Those looking for an investment platform are spoilt for choice nowadays – and it’s a good thing! You can invest money in a huge selection of investment vehicles, available from a wide range of platforms via both mobile and desktop interfaces. However if you’re reading this I’ll assume you’ve already decided that the best choice for you comes down to a toss up between Hargreaves Lansdown and Moneyfarm. The focus of my latest showdown here, therefore, is this pair of popular investment platforms which may appeal to investors for a number of reasons.
Both Moneyfarm and Hargreaves Lansdown (also known as HL) are hugely popular online wealth management services. Both have a variety of ways in which you can grow and manage your funds over time. But between the two, which is likely to perform best over time or be the best option for your unique set of circumstances? Let’s take a look.
Hargreaves Lansdown vs Moneyfarm: Quick Overview
Here’s a quick summary of both Hargreaves Lansdown and Moneyfarm stack up against each other:
|Investment Options||Managed portfolios||Managed portfolios & DIY (funds & shares)|
|Active or Passive?||Passive only||Both|
£100 for ISAs and SIPPs
|Account Options||Junior ISA, Stocks and Shares ISA, SIPP, General Investment||Junior ISA, Stocks and Shares ISA, Lifetime ISA, SIPP, General Investment|
|Socially Responsible Option?||All funds are socially responsible by default||Available|
|Annual Mgmt Fee||0.375% – 0.75% |
|0.25% to 0.45% |
|Notable Features||eBook learning, robo-advisor, risk questionnaire||Plenty of learning resources, huge fund selection|
Moneyfarm in Detail
What is Moneyfarm?
With £2.4 billion in assets under management and more than 90,000 clients, Moneyfarm is one of the successful platforms amongst the relatively new breed of robo-investment platforms. They started operations in 2012, but launched in the UK only in 2016. Having moved away from solely DIY trading to ready-made portfolios in 2016, the service now offers a range of products and services which are backed with expert advice and guidance.
Much like Nutmeg, Moneyfarm’s focus on robo-investing and ready-made portfolios will appeal to anyone looking for a hands-off approach.
Which type of accounts does Moneyfarm offer?
What Investment Options Does Moneyfarm Offer?
Moneyfarm chooses a portfolio based on your attitude to risk. The service ascertains which portfolio management system is likely to work best for you on the back of a short questionnaire. However, to be able to get a closer look at the options available, you will need to register and complete the introductory process.
Remember that this is a robo advisor service – in that it’s completely ‘hands-free’. Your Moneyfarm advisor is easy to adjust as you go, however, there’s no need to worry about making big portfolio decisions on your own. This can be a make-or-break feature for many investors – as, if you are comfortable with it, there are certainly some benefits to travelling the DIY route!
Moneyfarm portfolio profiles swing between bonds and stocks, with willing risk-takers likely to receive a package that’s weighted more towards the latter. These portfolios are ready-diversified, meaning you get a fresh, global pick of ETFs and funds recommended by Moneyfarm’s impressive robo experts.
While Moneyfarm’s portfolios consist of 3rd party underlying funds, they provide two tiers of service built with these funds:
- Fixed Allocation: The fund allocation amongst the various asset classes (stocks, bonds, cash, etc.) is set at the beginning of each year and then remains fixed until the next rebalancing period. This rebalancing is done once per year. This makes it very similar to Nutmeg’s Fixed allocation funds or Vanguard’s Lifestrategy funds. Barring exceptional circumstances, Moneyfarm does not adjust or rebalance over the course of the year.
- Actively Managed: The name is slightly misleading as the underlying funds are still index trackers, however Moneyfarm’s portfolio managers introduce their own secret sauce to actively allocate assets amongst the chosen asset classes. The portfolios are rebalanced more frequently based on their manger’s outlook on current events.
As you may imagine, the fixed allocation approach requires less work on behalf of Moneyfarm’s staff. Consequently, Moneyfarm passes this benefit on to their customers in the form of lower fees.
