Barclays has expanded its “DIY” investment service with the introduction of a suite of ready-made portfolios. But is the bank’s new offering, which is available from £50 a month, good value or are you better off using an alternative?
How the new service works
The new portfolios, called “Ready Made Investments”, offer a range of “growth” and “income” funds tailored to investors who see themselves as having a low, moderate or high tolerance for risk. They are available to Barclays’ 11 million current account customers now and will be offered to non-customers later this year.
The growth funds, which the bank says investors should hold for a minimum of five years, have “ongoing” annual fees of 0.45pc. Ongoing fees include certain charges omitted from the traditional annual management fee.
Costs are far higher for the income funds, at between 1.45pc and 1.48pc. This is because these funds are “actively managed”, while the growth portfolios are made up of “passive” tracker funds.
In addition to the fund management fees, investors also pay a 0.2pc-a-year administration charge on money held in funds and 0.1pc on all other investments, with a minimum fee of £4 a month and maximum of £125 per month.
Trading in funds and other investment costs £3 and £6 respectively if completed online (it is £25 over the phone).
So someone in the income fund range would pay up to 1.68pc a year plus a £3 fee per fund purchased. If regular investments are set up the dealing fee drops to £1.
You can hold the investments within an Isa or simple dealing account; investing through a Sipp is not yet available.
The service does not involve financial advice, meaning responsibility for picking the investment lies solely with the customer.
How does Barclays’ new offering compare with equivalents from rivals?
There is a huge range of alternatives if you want help managing your investments, including from specialist investment firms.
Digital wealth manager Nutmeg, for instance, does not give you the option of investing in individual companies. Instead customers pick between “fixed allocation” or “fully managed” portfolios. The latter (and more expensive) option provides more support, with underlying investments tweaked by a management team.
Fees here are around 0.94pc on investments of up to £100,000, reducing in price thereafter.
Hargreaves Lansdown, Britain’s biggest broker, offers six options for investors not confident about making their own choices through its “Portfolio Plus” service. There are three “growth” and three “income” portfolios, which invest in funds run by other companies.
Fees range from 1.33pc to 1.46pc and are paid in addition to Hargreaves’ standard administration fee – 0.45pc on the first £250,000. The fee covers asset allocation, fund selection and periodic “rebalancing” that ensures the mix of investments doesn’t change too much as a result of strong performance from one holding.
So for a £100,000 portfolio you would pay 1.91pc with Hargreaves, 1.68pc with Barclays and 0.94pc with Nutmeg.
How much cheaper is it to build your own portfolio from scratch?
Of course, confident investors can make all decisions themselves, and save money by doing so.
For instance, buying shares in Scottish Mortgage, a popular growth-focused investment trust with an excellent track record, through fund shop AJ Bell would cost £9.95 for the purchase and then 0.45pc a year for fund management. When AJ Bell’s 0.25pc a year administration charge is added the total cost is 0.95pc.
Buying Vanguard LifeStrategy 80pc, a well-known mixed-asset tracker fund, through the same fund shop would cost £1.50 initially and then 0.47pc a year in total ongoing fees.
As a rule, passive funds are cheaper as they automatically track a particular stock market index or sector, rather than employ fund managers to choose investments.
Choosing the best investment platform for you
See here for the cheapest “fund shops” based on a portfolio making four fund switches and two share trades a year.
What do other high street banks offer?
Barclays is the latest high-street bank to launch an investment service. Earlier this month HSBC said it planned to launch a low-cost investment facility but could not give details on costs.
NatWest launched its Invest service for existing customers earlier this year. It offers five funds run by Coutts & Co, each with a different portion in stocks, bonds and cash. It charges investors 0.95pc on the first £500,000 and 0.7pc on any sums above that amount.
Banks have a checkered past when it comes to offering investment and financial advice. Many have been forced to pay fines and stepped away from offering services as a result.
But there is concern that huge numbers of people on middle and low incomes cannot afford to take advice. The Government and regulators are keen to boost access and banks have a huge existing customer base to tap into.
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