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Scottish Friendly Review

Scottish Friendly occupies a unique position in UK finance. Unlike the fintech startups like Nutmeg or old-guard asset managers like JP Morgan, Scottish Friendly isn’t a Public Limited Company. It’s a type of financial organisation called a mutual.

Are you looking for a way to invest for your future but feel uninspired after a review of the latest startups?

You might do what millions of people have done over the past few hundred years: turn to one of the UK’s many friendly societies, like Scottish Friendly.

Mutuals are organisations owned by its members (i.e, you, the customer). Rather than running the company to benefit shareholders, mutuals like Scottish Friendly are run in a way that serves the members. All profits either get redistributed to members or reinvested in a way that benefits members, so there are no shareholders who get paid before you or impulse to run the company in a way that benefits those shareholders but not necessarily the customer.

Mutuals are a very old way of sustaining the financial health of communities. Scottish Friendly was founded in 1862. While they date back hundreds of years, mutuals remain a huge part of the UK finance landscape. Mutuals across the country manage £125 billion in assets and boast 30 million members.

Should you trust Scottish Friendly with your retirement funds? Will its products help you create and grow wealth? Keep reading our review to learn whether Scottish Friendly’s financial products might secure you the future you want.

Scottish Friendly Rating Summary

Overall Rating: 4/10
41%
Fees: 2/10
20%
Account opening: 8/10
80%
Deposit and withdrawal: 8/10
80%
Trading platform: 1/10
1%
Markets and products: 7/10
70%
Research: 2/10
20%
Customer service: 6/10
60%
Education: 2/10
19%

Pros

Easy to open an account
Quick and easy transfers
Sign up gift available between £40 – £70 in value

Cons

No pension options available
Very high annual management fee of 1.5%
Some lag in customer service response times

Scottish Friendly Investments Review

Scottish Friendly Product Range

Scottish Friendly offers a simple product range:

  • Scottish Friendly Investment ISA
  • Scottish Friendly Junior ISA
  • Bonds
  • Life Cover

Although the mutual places an emphasis on tax-free investing solutions, Scottish Friendly doesn’t offer any pension options, which is something to keep in mind if a private pension is on the cards for you.

Research Services & Tools

Scottish Friendly doesn’t offer any financial advice. Instead, the mutual directs all potential members with questions about the suitability of investments to an independent financial adviser.

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While choosing not to provide advice is very common, Scottish Friendly doesn’t provide much investor-focused information at all. The marketing team uses the blog to keep members up-to-date with mutual announcements and competitions.

At the same time, you also don’t need much in the way of knowledge of financial markets to use Scottish Friendly Investment ISA. Everything is managed on your behalf by Scottish Friendly’s team. All you need to do is check your account on the website and wait for the needle to move.

Fees & Charges

If you read any Scottish Friendly reviews in the papers or elsewhere on the web, you’ll see a big focus on the mutual’s fee schedule.

Scottish Friendly assesses a 1.5% annual management charge on a daily basis with the exception of the My Prime account, which enjoys a 0.% management charge. It covers both Scottish Friendly’s fee and the management for the underlying fund.

A 1.5% annual management charge is a seriously hefty fee. For example, Hargreaves Lansdown charges only 0.45% on the first £250,000 in an investment ISA.

While a difference of 1% may seem fairly small at first glance, discrepancies like this impact your investment no matter how much or how little money you add to your account.

For example, if you put £10 a month for £10 a year into an ISA with a 1.5% management fee, you will have £1582.94 assuming it grows by 7% a year.

If you invest the same way with a 0.45% management fee, you have £1,677.5 at the end of ten years (again assuming a 7% growth).

Fees like 1.5% can stop your money from growing over time, so you need to be sure that Scottish Friendly offer a value proposition that makes the fee worthwhile for you.

Non-Leveraged products

Like most friendly societies, Scottish Friendly only offers non-leveraged products.

Their non-leveraged products include the Investment ISA, Junior ISA, bonds, and life cover.

Leveraged products

Leveraged products allow you to increase your investment exposure to the market without increasing the amount you deposit.

Scottish Friendly doesn’t offer any leveraged products. There’s no investment account or option to play the stock market on your own.