Is Moneyfarm good for beginners?
Moneyfarm offers a managed investment service, which means that they do all the heavy lifting for you. Your portfolio is designed based on your risk tolerance and return goals. You are not required to select individual funds or pick stocks, which makes it very easy for beginners. It takes most of the stress out of investing!
What is the Minimum You Need to Invest?
Moneyfarm’s minimum investment requirement is £500.
What are Moneyfarm’s fees?
MoneyFarm will offer you a sliding scale of fees that is refreshingly easy to understand. MoneyFarm has simplified its management pricing structure – which promises to reduce rates slightly for most customers. As with most investment service providers, you will have to be aware that you will be paying for two sets of fees:
- Platform fees: This is what the providers like Moneyfarm or Hargreaves Lansdown charge for their services
- Fund fees: This is the fee charged by the underlying funds in the portfolios. This fee varies based on the provider of the fund and whether it is actively managed or a passive index tracker or ETF.
There are now seven main tiers of pricing that apply to the entirety of a portfolio, based on asset value within. Here’s a quick breakdown of what you can expect:
- £500 – £9,999: Pay 0.75%
- £10,000 – £19,999: Pay 0.70%
- £20,000 – £49,999: Pay 0.65%
- £50,000 – £99,999: Pay 0.60%
- £100,000 – £249,999: Pay 0.45%
- £250,000 – £499,999: Pay 0.40%
- £500,000+: Pay 0.35%
This pricing structure effectively means you can expect to pay a lower annual rate the more you choose to invest. Therefore, this sliding scale clearly benefits those who have more to save. Moneyfarm has a helpful calculator that can help you accurately determine how much you will pay.
However, do also take into account underlying fund fees (representative 0.2%) and market spread (representative up to 0.09%) on your portfolio. Effectively, these fees all ensure your portfolio remains fully managed, and that you also have access to your own investment consultant.
Fund fees are ‘built’ into the price of running your portfolio, meaning the main cost you will see is the annual rate(s) suggested above.
Moneyfarm offers an even lower pricing tier for accounts if you choose to go with their fixed allocation portfolios. The fees are set up in the following manner:
- £500 – £99,999: 0.45%
- £100,000 – £249,999: 0.35%
- £250,000 – £499,999: 0.30%
- £500k+ : 0.25%
Moneyfarm Fee Examples
Let’s use an example of £50,000 to see how much you’d expect to pay annually for Moneyfarm to manage your portfolio.
From the get-go, this allows for a management cost of 0.60%, which adds £300 to your total. An underlying fund fee of 0.2% (representative) adds £100, with market spread costs of 0.09% (representative) adding a further £45.
Overall, an investment of £50,000 is likely to demand fees of £445. That’s a rate of 0.89%.
That considered, let’s take advantage of Moneyfarm’s high-investment, low-fee benefits. By investing £500,000, you’d pay £3,200 (representative) – but at a rate of 0.64%.
Does Moneyfarm have an app?
Yes, Moneyfarm has an investment app. Mobile apps have become an almost indispensable component of the investment industry. The app is intuitive and friendly enough to appeal to most beginners and casual investors, and what’s more, you can ask the app to provide you with a starter portfolio based on your knowledge level.
Is My Money Safe With Moneyfarm?
Yes. As with all good investment services, Moneyfarm is FSCS protected. This means that, should the company fold, you will receive protection on money you have invested up to a certain point. Moneyfarm clearly states that you could receive compensation up to £85,000, for example.
Hargreaves Lansdown in Detail
What is Hargreaves Lansdown?
Hargreaves Lansdown is a very popular UK investment platform, particularly as they are market leaders in large portfolio support. HL has over £127 billion in assets under management – an impressive figure. HL users will also find that there is huge variety of funds and individual company stocks that you can invest in. HL tends to be very popular with most people getting started with investing, as their site offers a series of impartial guides.
