so advisers will focus on providers they know will be around to support them and their client long into the future.”
A provider that offers a good level of adviser support will help you to work more efficiently, which in turn could help to reduce your costs to the benefit of your clients.
“Beyond these immediate selling points, advisers should look to understand the infrastructure underpinning an ISA provider’s offering,” says Wynn. “For example, reporting services which allow them to find data and client information can help to inform discussions with clients, providing them with an overall picture of their portfolio.”
Your decision will usually hinge on which provider enables you to best meet your client’s needs while offering the most value for money.
Emily Perryman is a freelance financial journalist with over a decade of experience writing for national, consumer and trade publications. She specialises in investments, pensions, property, fintech and tax. Emily was previously the personal finance editor at Shares magazine.