How does Monzo's new investment service compare?

Digital bank Monzo has started offering customers the option to invest directly through its app, as banks and apps increasingly compete with investment platforms to provide investment services. Platforms such as Hargreaves Lansdown are still seeing new customers coming in even as cost of living pressures remain high, but younger investors are still a hot commodity. 

Monzo, the popular online-only bank, known for its bright coral bank card and zero fees when used abroad, now provides access to three funds from BlackRock’s MyMap range via an individual savings account (Isa) or a general investment account. The funds match different risk profiles and all have an environmental, social and governance (ESG) tilt. Monzo customers who want to start investing need to join a waitlist as the feature is gradually rolled out. 

With a platform fee of 0.45 per cent on top of fund costs, the proposition isn’t cheap. Hargreaves Lansdown charges the same for a much broader range of funds and more sophisticated service. Monzo’s Plus and Premium customers, who pay a monthly fee in exchange for additional services, are charged a lower platform fee of 0.35 per cent. The BlackRock funds also come with a small discount on Monzo – the fund management fee is set at 0.14 per cent instead of 0.17 per cent. 

Designed for first-time investors

Monzo has joined the ever-growing number of firms seeking to provide both banking and investing services. These can be attractive for investors who do not need a wide range of investments and like the convenience of managing different aspects of their financial lives from the same app.

Mike Barrett, consulting director at the lang cat consultancy, tried Monzo’s service and was impressed by the user experience, but said it is “very much designed for first-time investors”. “It is exceptionally easy to use – something you can’t say about most existing platforms,” he noted. On the other hand, “if you are a more experienced investor, the lack of choice and lack of pension wrapper would probably be a showstopper". 

But just because an app targets new investors, it does not make it the best for small portfolios, particularly if there are fixed fees involved.

Monzo competitor Revolut offers investment in single-company shares, but unlike with other trading apps, dealing is not fee-free. The likes of Plum and Moneybox combine savings and investments in a very user-friendly way, but charge a fixed monthly fee on top of percentage-based platform fees and fund management costs. Holly Mackay​, founder and chief executive of Boring Money, said: “As a rule of thumb, the cooler-looking new investment apps are actually typically more expensive for smaller accounts than the more traditional providers.” 

If you are after something simple, the banks can be cheaper than some of the newer apps, she added – although “their user experience won’t typically win any prizes”. Earlier this year, Lloyds (LLOY) launched “ready-made investments” via three multi-asset funds managed by Scottish Widows, with a platform fee of £3 a month.