What Investment Options Do They Offer?
As mentioned, Hargreaves Lansdown offers a range of funds for you to invest in. With over 3,000 options to choose from, there is much more variety on offer here than at many other competitors. In the battle between Moneyfarm and Hargreaves Lansdown, HL is the clear winner in this section.
There is the full range of investment ISA options available: Stocks and Shares ISA, Junior ISA and Lifetime ISA as well as a range of pension options: SIPPs and Junior SIPPSs. There’s also General Investment Accounts available and to make the most of your cash savings they also offer an Active Savings account. Which will help you to get the best possible rate available for your cash savings.
HL offers three different investment options to their clients:
- Leave it to the Experts: This is the lowest effort approach and is well suited for those who want the experts to choose the best portfolio for their own risk tolerance.
- Help Choosing Funds: This is a middle-of-the-road approach wherein HL guides you to funds that are in their shortlist.
- Choose Your Own Funds: This is the fully DIY approach wherein you make all the necessary decisions regarding which funds to buy.
These options help you to self-select in to the bucket that is best suited for your skills, time, and expertise. I like this aspect and it helps that Hargreaves Lansdown is one of the most comprehensive investment platforms around, meaning that if you are really in the market to pick one provider, you should be onto a winner.
Is Hargreaves Lansdown Good for Beginners?
For the most part, yes. Hargreaves Lansdown is famous for its introductory guides, which are surprisingly impartial. HL offers a realistic approach for long-term investment that beginners will likely want to get involved with. HL’s Leave it to the Experts offering will be perfect for beginners as you can outsource all the difficult work to HL’s experts.
What’s also likely to appeal to people is the fact that you can get started from £1 in most accounts, while ISAs and SIPPs have a minimum requirement of £100. Note that most fund investments are going to demand at least £100 in a lump sum to start out.
Do They Offer Financial Advice?
Yes. Hargreaves Lansdown offers a standalone impartial financial advice service. However this financial advice is very much a separate service and is chargeable – Usually the cost is a minimum £495+VAT or 1-2% of your advised portfolio. Aside from the paid financial advice service, Hargreaves Lansdown also has a comprehensive knowledge base, which means that some people may not feel they need to get in touch with advisors at all.
What is the Minimum You Need to Invest?
As mentioned, if you want to invest in stocks, you are going to need to have at least £1 available or £100 for ISAs and SIPPs. For a high-value investment service, this is likely to be very appealing. It’s very competitive with some of the emerging low-fee trading apps and services out there.
However, you are going to need at least £100 as a lump sum to invest in funds, or to deposit at least £25 per month through direct debit instruction. This shouldn’t set many investors back much, even those who are just getting started.
What Are Hargreaves Lansdown’s Fees?
If you are buying and selling funds, then Hargreaves Lansdown’s fees are charged at two different levels:
- HL’s administration fees: You’ll need to pay 0.45% on anything up to £250,000, and beyond that, there’s a fee of 0.25%. If you have an ISA or SIPP, and invest in shares, investment trusts, ETFs, and bonds, your fees will be capped at £45 per year for the ISA and £200 per year for the SIPP.
- Fund fees: As you can also buy mutual funds or tracker funds from 3rd parties such as Vanguard, you will be charged by the fund provider. These fees can be as high as 1% for active funds or go down to as little as 0.05%.
- There are no fees for buying or selling the funds.
What’s interesting here is that despite being one of the older firms in the business, HL’s fees are actually lower than that of Moneyfarm!
The only point you have to aware of is that many of the actively managed funds offered by HL charge a 5% entry load, which means that you are instantly charged a one-time fee of 5% when you purchase these active funds. This fee does seem a bit excessive to me. The two ways to mitigate this fee are to either choose passively managed funds or to minimize the repeated trading of these funds, as you would get slapped with a charge each time you re-purchase the fund.
