Investment

Wahed Invest Fee Changes 2021 – What This Means for UK Investors

Wahed Invest is an online sharia-compliant investing platform that allows you to invest in pre-set investment portfolios. They have recently announced some fee changes in the UK which we will cover in this article.

We will also discuss who we think are the winners and losers from this change and how these changes compare with the market.

If you’re new to Wahed Invest*, do check out our deep dive here.

What’s changed?

The annual fee that Wahed charges for management and custody fees is changing. For account holders in the UK, it used to be:

  • 0.99% for account balances between £100 – £249,999, or
  • 0.49% for account balances £250,000 and more.

The new fees will be:

  • £2.99 per month for balances up to £10,000, or
  • 0.49% per annum for balances greater than £10,000.

These changes will take effect after 11th June 2021 to coincide with the launch of their new app.

Are the changes only for the UK?

These changes are only for the UK. As of now we are yet to hear if any changes are due outside of the UK. We will keep you posted as we learn more.

The winners and losers

The winners

In short, most of the account holders with balances greater than £3.6k will benefit greatly from this change.

For account holders between £3.6k and £10k, your fees will reduce by a sliding scale as your balance increases. This can be seen in table 1 below where your effective fee reduces as your account balance increases. Balances of exactly £10k will have an effective fee rate of just 0.36%.

Account Balance Old fee (0.99%) New fee (£2.99 pm) Change Effective fee %
£10,000 £99.00 £35.88 -£63.12 0.36%
£9,000 £89.10 £35.88 -£53.22 0.40%
£8,000 £79.20 £35.88 -£43.32 0.45%
£7,000 £69.30 £35.88 -£33.42 0.51%
£6,000 £59.40 £35.88 -£23.52 0.60%
£5,000 £49.50 £35.88 -£13.62 0.72%
£4,000 £39.60 £35.88 -£3.72 0.90%
£3,600 £35.64 £35.88 £0.24 1.00%
 

Table 1: Difference in fees for account balances between £3.6k and £10k

 

There is no change for account balances over £250k. Balances between 10k and 250k will see their annual Wahed fee halved from 0.99% to 0.49%. This is a significant reduction and great news for investors.

The losers

Anyone who has a balance of less than £3.6k will lose out due to this change. Let’s look at the differences in fees for those with less than £3.6k. You can see from table 2 how the effective fee applied increases as the balance decreases. Eventually reaching a whopping 36% for account holders who have invested the minimum £100. That alone would see your investment wiped out within 3 years.

Account Balance Old fee (0.99%) New fee (£2.99 pm) Change Effective fee %
£3,600 £35.64 £35.88 £0.24 1.00%
£3,000 £29.70 £35.88 £6.18 1.20%
£2,400 £23.76 £35.88 £12.12 1.50%
£1,800 £17.82 £35.88 £18.06 1.99%
£1,200 £11.88 £35.88 £24.00 2.99%
£600 £5.94 £35.88 £29.94 5.98%
£100 £0.99 £35.88 £34.89 35.88%
 

Table 2: Difference in fees for account balances of £3.6k and less

How does this compare with the other players out there?

 

Sarwa

Sarwa is a UAE-based roboadvisory platform who we have covered in-depth here. They are mainly available to UAE and MENA investors but are still open to global investors so you can give it a go and see if you successfully onboard with them. For Sarwa you will need a minimum balance of $500 (roughly £300) to open an account.

Their fees are as follows:

  • Free for balances between $500-$2.5k
  • 85% for balances between $2.5k and $50k
  • 7% for balances between $50k and $100k
  • 5% for balances over $100k

Of the two, Wahed’s fees will be more favourable to most investors. Sarwa does have a strong edge though for balances below £4k.

Simply Ethical

Simply Ethical is an ethical halal investment platform who also offer roboadvisory investing, similar to Wahed. To find out more, here is our in-depth review. They do have a minimum investment of £1k which will price out some smaller investors.

Their annual fees are 0.75% for the first £50,999. They then operate on a sliding scale from 0.7% between £51k and £101k all the way up to 0.25% for balances over £1m.

Unless you have a balance of less than £5k (Wahed’s effective fee on a £5k balance is 0.72% as per table 1), Wahed is still the clear winner here on fees.

Of course Simply Ethical’s focus is on personalised financial advice which is usually more suitable for the higher net worth individuals given the associate cost of the financial advice.

The big brokers

We have already done a comparison with the big brokers in our deep dive of Wahed. The conclusion we reached was that Wahed’s offering was cheaper. Given for most investors Wahed have reduced the fee, they will come out on top again.

For smaller balances, despite Wahed increasing their fees, the big brokers will still prove inaccessible. This is mainly due to the pretty hefty dealing charge levied by the big brokers to buy into ETFs.

Take AJ Bell. They have a decent 0.25% custody charge but will also charge £9.95 every time you invest into an ETF. Although you can set up a regular online investment which will only cost £1.5 but this may not suit every small investor.

The low-cost brokers

We’ve written previously about low-cost brokers which you can find here. In short, they can be quite good for accounts with low balances. Wahed’s portfolio give you access to a range of equities funds, gold and sukuk instruments. With low-cost brokers you can easily gain access to the former two. However you’ll find it difficult to gain access to sukuks.

Take Trading212. They have the Ishares MSCI World Islamic and Ishares MSCI EM Islamic equities funds. Invesco Source Physical Gold ETC is also available to give you exposure to gold. You could easily set a pie up, which basically allows you to create your own mini-fund. You decide what investments you want in your pie and what percentage allocation to give to each investment. You can then set up a direct debit or simply make a one-time payment. This is a low cost low effort way to get exposure. If you are unsure about how to distribute your pie, you could simply just mimic the weightings of the Wahed portfolios. Although Wahed do rebalance their portfolios, so you may want to keep tabs on how those portfolios change over time.

Final words

All in all, for those with balances greater than £3.6k this is great news. Investors with smaller account balances might feel a little aggrieved and should now look elsewhere if they can get the same thing cheaper.

It looks as if Wahed have made the commercial decision that they need to charge the small everyday investor a higher amount to make their business model work. From the Wahed perspective we can completely understand it – running a fintech isn’t cheap and each account has a cost associated with it.

For small investors, if you don’t mind taking a slightly more hands-on approach, then a low cost broker would be the best option to save on fees. Otherwise Simply Ethical and Sarwa are probably your best alternatives for a completely hands-off approach.

For more on any of the investment options we covered and more, do check out our halal investment comparison engine.

*Like other comparison websites, IFG pays its bills through referral fees. So if you use this link to invest in Wahed it helps supports our journalism. Our views and coverage remain strictly independent. 

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