Banks' Investment Offerings: Weighing Options for Savers

Investing through a high street bank can seem like a straightforward choice, given the existing customer relationship and familiarity with the institution. A survey by financial research website Boring Money indicates that half of savers would prefer to use their bank for investments over a specialized provider. However, it is crucial for individuals to research thoroughly before selecting a stocks and shares Isa to avoid paying excessive fees.

Historically, banks have been known for higher fees and a more limited range of investment products compared to specialist platforms, although improvements have been made in recent years. For example, HSBC's Global Investment Centre charges £5 per trade and a £10.50 quarterly account fee for shares and exchange-traded funds (ETFs). Lloyds Bank charges £9.50 per trade for shares and ETFs, which is considered relatively high. Some banks, like NatWest, do not offer direct share dealing, instead providing a limited selection of ready-made portfolios more suited to novice investors.

Notable Bank Investment Services

Two banks have emerged with notable investment offerings. Barclays Direct Investing became more competitive in June by eliminating its 0.25% account fee. While investors do not pay fees to buy and sell funds, there is a £6 dealing fee for shares, ETFs, bonds, and investment trusts, which can be waived for regular investments. This fee structure, combined with a choice of over 8,000 investments, positions Barclays favorably against newer platforms such as Freetrade and Trading 212, which also offer no account or dealing fees. In contrast, established providers like AJ Bell and Hargreaves Lansdown have annual platform charges of 0.25% and 0.35% respectively.

Barclays also provides five ready-made portfolios with no account charges or dealing fees, but an ongoing charge of 0.45% per year. The platform does not offer a self-invested personal pension (Sipp). It is a suitable option for those primarily investing in funds, using ready-made portfolios, or setting up regular investments in shares and ETFs.

Scottish Widows Share Dealing, part of Lloyds Bank, offers a stocks and shares Isa or general investment account with no annual fees. However, their Sipp, which they do offer, has a 0.25% annual charge, capped at £16.50 per month. The £5 dealing fee for shares is slightly lower than Barclays, but Scottish Widows also applies this fee to funds. This is higher than many specialist platforms, where Hargreaves Lansdown charges £1.95 for one-off fund trades and Fidelity offers them for free. Scottish Widows allows for free regular investments, which can help bypass dealing charges. Other fees include a 2% charge for dividend reinvestment, capped at £5. Ready-made portfolios are available for a £3 monthly account fee. This service is a good choice for those who trade shares and ETFs on an ad-hoc basis, as it is marginally cheaper than Barclays.

Considering Specialist Platforms

Holly Mackay of Boring Money notes that banks have simplified the investment account opening process through their apps. The decision on where to invest often comes down to fees, customer service, tools, and features. Specialist platforms like Hargreaves Lansdown and Interactive Investor offer research from analyst teams and tools for in-depth performance analysis. Newer platforms such as Trading 212 provide fee-free investing and user-friendly mobile apps. Some platforms also allow for fractional share purchases, enabling investors to buy smaller portions of high-value stocks, a feature often not available with traditional providers.

DIY investing platforms offer a simple, cost-effective, and accessible way to invest from various devices. When choosing a platform, it is important to consider the services offered, administration charges, dealing fees, and any other associated costs. Providers vary in their trading fees, investment access, and account structures. For instance, AJ Bell charges £1.50 for fund dealing and £5 for shares, trusts, and ETFs, with free regular investing. Bestinvest offers free fund dealing and charges £4.95 for shares, trusts, and ETFs, with free regular investing for funds. Charles Stanley Direct has a 0.30% admin charge, with a minimum platform fee of £60 and a maximum of £600, charging £4 for fund trades and £10 for shares, trusts, and ETFs, with free regular investing for funds. Etoro offers free trading on stocks, investment trusts, and ETFs, but has limited Isa options and no Sipp. Fidelity charges 0.35% on funds and £7.50 for share, trust, and ETF dealing, with free fund dealing. Freetrade offers free dealing on stocks, funds, investment trusts, and ETFs. Hargreaves Lansdown charges 0.35% with a cap of £150 annually for Isa holdings, £1.95 for fund trades, and £6.95 for share, trust, and ETF trades, with free regular investing. Interactive Investor has a monthly fee structure with a free monthly trade on its Plus plan, charging £3.99 for fund trades and £3.99 for share, trust, and ETF trades. InvestEngine offers free ETF investing with a 0.25% charge for its managed service. Prosper offers free investing on 30 ETFs, with no share trading. Scottish Widows charges £5 for fund and share dealing, with a 2% charge for dividend reinvestment. Trading 212 provides free dealing on stocks, investment trusts, and ETFs. Vanguard offers a 0.15% admin charge, exclusively for its own products, with free dealing on Vanguard funds and ETFs.