Simply Ethical Review: An Alternative to Wahed Invest? | IFG

Simply Ethical Review: An Alternative to Wahed Invest? | IFG Featured Image

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Halal Investment Review
Mohsin Patel

Mohsin Patel

Co-founder

Simply Ethical is an ethical halal investment platform.

What started out as your standard Muslim financial advisory company has grown into an outfit that:

(a) offers bespoke financial advice;

(b) discretionary investment management (i.e. they will invest on your behalf);

(c) robo-advisory investing (i.e. they ask you questions and invest for you based on your answers); and

(d) a stock brokerage platform (i.e. a Muslim AJ Bell). It’s important to mention at the outset that Simply Ethical is not just FCA-regulated, but also benefits from FSCS protection.

In this review, we’ll explore whether Simply Ethical is a viable option for Muslims wishing to invest in sharia-compliant stocks and shares.

In writing this review of Simply Ethical, we have interacted not just with the platform, but with the team behind it too. If you have any comments, please do leave them in the comments section.

What options do they offer?

I found this to be a key element of the Simply Ethical difference. They have 3 main offerings which are as follows:

1. Financial Advice & Discretionary Management

As an FCA-regulated entity, Simply Ethical is able to offer personal financial advice that is completely tailored to you. This is paid financial advice – as the government introduced legislation requiring all financial advisors to charge for their financial advice.

In our experience, the types of people who usually go for this are people with significant assets who need guidance on exactly where to put their money. It might be that you’re coming up to retirement, for example, and you have some very specific needs and don’t really know where to start. Or it could be that you’re a working professional with significant assets and don’t know what assets to invest in to achieve your financial aims.

Getting personal financial advice helps with this and Simply Ethical have the ability to do this.

Simply Ethical can also go one step further and actually manage your money for you (of course, guided by your risk profile and expressed preferences). This is what is called discretionary management.

We’ve not been through the financial advice/discretionary management process ourselves, but having met with the team, considering their long experience, and as Simply Ethical is an FCA-regulated entity, we have confidence that they are a safe pair of hands on this. If you would like to reach out to them, you can do so via this form.

2. Robo-advisory

This is a very neat little feature. Simply Ethical refers to it on its website as “Simplified Advice Online”.

You essentially create an account and run through a series of questions about your financial goals. Depending on the answers you give, Simply Ethical will advise on what you should invest in. So if you’re a 65-year old retired person, you’ll have a different risk attitude compared to a 21-year old graduate. And that will be reflected in the advice you get in terms of what to invest in.

To my mind, this is not far off Wahed Invest’s equivalent, which is their sliding scale from “very conservative” to “very aggressive”. But I think Simply Ethical’s version is better as an advised experienced because it is more interactive and there is actual guidance and advice as opposed to you self-selecting whether you are conservative or aggressive.

All of this left me with a feeling that although it wasn’t a human directly advising me, it was a much more tailored, and accurate, approach than if I had simply self-selected.

3. DIY

The third and final offering they have is the DIY approach. Simply Ethical refers to it on its website as “Self Select Trading”.

This is the default position for most brokers. You open an account, you search an investment to buy, and you buy it. You don’t ask for, or get, any financial advice. As I mentioned earlier, the good bit about the DIY approach with Simply Ethical is that you are only ever choosing from a halal list.

Charges & Fees

Here is a summary of the key charges that Simply Ethical take:

Let’s compare that with Wahed. Bear in mind that the comparison with Wahed is only appropriate for the robo-advisory section (because that’s all Wahed do).

Robo-advisory

Fee Type Fully Managed Robo-advisory DIY
Annual platform charge Bespoke 0.75% per annum for the first £50,999 The higher of: 1) 0.45% per annum for the first £250,000 or 2) £50 per annum
Trading Costs Bespoke 0.48%-0.73% (estimated cost of underlying funds) £5.95 per online trade

So on the charges front for robo-advisory, Simply Ethical wins out.

Now, having said that, three things to bear in mind: (1) You can start investing with Wahed for just £100, but with Simply Ethical you’ll need to put in £1000 at least; (2) from our conversations with the management in both companies, we know Wahed is singularly focused on robo-advisory whereas Simply Ethical sees this as a service to the wider community alongside their main business of financial advice; and (3) Wahed is global in its outlook and mission with significant financial backing.

Given (2) and (3), our prediction is that Wahed will very quickly become the cheapest provider globally, and the kinds of products it will be able to offer will be unmatched by others as it starts developing its own proprietary funds.

