Understanding investments and wrappers

There is a common misconception about the difference between an investment wrapper and the investment itself, so let’s look at the differences in their simplest terms.

In the past, if an ISA was purchased with an investment company, it would hold a specific fund from that same investment company. For example, a Jupiter UK equity fund could be held in a Jupiter ISA.

A modern ISA is more often than not held on an investment ‘platform’. On this platform, a variety of investments can be placed – holding shares, pensions, commodities, etc, all from different companies.

However, it’s important not to confuse the two and give undue credit or blame to the investment platform provider or tax wrapper rather than the actual investment itself. With an ISA purchased with Fidelity’s platform, for example, you could hold Fidelity’s own funds in the ISA, or indeed a fund by another company.  However, not all funds or other qualifying investments are available on all platforms.  There is a lot of overlap but one of the things you need to check when selecting a platform, is whether the investment you want is available on it.

Regardless of what platform or tax wrapper you use to buy the investment and bearing the costs and charges that go with that choice, the performance of the particular investment remains the same, but it may benefit from different tax treatment. It’s important to understand the suitability to your individual requirements, which your Ascot Lloyd Independent Financial Adviser can assist with.

There are numerous layers to an investment, each one with different charges and tax implications.

Many highly sophisticated investors purchase individual company shares or other stocks directly, skipping the wrapper and fund levels of this diagram. This approach would not be recommended for less experienced investors.

At the highest level, choosing how to buy and hold an investment between an individual, his/her family or company is one of the most significant choices for both tax and personal reasons.

After this, choosing the wrapper type and provider is likely to involve research into the type of wrapper that is most suited to your needs, then finding a provider with the appropriate combination of costs, administrative capabilities and investment options.

Within the wrapper, it is important to think carefully about the portfolio. Will you invest in stocks and shares directly, or use funds? Again, there is a huge universe (many thousands!) of funds to choose from, each with different costs, objectives, and many other considerations that need to be considered before investing.

Within this is where your cash is actually invested, where our goal is to grow your wealth for the future. Your adviser will sit outside and above this process, guiding you on every step of the journey, picking the most suitable and appropriate options at each level from our robust research and continuing evaluation of the different markets.

We have no obligation to pick any specific owner, investment wrapper, or fund. Our objective is the same as yours – to help you maximise your return on life by investing and spending your money in line with your personal situation and the outcomes you want to achieve.

Your adviser can help you to understand your investment options, invest at a level suitable to your needs, explore your options and utilise their expertise for your benefit.

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