Keep in mind that you’re not allowed to use leveraged ETFs or other instruments in your ISA.

Scottish Friendly Investment ISA Review

Scottish Friendly provides three investment ISA options. While all three options cater to a specific customer, only the My Prime account really stands out as a viable product option if you’re hoping to grow your money.

Let’s start with the mandatory minimum investments. The big attraction to the My Easy Choice or My Choice accounts is the low barriers to entry. Increasingly more ISA providers require at least £10-£50 a month in deposits to keep the account. But that can be a burden if you just started working or if your industry is dominated by unstable employment conditions (contract work, etc.). Scottish Friendly allows you to minimise and even stop payments without any kind of penalty. In effect, it opens up the chance to invest for a group of people who may still be ignored by many providers, even with the changes in the market trending towards providing easy access to investors of all backgrounds.

Scottish Friendly Investments ISA Review
The lack of mandatory minimums and deposit flexibility are big pros if you’re the kind of customer who legitimately benefits from them.

Now, let’s talk about fund choice. Scottish Friendly only offers nine fund choices, and that’s a pretty small number given the sheer number of funds available. What’s more, there’s a significant likelihood that you’ll miss out on the best performing funds given that they do change over time. To accept the limited fund options, you need to be confident in Scottish Friendly’s choices and management. You should also keep in mind that you only get the best fund choice when you agree to a My Choice or My Prime account. (But also remember that the My Choice account is so expensive that you’re better off looking for high-interest savings plans).

Scottish Friendly doesn’t offer any groundbreaking or even exciting features. The one thing anyone considering opening a Scottish Friendly account should look closely at is the fees. These are extraordinary, but they stand out in a way that hurts the brand.

The My Simple Choice and My Choice fees are astronomical for the value offered by the accounts. In reality, the My Simple Choice and My Choice plans are really more of a high-interest savings plan than an investment account if only because the fees eat up any ordinary gains you might make. Keep in mind that high-interest savings plans don’t come with the risk of market volatility, so you may actually earn more with the right savings program. The guarantee that the investor will receive at least their minimum investment amount after 10 years suggests that Scottish Friendly knows this is the case, too. In some ways, the guarantee means Scottish Friendly won’t eat into your principal when taking out its fees rather than acting as a promise of protection from market volatility.

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Finally, it’s worth noting that one of the ways Scottish Friendly attempts to attract new users is through sign-up gifts. You’ll get a gift card in the post when you open a Scottish Friendly ISA account. The amounts vary by period, but they are rarely more than £40-£70. These are one-off gifts, and you should remember there’s a chance that the high fees mean you’ll spend more on management costs than you received in the sign-up bonus.

Overall, a review of the Scottish Friendly Investment ISA products suggests that they benefit a pretty select group of people, usually those who are locked out of other providers’ products and who don’t have the lump sum needed for the savings accounts with the best rates. Even My Prime ISA doesn’t offer the benefits associated with other products in the same bracket: a lack of choice in funds really damages its ability to compete with other providers.

Scottish Friendly offers three investment ISAs under the umbrella of ‘Scottish Friendly My Plans’:

  • My Easy Choice
  • My Choice
  • My Prime

If you previously considered opening an ISA at Scottish Friendly, you’ll notice the account names changed in the last few years.

Account holders can choose between nine funds depending on the investment ISA product chosen and according to your personal risk level.

My Easy Choice is the entry-level ISA available to brand new savers and investors who aren’t able to commit to investing larger sums just yet. You can begin investing in a My Easy Choice investment ISA with £10 a month or by putting in a lump sum of only £100. You don’t have any choice in funds. Instead, you hand over your money, and Scottish Friendly manages it.

The big feature offered by My Easy Choice is the Scottish Friendly guarantee. If you keep the account for ten years, you are guaranteed to get back the balance you invested. In other words, you won’t make a loss as long as you stay the course.

My Choice represents the next tier in the provider’s investment options. The same minimums apply (£10 monthly or £100 deposit), but you have the chance to pick the funds that appeal to you based on your risk preference. It’s a way to ‘level-up’ from the basic account without taking hold of the reins.