For now though, Simply Ethical will be better on fees.

DIY

Let’s compare what the charges look like on the DIY front.

Fee Type Simply Ethical Wahed Invest
Annual platform charge (up to £50,999) 0.75% 0.99%
Underlying fund fees 0.48%-0.73% (estimated) 0.58%-0.88% (estimated)

Click here to open a Simply Ethical account (and select IFG when you sign up!)

Yes please!
 
 
 

How is Simply Ethical different to mainstream share brokers?

This is quite an easy one. Simply Ethical differs mainly because they only offer halal and ethical investment options.

When you go to AJ Bell, Cavendish or whichever other mainstream broker, you are having to do a manual process to filter for sharia-compliant options. They don’t have a button you can tick to filter halal shares from haram shares. That makes a Muslim’s life difficult. It’s why we had to come up with our own list of halal funds for AJ Bell, for example. Many of you have downloaded and used that, but Simply Ethical solves that problem because the very platform is geared towards Muslims.

So instead of having to filter for halal stocks, funds and ETFs yourself, you’ll only be faced with halal options on the platform. Think of it like going to a halal restaurant.

Screening Methods

Qualitative screen

You might be wondering how exactly Simply Ethical filter out the haram stocks. I’ve taken a look for you and it’s in 3 steps. The first is to filter out simply by haram activity of companies involved directly in haram stuff (e.g. gambling companies) or indirectly (e.g. marketing companies who are supporting haram clients).

As an aside, the IFG approach on the latter is less rigid – Ibrahim has consistently been of the view that simply providing services which in of themselves are halal is permissible, even if it is to clients undertaking haram activity (although you try to make this a very limited amount of your practice). I only say that to introduce the fact that there is some nuance to this issue. I think Simply Ethical take the right extra-cautious approach given that it’s a mainstream platform.

Since they label themselves ethical as well as halal, Simply Ethical also do a screen to filter out unethical companies. There is a cogent argument to be made that today’s meaning of ethical should actually be part of our halal screening. In the strictest sense they are distinct concepts though.

Simply Ethical’s additional ethical screen will mean that companies with certain business practices are deemed unethical and will not feature as an option for you in which to invest. I’m personally of the view that it should be for us as customers to do the research on whether a particular company is ethical or not as different people have different definitions of what is ethical and what isn’t. This certainly isn’t a deal-breaker though.

Financial screen

Lastly, they they do the quantitative financial screening for sharia compliance according to the following criteria to get to a final list:

Platform Cost Per Trade Annual Cost Easy Halal Filtering
Simply Ethical £5.95 0.45% ✔
AJ Bell £9.95 0.25% (max. £30) ✘
Hargreaves Lansdown £11.95 (but funds are free) 0.45% (max. £45) (ISA only. Free in a standard dealing account) ✘
IG.com £8 £96 ✘
Freetrade.io £0 £36 ✘

One feature I really like here is that they tell you what each company earns from haram income so that you can give away that amount in charity. For DIY accounts, this information is available through a web link, and if you are opting for the robo-advisory or the fully managed accounts, you get a statement telling you the amount. A really handy feature and this is the sort of value-add that makes this platform much more useful than the mainstream.

I also really like the fact that any cash held in trading accounts (i.e. uninvested money) is kept in a sharia-compliant bank account with Al Rayan. What you normally find with mainstream brokers is that that cash would be held in a conventional bank account attracting interest.

The other really useful element from a Muslim point of view is that they send you an annual Zakat statement.

Comparison with Wahed & other brokers

Versus Wahed Invest

Let me begin this by saying that Wahed, in our view, is a great platform. Particularly for beginners. Where Wahed falls down a bit is for people who are more advanced than complete beginners.

Through its DIY account, Simply Ethical allows you to choose your own investments without the headache of having to filter out for halal only.

So if you are someone that wants a bit more control over what you are investing in, Simply Ethical is a good choice.

Where Wahed is hands-down better, is the intuitive layout, usability, and ease of navigation. There is a lot of content on the Simply Ethical website but it can often be quite tricky to track it down. Simply Ethical tell us that they do intend to make things slicker overall.

Versus other mainstream brokers

We mentioned the likes of AJ Bell and Hargreaves Lansdown before. Again, these are great platforms, and many of you have opened accounts with them. You absolutely can access halal companies, funds and ETFs via these platforms, it’s just that you’ll need to know what you are looking for in order to find them. Our comparison page does the heavy lifting for you here.

