12 January 2023
Introducing Our New Ethical Ready-Made Investments Product Ratings
We are pleased to announce the launch of our new product ratings for ethical ready-made investments. You can view these ratings here.
Following our product ratings consultation at the end of 2022, we made the decision to separate ethical (sometimes known as ‘socially responsible’) portfolios from our existing ready-made investments product ratings.
Our research found that the average charges for an ethical portfolio are typically higher than for standard portfolios. The average fund management charge for an ethical portfolio is 0.60%, which is 0.1% higher than the average for regular portfolios (0.50%).
Total costs, including platform charges and transaction costs, are also higher on average for ethical portfolios. Total annual charges for ethical products average 1.09%, while standard portfolios average 0.90%.
Because they generally have higher charges, we have decided to separate ethical products into their own category, since they come off badly when judged against standard portfolios. Measuring them against other ethical products is a fairer way to evaluate them.
We work out our product ratings using a series of ‘red lines’. To get five stars, a product has to meet all of our red line criteria. The ‘annual cost scenario’ red line for ethical portfolios (which measures the cumulative annual charges on a portfolio of £50,000) is set at £359, while the cost scenario red line for the standard ready-made portfolios is £306, reflecting their lower charges. The cost scenario is the only red line which is different for ethical and standard portfolios. Otherwise they have the same methodology. You can see the full methodology here.
If you have any questions about our methodology, or if you’re interested in licencing a product ratings endorsement, contact firstname.lastname@example.org