My Prime is a relatively new product for investors who are serious about saving and willing to commit £100 each month to their account. It caters to a group of investors outside of Scottish Friendly’s core customer base: those with high net wealth. There’s no flexibility with the £100 minimum, so it’s important that you’re able to foot this debit comfortably. As a My Prime account holder, you get a short-list of funds to choose from. However, the real benefit is in the much lower management fee of only 0.5%.

Opening an Account

Scottish Friendly makes it easy to open an account thanks to the focus on user experience offered on its website. Most Scottish Friendly reviews from customers say that set-up is almost always simple and straightforward. However, the site can be confusing because Scottish Friendly changes the names of its packages, which means old documents are still discoverable through search, even when they no longer accept new investors.

To open a Scottish Friendly Investment ISA or Junior ISA, you can start an account with £10 as long as you don’t have an Investment ISA with another provider. This is unique because nothing in HMRC guidance says you can’t have multiple ISAs open at once.

All applications can be completed online or with phone support if you need extra help.

Before starting the application, make sure you have your National Insurance number and a form of payment to hand. You must provide either provide your bank account details (sort code and account number) to set up a direct debit or use your debit card to provide a lump sum.

If you don’t have your NI number handy, you can provide it later on in the process. It’s better to provide it with the application if you can because doing so seems much less complicated.

Once set up, you can then manage your account online using the My Plans platform either on the website or on Scottish Friendly’s mobile app.

Transferring Your Investments to Scottish Friendly

Scottish Friendly allows you to transfer your existing ISA into one of its products.

To transfer in, you must complete the ISA Transfer Application Form. Your current ISA manager will then sell off your existing holdings and make the transfer to Scottish Friendly in cash.

You can’t transfer into a My Choice ISA from a flexible ISA.

Customer Service

The Scottish Friendly customer service team welcomes feedback and complaints via phone and post.

Those with accounts at Scottish Friendly say that the online platform makes it easy to set up and manage an account. But there are some reports that the response time on query emails leaves a lot to be desired.

Overall, customers’ experience with Scottish Friendly customer service seems to be neutral verging on positive.

Who is Scottish Friendly Suitable for?

Scottish Friendly best suits new investors and those with small investment appetites. The ISA products, in particular, offer an exchange that caters to a very select crowd. In exchange for the freedom to change (and lower) your payment whenever you like, you do pay quite a high fee. While fees certainly impact investors at every level, they can be particularly devastating for those who invest the bare minimum of £10 a month.

The Scottish Friendly My Prime is the best of Scottish Friendly’s offerings. At 0.5%, the fee is reasonable. However, you don’t have much fund choice compared to the provider’s competitors.

If you’re looking for somewhere to put your money and you’re not bothered about growth, then Scottish Friendly would suit you. Just be very aware of the fees, including the exit fee, before you sign-up.

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Scottish Friendly FAQs

Who Owns Scottish Friendly?

Scottish Friendly is a group of companies. It began life as the City of Glasgow Friendly Society in 1862. In 1992, the company adopted the name Scottish Friendly Assurance after transferring from a Scottish-based mutual.
The group includes:
Scottish Friendly Assurance Society Limited
Scottish Friendly Asset Managers Limited
Scottish Friendly Insurance Services Limited
SFIS (Nominees) Limited
Each of these groups looks after the company’s insurance and investment products (e.g., Scottish Friendly Asset Managers covers the ISAs).

How Safe is Scottish Friendly?

Scottish Friendly has over 700,000 members and £5 billion in assets under management. Figures like these suggest that Scottish Friendly is a safe choice and unlikely to ‘go bust.’ After all, during the 2008 financial crisis, not one mutual went bust even as banks around the world failed.
However, you don’t need to take the organisation’s word for it. You can read the Scottish Friendly’s up-to-date financial results on its website. The Scottish Friendly Solvency and Financial Condition report is also available for customers who might have been burned by asset managers in the past.
It’s also good to remember that mutuals are controlled and shaped by their members. Members elect delegates who represent their views on the board. Because the community benefits when Scottish Friendly does well, there’s a big focus on transparency and responsibility within the organisation.
Either way, Scottish Friendly products receive protection from the Financial Services Compensation Scheme (FSCS). If Scottish Friendly did go bust and couldn’t pay back your investment, then the FSCS may pay it back. The maximum level of compensation for new investments is 100% of the claim.