The Simply Ethical platform gives you a comparable platform in terms of usability, look and feel, but with the added bonus of being geared towards Muslims.

I can’t personally think of a good reason to go with a mainstream provider over Simply Ethical.

What accounts can I open under each option?

So let me just explain in case that heading is confusing. When I say “option” I’m referring to the 3 I talked about above (under “What options do they offer?”), i.e. fully managed, robo-advisory or DIY.

Now depending on which one you opt for, you’ll be able to open different types of accounts like ISAs, SIPPs etc. The table below summarises it nicely for you:

Financial Ratios Tolerance
Short term & long term debt to total asset ratio <20%
Cash, deposits and interest bearing investments to total assets ratio <30%
Sum of cash, deposits, and receivables to total asset ratio <49%
Cumulative income from non-compliant activities and interest income as <2%
Interest or finance cost to total revenue <10%

The robo-advisory accounts are set up 100% online. If you are transferring a SIPP over to Simply Ethical, this is all online too.

The funding process is by bank transfer and sadly you can’t pay initially by debit card. You can, however, set up an automatic direct debit and do it that way so no real drawback here.

In addition, if you are opting for the robo-advisory account, once the money hits your Simply Ethical account, it automatically gets invested.

One thing to flag though is that the SIPP needs a £5000 minimum to get going, while the other accounts need £2500 (or £1000 and then a direct debit of £100) to get going. And if you’re going for bespoke advice/discretionary investment management, you’ll need a minimum of £50,000.

How do I fit it into my life?

I really do think that opening an account with Simply Ethical is a great way to both get started if that’s where you are in your investment journey or to complement your existing investments.

As I’ve said, it’s a great way to invest DIY by being able to choose your own stocks or funds, but in a platform that curates those products for you. You can simply search the list, do your own research on whether or not you want to invest in it, then go ahead and do it. Alternatively, if you’re going to the managed side of things, just set up your direct debit and leave the Simply Ethical guys to it.

Here’s a few scenarios where Simply Ethical would be a sensible option:

  1. You’re someone with at least £50k liquid assets. You want an FCA-regulated personal financial advisor that focusses on sharia-compliant investments.
  2. You have at least £1000 liquid. You can commit to £100 monthly to put into either a DIY account or robo-advisory. You want the comfort of a sharia-compliant, FCA-regulated, FSCS-protected platform.
  3. You have built up a pension (or multiple pensions). You want to transfer them into one sharia-compliant platform with a SIPP.

Conclusion

A solid platform for Muslims. Yes, the DIY account is a little cumbersome to set up and the funding could be a little slicker, but this is a sound platform that caters well for Muslims.

Overall I would say that Wahed and Simply Ethical are really good options for Muslims. Wahed has a much lower entry point in terms of investment amount (£100 vs £2500 (or £1k and £100 monthly)), and slicker app access and ongoing use.

Simply Ethical tends towards being a bit more conservative on risk – which is a matter of taste for you. And Wahed will give you a more rapid/streamlined digital experience, but they are a little more expensive on fees right now.

Simply Ethical is great for more complex needs (like if you want a SIPP) or if you want a bit more control over what exactly you invest in. People like Wahed don’t offer that yet.

As we always say for these sorts of products, the only way the folks at Simply Ethical will actually gain enough traction to be even better is if we, as the community it serves, support the product by voting with our wallets.

Sign up to Simply Ethical now (and select IFG when you sign up!)

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Mohsin Patel

Mohsin Patel

Co-founder

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Mohsin is the co-founder of IslamicFinanceGuru, an Oxford graduate and a Forbes 30 under 30 alumnus. He's a former corporate lawyer at one of the world's largest US firms. Whilst running IFG, Mohsin is also actively interested and invested in the web3/crypto space. Publication: Halal Investing for Beginners: How to Start, Grow and Scale Your Halal Investment Portfolio (Wiley) Mohsin is the co-founder of IslamicFinanceGuru, an Oxford graduate and a Forbes 30 under 30 alumnus. He's a former corporate lawyer at one of the world's largest US firms. Whilst running IFG, Mohsin is also actively interested and invested in…

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Account Type Fully Managed Robo-advisory DIY
Standard Investing Account ✔ ✔ ✔
Joint Standard Investing Account ✔ ✘ ✔
ISA ✔ ✔ ✔
Junior ISA ✔ ✘ ✔
SIPP ✔ ✔ ✔