Where are ISA millionaires putting their money?

A total of 852 ISA millionaires are with interactive investor, the UK’s second largest investment platform for private investors, which today publishes its annual ISA millionaire’s data.

The total (as at 31 January 2023) is down from the 983 recorded at the same time last year, with tough market conditions affecting valuations, but still significantly above the 731 recorded at the beginning of 2021.

Crucially, instead of charging a percentage fee on customer wealth, interactive investor charges a flat monthly fee of £9.99 per month for its core Investor price plan. That means customers get to keep more of their own money, and the savings can be substantial and life changing over a lifetime of saving.

The average age of an interactive investor ISA millionaire is 73, compared to an average age of 56 for the overall ISA cohort. Most will likely have started out with Personal Equity Plans (PEPs), when ISAs were just a twinkle in policymakers’ eyes. So, the number one lesson is patience – ISA millionaires didn’t get there overnight.

Where are ISA millionaires putting their money?

Investment trusts are continuing to power ii ISA millionaire portfolios and account for the largest share of ISA portfolios (42.5% compared to just 8.2% for funds).

For ii’s broader ISA base, investment trusts and funds tend to have similar prominence in portfolios (24% investment trusts, 22% funds).

Investment trusts are ahead of direct equities (39.9%) in terms of asset split and Exchange-Traded Products (3.7%). ISA millionaires are also holding close to 50% less in cash (5% versus 10% cash for the broader ISA base), suggesting that ISA millionaires are studiously avoiding the long-term effects of cash drag.

Asset splits

Dzmitry Lipski, Head of Funds Research, interactive investor, says: says: “Congratulations to all the fortunate customers who have been able to grow their ISA pots to £1 million plus. With an average age of 73 compared to 56 for our overall ISA cohort, this is very much about getting rich slowly.

“Most of our ISA millionaires will have likely started life in PEPs, which preceded ISAs, a reminder that long term wealth creation is about discipline and process. That means utilising Government tax wrappers, a great rule of thumb, even if millionaire status might prove elusive for most of us.

“It’s no surprise to see investment trusts take up such a large proportion of customer portfolios. Over the long-term, some unique features such as gearing (borrowing) to enhance returns have helped them deliver strong long term returns overall. Over time that might mean that they might start to account for a larger percentage of a portfolio. Some investors might consider rebalancing, particularly if a very adventurous investment trust is suddenly taking up a big share of the pie due to outperformance.

“Remember also that that those same investment trust bells and whistles mean they can also underperform in a falling market, and because they are listed on the stock market, trusts can also be impacted by sentiment. But the data shows that investment trusts should not be overlooked.

 “FTSE blue chips are widely held in ISA millionaire accounts, and while these tend to have strong overseas earnings, the ultimate overseas exposure has been sought via global investment trusts, with Alliance Trust the most held overall stock amongst ISA millionaires, and Scottish Mortgage in third place.

“Finally, ISA millionaires only have an average of 5% cash in their portfolios compared to 10% across all ISA accounts, so they are putting more of their money to work. Long term, this can help avoid cash drag. While it’s inspiring to look at how the very wealthiest have got there, it’s also important to consider your risk profile and individual circumstances.”