How do I Close my Account at Scottish Friendly?

You have 30 days to cancel or surrender your policy after you first open it. You’ll get instructions for closing your account during the cooling-off period within your welcome package.
After that, you must surrender your policy by requesting a ‘surrender a claim’ form. Scottish Friendly then decides if your policy is eligible.
It can take up to four weeks to close your account, and Scottish Friendly is clear that you may not get the current value of your policy if you withdraw your funds.

How to Withdraw Money from Scottish Friendly

If you want to withdraw money from your Scottish Friendly ISA, you have two options. The simplest is withdrawing by using the online service (My Plans). Alternatively, you can send signed instructions to the Scottish Friendly customer service department.
Once received, Scottish Friendly makes the payment with four business days of your units being sold. You get the money back in the bank account you use for direct debits.

Is Scottish Friendly Any Good?

This question can be a loaded one because there are so many factors that go into whether a provider is ‘good’ or not.
Scottish Friendly provides trusted products on an easy-to-use platform and follows Financial Conduct Authority Rules.
But will you build wealth?
According to Scottish Friendly’s 2109 report, the group’s investment performance 12%. While this isn’t nothing, it doesn’t quite stack up to the 19.2% performance rate of the FTSE All Share Total Return Index. In 2018, Scottish Friendly reported -3.7% investment performance compared to -9.5% from the FTSE All Share Index.
Keep in mind that the 1.5% fee can as much as half your return.

How to Contact Scottish Friendly

You can get in touch with Scottish Friendly by phone, post, email, or online form.
The UK phone is 0333 323 5433.
The UK postal address is:
Scottish Friendly Assurance House, Scottish Friendly Assurance Society Ltd, 16 Blythswood Square, Glasgow, G2 4HJ

2 Comments. Leave new

  • Mal WHITE
    12/11/2020 3:16 pm

    An interesting review. One or two points. You mention that the fee includes that of the underlying fund, but don’t point out that that doesn’t apply to Hargreaves Landsdown. So HL’s fee is .45% plus the fund fee. This fund fee could be high in the case of an active fund, whereas the cost of the active fund with SF with the Prime account is .5% all in, possibly the cheapest active fund on the market. It is 1st or 2nd quartile over the various time periods at the moment and is outsourced to SVM.
    The range of funds is greater than appears at first sight as many are funds of funds. The risk graded funds use L and G index funds and I find them a good alternative to Vanguard Lifestrategy. Incidentally, SF has recently added a Vanguard ethical global index fund, so there are now 10 funds.
    I switched from My Choice to My Prime, but kept a nominal amount in My Choice. My Choice has made over 12% for me over the last 18 months, so far more than a savings account. I make tactical moves between funds within the policies to try to get better returns, so there is user flexibility.
    You are able to drop payments below £100 in the Prime account or pause them altogether. It just means the the fees will revert to the larger amount. You don’t have to worry beforehand whether you can keep the payments up.
    You can only open one investment ISA with one provider in any one tax year. SF’s rules are precisely the same as for other providers.
    I don’t agree that fees impact more on people with small amounts invested. Far less so, as they’re percentage based. For example I have £30000 in My Prime which costs me £150 per annum at .5%. Reduces my returns, I should say. If on the other hand, someone had £100 in My Choice, they’d pay £1.50 per annum at 1.5%. They would also have seen potential returns of 12% net of fees if they’d used my strategy.
    There is another way in which SF is particularly useful to people with small amounts invested. There is a discretionary Vectis discount card issued at present and has been since I started investing with SF in 2013. I get a 4% discount with Morrisons and Sainsbury’s every time I shop there. I’ve also had recent purchases at Go Outdoors with a 10% discount. Very many major brands are included, e.g Tesco. All that’s needed to take advantage, is to invest £10 a month or £100 with SF. That would certainly cover your fees.

    Reply

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peter

Peter Field – CFA

As a financial analyst and the chief editor at InvestingReviews.co.uk, I write about how accessible investing can be for everyone. I hope you find my guides and reviews helpful.

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