Where’s the best place to open a junior ISA?
There’s no shortage of choice when it comes to picking a home for your child’s junior stocks and shares ISA.
In fact, there are so many options that you may find choosing a provider more overwhelming than the investing itself.
The traditional route is to go for an investment platform or fund supermarket. Established players include the likes of Hargreaves Lansdown, AJ Bell and Fidelity International.
But there are also newer, online investment services or ‘robo-advisers’. Several of these have emerged in the past few years but as things stand, only a couple offer a junior ISA.
Both routes have their pros and cons, and the one you choose will ultimately depend on how involved you want to be in the investment process.
Time poor parents
Robo-advisers are a good option if you can’t or don’t want to commit a lot of time to setting up and managing your child’s portfolio or if you’re not a confident investor.
Wealthsimple and Wealthify are the only robo-advisers in the UK currently offering a junior ISA, with the latter launching its version this month and marketing itself as a “hassle-free” way to start investing for your children.
You can set-up an ISA quickly – Wealthify says it can be done in less than 10 minutes. All you do is select your risk level or complete a short quiz and you are then allocated a suitable, ready-made portfolio or basket of investments.
You don’t have to pick individual shares or funds, it’s all done for you. An investment manager then monitors the portfolio on your behalf.
Another benefit of robo-advisers is they have no minimum initial investment limit and don’t require a minimum monthly contribution. This is ideal if you’re worried you won’t be able to fund your child’s junior ISA on a regular basis.
These services are very much tech-first and have modern, easy-to-use apps so you can monitor your child’s investments on-the-go.
Hands on investing
If you’re looking for more flexibility or you want to play a bigger role in investing for your child, you’re probably better off going for a traditional platform.
They typically offer a wide range of investments including both active and passive funds (robo-advisers tend to just use passive investments), investment trusts, ETFs and shares.
Their websites offer plenty of guidance and most have best-buy fund lists to help you build a tailor-made portfolio. It’s worth noting that most platforms also offer ready-made portfolios if you’re not confident building your own, so they cater for less-confident investors too.
However, minimum starting investments and monthly contributions are high when compared with robo-advisers. Hargreaves Lansdown, for example, requires a £100 minimum initial deposit or a monthly deposit of at least £25. AJ Bell has a minimum starting deposit of £500 then requires a £25 monthly contribution.
Many of the platforms now have a mobile app, but they’re unlikely to be as slick or easy-to-use as the robo-adviser apps.
Cost is something to bear in mind when picking the best place for your child’s ISA. But it’s not as simple as saying one route is cheaper than the other. You need to think about value for money.
Calculations from Boring Money based on a lump sum investment of £4,260 – the maximum amount you can put in a junior ISA in the 2018/19 tax year – show you’d pay £41.10 in fees with Hargreaves Lansdown, based on the average cost of a fund on its Wealth 50 best-buy list, and assuming the portfolio was split evenly between funds and shares.
With Wealthify, the cost would be slightly higher at £43.88.
Although the robo-adviser is more expensive in this case, it’s doing more on your behalf, so you may consider it good or even better value for money.
Direct to a provider
A third option is to go straight to a provider to open a junior ISA. However, Holly Mackay, founder of Boring Money, says this route can result in a worse service with limited choice and could end up costing the same or more.
One exception, she says, is Vanguard, which offers “a low-cost decent one-stop shop for parents who want an easy option”.