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interactive investor – power to the people!

Who is interactive investor?

In the past five years, interactive investor (ii) has grown from a relative tiddler to become the second-largest platform in the market, behind only Hargreaves Lansdown. It has assets under administration approaching £55bn and over 400,000 customers.

While organic growth has played its part, interactive investor has also been acquisitive, snapping up competitors including TD Direct, Alliance Trust Savings and the Share Centre. Most recently, it announced that it would purchase Equiniti Group’s D2C business, EQi — the platform we see today is very different to the one that launched in 1995.

ii’s aims are to help customers control their financial future, be straightforward, transparent and honest, support its customers in making better financial decisions and cutting out jargon wherever possible.

A flat-fee charging model

These principles can be seen in the way ii charges for its services. From its perspective, investing should be simple and open to all, with transparent and fair fees. As a result, ii is one of the very few platforms that charge a fixed price rather than a percentage of assets held, where the fee increases as your assets increase.

It offers three different price plans – Investor, Funds Fan and Super Investor, priced at £9.99, £13.99, and £19.99 per month respectively. So you know exactly what you are paying, regardless of your level of assets.

The Investor plan gives you access to a Stocks and Shares ISA, Junior ISA and a general trading account, but to open a SIPP costs an additional £10 per month. The plan also includes one free trade per month, with any additional fund or UK share trades priced at £7.99 each. The two more expensive plans offer an extra free fund trade per month as well as scaled-down costs on subsequent fund or UK share trades.

Investors can find further fees for bespoke or ad hoc services easily on the group’s website.

While fixed fees are transparent and can be simple to understand, it does mean that ii can be expensive for smaller portfolios of £50k see bor less when benchmarked against alternative providers. However, the pricing is attractive for portfolios above that amount or for investors who trade frequently – and there is a lot of trading potential, as we shall see below.

A vast investment universe

ii offers a choice of over 40,000 UK and international investment options, including shares, funds, trusts and exchange-traded funds (ETFs), keeping even the pickiest of DIY investment pickers happy.

In addition, it has its Quick Start Funds for those who need a little extra guidance and support in selecting products. These are three passively managed funds from the Vanguard LifeStrategy range and three actively managed options from BMO Global Asset Management, all chosen and rated by ii’s investment selection committee.

However, if 40,000 funds feel too like too much and the six options feel too narrow, ii also has its ii Super 60 list. This is a selection of 66 (not 60!) active and passive funds, investment trusts, and ETFs, again selected and rated by the group’s investment committee.

For ethical investors, ii also has the ACE 40, which it claims to be the UK’s first rated list of ethical investments. Each fund is sorted by asset class and placed into one of three ethical styles: avoid, consider, embrace.

Finally, while the spread of investment options is vast, the tax wrappers that an investor can hold on the platform is more limited. It only carries ISAs, SIPPs and general investment and trading accounts, so it might not suit investors with more complex requirements.

But it’s not just about the number of assets – ii has put some thought into how you can get the best from the platform.

What else is on offer?

Other notable features include its Refer a Friend and ii Family services. The latter is the group’s family linking service that gives up to six family members free access to its platform for an additional £4.99 a month to the accountholder. Each member can invest up to £30,000 in an ISA or a general investing account. Those new to investing will also have access to an online beginners’ course, with guidance and support available. Overall, a great way to manage family finances and encourage younger investors to have an active interest in their investments.

ii regularly offers promotions via the platform. For example, it’s currently waiving any SIPP fees until March 2022 for anyone who opens a pension by the end of August. In addition, it hopes to entice additional customers by offering cashback to anyone who transfers their ISA or SIPP to the group, subject to specific criteria.

Its mobile app is ahead of much of the competition. While most platforms only let you view your portfolio via the app, ii allows you to research, actively trade, and easily fund your accounts. In many ways, the mobile app is more straightforward to use than the desktop version.

But funds and features aside, ii tries to put the customer at the heart of what it does.

Championing investors’ rights

True to its principles of transparency and openness, this year, ii, along with two of its competitors AJ Bell and Hargreaves Lansdown, has written to the Treasury to demand more rights for retail investors during initial public offerings (IPOs). An IPO is when a private company decides to go public by offering new shares to investors and being listed on the stock market. Often IPOs are only publicly available to institutional investors.

What ii has proposed would mean that any shareholders (not just large institutions) are invited to participate. At the moment, this doesn’t happen much. Currently, retail investors can only get access once the shares have been listed and the price has begun to rise. If the lobbying were successful, the new rule would alleviate the possibility of a retail investor buying a share at a premium on the open market, post-IPO.

Furthermore, in an article on its website, ii also called for greater transparency from the very funds it makes available on the platform. It wants new rules to require fund managers to disclose how much they have invested in the funds and investment trusts they manage. CEO Richard Wilson says ‘We believe this transparency gap needs to be addressed by the FCA for the benefit of investors in the UK, to ensure they can make better-informed decisions…Retail investors deserve better disclosure and treatment — it is just good governance. They should be given the critical information required to decide if those who eat their own cooking are indeed better cooks.’

Summary

ii has developed into a serious market player in recent years. It has one of the broadest asset universes in the market, and the rated fund lists make getting started more straightforward for those who don’t want to trawl through 40,000 funds.

In addition, its flat fee structure separates it from its competitors and will appeal to many investors, particularly those with large portfolios. ii has acquired several of its smaller competitors and we have taken many calls enquiring whether it is safe to move to them (the answer is a resounding yes) and whether they will get the same kind of service after. Hopefully ii does its utmost to ensure that newly acquired investors don’t experience any drop off in service as they are migrated onto the system.

While it is still behind the likes of Hargreaves Lansdown for the depth and breadth of materials and information available, the investment and educational content available on the ii website is varied, well thought out, and accessible to even a novice investor. ii has made some improvements to its website navigation, removing some of the clutter and replacing it with some striking imagery, but some of the pages are still quite text-heavy.

The group’s work on bringing transparency into the investment landscape is laudable, and it has already shown itself to be a vocal critic of government policy. We expect to see more of this from them in the future.

If you like the idea of paying for your investment services in the same way as you pay for a Netflix subscription, then ii is definitely a platform you should consider.


Photo by Thomas Kelley on Unsplash

2021-08-23T12:35:34+01:0024/08/2021|

About the Author:

Bella has 20 years’ experience in the research and analysis of the investment industry. She set up Fundscape (comparetheplatform's owner) in 2010. Before Fundscape, she worked for Thomson Reuters as Global Head of Research and Publications (Lipper) and was the author of numerous publications and reports. Bella has a master’s degree in International Business and is fluent in four languages. She is particularly fussy about grammar and punctuation, and loves going to the theatre, disco dancing and pub quizzes. @bella_caridade @fundscapeuk

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