interactive investor Stocks & Shares ISA Review: A combination of fixed fee DIY & Managed Investing

Is the Interactive Investor ISA any good?

Yes, we rate the Interactive Investor ISA as very good, especially for high-value accounts as the account costs do not rise with your portfolio value. Plus, there are DIY and managed ISA options. However, for smaller accounts, the fixed monthly fee is expensive, so ii is a better ISA account for larger investors.

II does not charge any additional fees for a Stocks and Shares ISA, over and above its standard trading account charges. Whilst competitors Hargreaves Landsdown and AJ Bell both charge annual custody fees based on the value of your holdings.

How does the managed ii ISA work?

interactive investor offers both a self-managed stocks and shares ISA and a managed option, which means that you can either make your own investment decisions or buy into a pre-made portfolio. One of the key advantages about the ii ISA is that you can invest in smaller-cap shares on the AIM market which you cannot do with other investment apps like Lightyear or Freetrade.

The Managed ISA is designed for investors who want to hold investments in a tax-efficient ISA wrapper, but who don’t have the time, or inclination, to research and select investments themselves. These are similar to what robo-advisors offer like Nutmeg, Wealthify and Moneyfarm,

Low-cost trackers or sustainable investing 

There are two options: lost-cost index trackers, and a sustainable plan, but that is more expensive with investment costs (charged by investment manager, not ii) of 0.25%-0.29% versus 0.13% – 0.2% for the non-sustainable option. However, with the sustainable portfolio only 55%-90% of your investment is in sustainable funds (depending on how much risk you take).

But how sustainable are they? For instance, the biggest allocation of the sustainable portfolio is 33% in the iShares US ESG Index Fund, if you take on the most risk, which mainly consists of big US tech stocks like Apple (6.76%), Microsoft (5.81%) and Nvidia (3.21%).

This is opposed to the standard index tracker where the two largest holdings are abrdn American Equity Tracker (16%) which is 6.5% Apple stock and the L&G US Index Trust which has 6.45% Apple stock. So you’re really only investing a small about in sustainable investments and being charged a lot more for it.

Performance

When I opened an II managed ISA to test them out I went with the minimum £250 initial deposit and set up recurring monthly investments of £50 in the Level-5 very adventurous portfolio, which according to ii would net me healthy £8,030 if the market performed as expected from £6,250 contributions (a profit of £1,780) which they calculate on assumed returns of 5%, which is a bit dull in my opinion, especially when the fees are going to be £144.55 a year or £1,445.50 over 10 years, essentialy halving my returns. more on that later.

These portfolios have just turned a year old so I wanted to have a quick look at how well they had done, but alas, ii does not publish this info. When I phoned customer services (got straight through) to find out more they said they don’t have the info but woudl let me know when they do and I will let you know to.

Which I thought was odd becuause the entire reason I updated this ii managed ISA review was becuase I just received an email titled “Managed ISA turns 1 — ready to join the club?” 

No I know that past performance is no reflection of future returns, (the risk warning that must apply to all investing) but I’d at least like to see a chart that can tell me if it has made or lost money in the past. Not just a bog-standard estimation based on assumed returns. I hope this gets better in the future, as clearly no-one is going to want to invest in a poorly performing product, and not being able to see historic returns sort of implies there is something to hide. Even if there isn’t.

How does the II-managed ISA compare to the competition?

interactive investor’s flat monthly fee charging structure will save ISA investors money over the long term.

Which brings me back to my point about ii being expensive for small portfolios. But, if you invested all £20,000 of your ISA allowance with ii, your estimated profit on the same basis would be £11,900 with £1694.80 in fees over ten years, which is less than 15% of your returns

Compare this to other managed ISAs like Wealthify who charge 0.6% where if you added your full allocation to your ISA each year your fees would be around £8k, but as interacitve investor fees are fixed, you would save nearly £6k.

According to calculations on their website, £50,000 held in an ISA with the platform for 30 years, would have grown to almost £1.20 million, assuming a growth rate of 5.0% per annum, in a mixed portfolio of funds and shares.

That’s up to £45,000 more than you would have returned at rivals like Hargreaves Lansdown, AJ Bell, Fidelity, and Barclays Smart Investor, according to the Interactive Investor data.

In terms of ISA fees Hargreaves Lansdown offers a a tiered fee structure based on the value and type of investments held.

Those fees start at 0.45% for sums up to £250,000 invested in funds, falling to 0.1% between £1.0 and £2.0 million, with no charges levied for investment amounts over £2.0 million.

There are no additional fund dealing charges.

Money that’s invested in UK and international shares and ETFs, in a Hargreaves Lansdown ISA, attracts a maximum monthly fee of £3.75 and trading charges start at £11.95 per deal, with volume discounts down to £5.95 applied one month in arrears.

AJ Bell levies a fee of 0.25% of the first £250,000 invested. However, that scales down to zero if you have more than £500,000 in your account.

Share deals, including ETFs, are charged at £5.00 per trade, which falls to £3.50 if you traded 10 times or more in the prior month. Whilst fund trades cost £1.50 a pop.