If you are trading in shares, then the trading fees are £5.95 up to £11.95 per trade, which will vary depending on trade volumes.
If you want to trade mostly in shares, you’re likely better off with a dedicated platform like Fineco as the fees are lower and you have much more flexibility. You can read more about Fineco in my review article.
Does Hargreaves Lansdown have an app?
Yes, Hargreaves Lansdown has an app. The app supports all the features you would expect nowadays – viewing, managing, and trading your portfolio, getting news and research, and adding and removing cash. It’s all there!
Is My Money Safe With Hargreaves Lansdown?
Hargreaves Lansdown is protected by the FSCS, which means you will be able to recall anything up to £85,000 if the company goes bust. The company is a FTSE 100 mainstay and they are likely to be one of the most secure investment platforms around.
Hargreaves Lansdown also states that the staff involved in the company own 46% of the total equity, which by their own reasoning means they have significant interest in making sure the company stays afloat.
Now that we have looked at Vanguard vs Hargreaves Lansdown in detail, let’s run through a few pros and cons to close down the debate.
Moneyfarm vs Hargreaves Lansdown: Pros and Cons
Hargreaves Lansdown: Pros and Cons
- Hargreaves Lansdown is the best choice for people who want to invest money in a variety of investments. With over 3,000 funds available, as well as multiple ISA and Pension options, it’s certainly one of the most diverse personal investment platforms around.
- HL offers their clients flexibility for guidance: from a fully Do-it-for-me approach to a fully DIY approach.
- For the privilege of using the HL platform and enjoying the range of funds on offer you’ll need to pay 0.45% on anything up to £250,000.
- Individual stock trading fees can be expensive, depending on how much you are investing, so you’re better off with a cheaper stock brokerage like Fineco.
- That being said, there are no dealing fees at all for buying and selling funds which is a big plus point.
- It’s also a good choice for beginners. There are few platforms out there which offer quite so many introductory guides and tutorials. What’s more, there is a standalone financial advice service, should you need it.
- The Active Savings service is a great way to make the most of your cash savings.
- You can also invest from as little as £1, clearly beating Moneyfarm in this category, too.
- The 5% entry load on their active funds is disappointing. It would be great if HL dropped this charge from their actively managed funds.
- In some cases, the total combined cost when going with actively managed funds can be quite high – up to 1.85% annually, so be sure to check the total cost before you pull the trigger.
Moneyfarm Pros and Cons
- Moneyfarm offers a careful, managed ready-made portfolio system based on your unique approach to risk.
- Historic data shows that Moneyfarm weathers volatility well, though this is no indicator for future performance.
- The website has several eBooks and helpful guides to ease you into the process.
- However, Moneyfarm offers fewer portfolio options and products than HL on the whole.
- Moneyfarm has a higher minimum investment threshold £500 to get started.
Moneyfarm vs Hargreaves Lansdown: Verdict
Based on the flexibility – for guidance and fund choice – as well as cost over the long term, I think Hargreaves Lansdown is the clear winner in this battle! Moneyfarm is however a close runner up.
I think the difference comes down to the fact that Moneyfarm and HL appear to be targeting a slightly different audience in their offerings, so depending on your preference, one of them might be a better fit. Both are solid offerings in their own right, but as with everything in life, certain offerings may simply resonate with you better.
I think Moneyfarm is best suited for someone who wants the simplest approach, without any confusion or without getting overwhelmed. If you choose Moneyfarm’s fixed allocation portfolios, your total fees will be even lower than what Hargreaves offers! However for those willing to put in slightly more time and analysis, Hargreaves Lansdown beats the competition on a vast majority of the parameters.
Ultimately you will not go wrong with either choice as there are no major issues with either platform!
by Jon Craig
I am the creator of Project Financially Free and I started this journey to both educate myself and share my insights on personal finance. I’m passionate about financial literacy and I invite you to join me on this transformative path. See more.