John Lewis has partnered with robo-adviser Nutmeg to offer people a simple way to invest. Here's how it will work, your investment options, and the fees and charges involved
There are few brands that are as immediately reassuring, to me at least, as John Lewis.
It has always been a retailer synonymous with quality, where the goods might be a little more pricey than you could find elsewhere but which you know will stand the test of time.
I’m clearly not alone either. A study by the pollsters at YouGov last year tried to establish the strongest brands in the UK, based on our perceptions of the quality, value, reputation and satisfaction that they deliver.
And John Lewis came top, for the fourth straight year, ahead of the likes of Netflix, Marks & Spencer, and the Royal Mail.
John Lewis may be best known as a department store, but it has its own financial services arm too and has now branched out beyond the usual offerings of credit cards and insurance into ISAs and investments.
Which leads to the big question ‒ should you trust John Lewis with your savings?
How do the John Lewis ISAs and investments work?
Let’s take a look at how the proposition works since these aren’t cash savings accounts.
Instead, your money is invested in stocks and shares, offering the potential for a better return but also raising the possibility that you end up with less than you put in.
Investors can put their money into a Stocks and Shares ISA, a Junior ISA, or simply use a general investment account.
The accounts are handled by the robo-adviser Nutmeg, rather than John Lewis themselves, and the firm will ask you some questions about your attitude to risk.
From these questions Nutmeg will then work out which of its pre-built portfolios best match you.
So if you’re quite a cautious person, then your money will be allocated to one of the funds where there is less chance of explosive growth, but equally, there’s a reduced chance of losing your money.
However, if you have more of a relaxed attitude towards risk then you may end up in one of the more daring funds.
What will it cost me?
As your money is being invested, rather than saved in a traditional cash savings account, there will be fees to factor in too.
These will vary based on the type of investing strategy you go for.
For example, with the ‘socially responsible' investments ‒ where your money only backs firms who have high environmental, social and governance (ESG) standards ‒ then the Nutmeg fee comes to 0.75% (up to pots of £100,000), with fund costs and a market spread on top costing you a further 0.37%.
By contrast, with the ‘fixed allocation’ funds, the idea is that your cash is invested in firms that match your risk attitude and won’t need to be reviewed more than once a year.
This lighter level of management is a bit cheaper, with Nutmeg’s fee coming to 0.45% up to £100,000, with those fund costs and market spread setting you back an additional 0.27%.
Fees are a really important consideration with any investment since they are eating into the returns you enjoy.
If your money is being actively managed, where a fund manager is making regular decisions on which assets to buy and sell, then it’s likely to be more costly.
That’s great if those funds are performing well, but all too often these funds are not only more expensive to invest in, they also underperform the rest of the market, leaving you doubly worse off.
As a result, it’s always a good idea to keep an eye on how your investments are performing, and whether you are getting the results you’d expect given the fees you’re paying.
I want to invest
The timing of this tie-up is particularly interesting.
One of the knock-on effects of the pandemic has been that a fair number of people are sat on pots of cash ‒ money they normally would have spent on leisure pursuits and holidays ‒ and are thinking about getting started with investing.
It’s something that the FCA, the financial regulator, has admitted concern over, with plenty of these young investors putting money into assets like cryptocurrency, which are high risk and which perhaps the investors don’t completely understand.
Similarly, research from Hargreaves Lansdown has found that significant numbers of new investors are turning to social media like TikTok and Facebook in order to work out where to invest.
However, not everyone will want to take quite such a hands-on role.
The appeal of robo-adviser services like Nutmeg has always been that they don’t require much work from the individual investor ‒ instead, the adviser builds the investment portfolios, and matches the investor to the most appropriate one.
Personally, I prefer to take a slightly more active role with my investing, even if I’m still sticking to relatively lower-risk investments like tracker funds.
But I could certainly see myself using a robo-adviser.
A big hurdle for the firms in this market has been appealing to more investors.
After all, how many people have really heard of Nutmeg? But by partnering with a large, trusted brand like John Lewis it means that far more people are likely to give it a go.
And ultimately, investing is a sensible thing for most of us to do with at least some of the money we save.
Investing through a robo-adviser is certainly a more secure option than backing one of the myriad cryptocurrencies, NFTs and other alternative assets which could easily crash at any moment.