Do You Need Advice Before Investing in a NISA?

ASK THE EXPERT: More people are choosing to DIY invest. But is this the correct approach for tax-efficient investment? And when should you call in an expert?

Emma Wall 1 July, 2014 | 12:53PM
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Emma Wall: Hello and welcome to the Morningstar series 'Ask the Expert'. I'm Emma Wall and here with me today is Charlie Nicholls, from Money on Toast. Hello Charlie.

Charlie Nicholls: Hello Emma.

Wall: So I thought we talk about the new ISA, the NISA. I have read a statistic recently that showed that far more people invest in cash ISAs, than they do in investment ISAs. With returns being so low on cash ISAs at the moment, this isn’t exactly ideal. But you think that with the increased flexibility moving between cash and investment, and investment and cash, perhaps this may encourage more people to sort of open their risk horizon a little bit and go into investment ISA.

Nicholls: Yes, I think it will I think what we'll find is that previously obviously you could convert from cash ISA into a stock and share ISA. But you can't go back around, so it was very much a one way street and you were stuck in the stocks and shares ISA. Well I think now is that because now under the new NISA rules, you now have the ability to convert it back into a cash ISA, that people will feel that it's less of a taxing situation for them to be able to move into that investment space.

It's just that security of knowing that once they are there they can go back if they want to. I think it will encourage more people to look at investment ISAs especially since as you say at the moment cash ISAs with current rates people often actually losing money in real time and the only real opportunity for them to improve that return is in a stocks and shares ISA.

Wall: ISAs are obviously something that people can do on their own without the aid of an advisor. This kind of DIY investment is on the up isn’t it?

Nicholls: It is and especially on products like ISAs which are probably at the simpler end of the spectrum of the various products you can get advice on. With ISAs especially stocks and shares ISA it's relatively basic and you have to know that obviously what the allowances are and what sort of risk you are willing to take with that investment. But as long as you know that and the actual process of setting up and investing in ISA can be relatively simple.

You can either pick your own funds have an expert pick them for you. So I think that especially with the rise of different online services like Money on Toast, there will be more people who are happy to do it – either do it themselves or do it with the help of an online service and won't feel as though they actually need to go to advisors office and speak face-to-face with an actual human being because especially with these new services it's just not necessary any more.

Wall: And this kind of blended approach to investment where you do a bit yourself, use some sort of discretionary online product sometimes, but then you can bolster a financial adviser on the end this is perhaps what the future is going to look like in investment industry isn’t it, for those really tricky to tackle things using an adviser, but then doing a lot yourself.

Nicholls: Definitely yes, so I don’t think it's going to be a one-size fits all anymore. People are going to have different products and for their different parts of the financial advice. They can now go to different services. Things like ISAs, things like basic pensions they could be set up online much, much more cheaply and relatively easily.

Whereas at the other end of the spectrum you are still going to have people with highly complex tax situations, very difficult sort of employee pension schemes and for that, that’s where they are going to go to a financial adviser and actually want to speak to someone.

So I think the mass market distribution will remain online and then people want more specialist advice with the complex situations that's where the value that an adviser brings and an actual appointment with one can actually help with the situation.

Wall: Charlie, thank you very much.

Nicholls: Thank you.

Wall: This is Emma Wall for Morningstar. Thank you for watching. 

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Emma Wall  is former Senior International Editor for Morningstar

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