This is a review of Just ISA: an investing opportunity building upon crowd funding the legal costs of people who would otherwise be unable to afford to take legal action. Keep reading if you are curious to hear my verdict on this ISA.
I’ve never made a secret of my belief that ISAs are an excellent investment. ISAs are tax efficient, flexible and can be invaluable to beginner investors. While they were meant to be a simple financial tool for saving and investing, the instrument has been evolving to include many new possibilities. Hence, I’ve decided to expand the pool of information about ISAs on The Money Principle.
I’ve written about Innovative Finance ISA before, focusing on provisions offered by peer-to-peer landing platforms. However, Innovative Finance ISAs (IFISAs), introduced by the British government in 2016, are broader than that and include other forms of crowd funding.
Today, I’d like to offer you my review of Just ISA.
What is Just ISA?
Just ISA is platform that ‘helps fund the legal costs of people who can’t afford to commence or take to trial legal cases against individuals and corporations.’
I suppose this needs a bit of clarification (and there is a very nice graph that could help you understand exactly how Just ISA works).
Put simply, however, Just ISA connects people who have some money to invest (lend), people who have no money to spend on litigation (including professional negligence cases) and the legal system.
What is the ROI on Just ISA?
The ROI that is being publicised by Just ISA is 8% per year. Unfortunately, as is the case with all IFISAs, it is not possible to trace this historically – these ISAs were established only couple of years ago.
What are the fees for Just ISA?
Just ISA uses bonds. If you are not sure about it, please learn more about bonds; it suffices to say that bonds are widely used by governments and corporations to borrow money.
In the case of Just ISA:
“The Bonds allows Bondholders [this is you were you to choose to invest in Just ISA] to lend money to the Company in exchange for interest payments. The Bonds pay a fixed rate of interest that does not change over its life. The original full face value of each Bond is returned 5 years after it is issued. “
There is no fee for investing in the bonds.
When it comes to fees for the Just ISA plan management the website information is somewhat misleading and what fees are charged is hard to find out. (Having said that, the assistance and customer support offered through the interactive box was excellent.)
Here are the Just ISA management fees (found these out through talking to the company):
Can I withdraw my money when I need it?
No, you can’t.
Just ISA works with bonds set to mature in five years and there is no secondary market. This means that you’ll have to ‘stay the distance’.
Your investment can be withdrawn early, subject to fee, only if you pass away before the five years are over.
Can I invest in Just ISA and other ISAs in the same year?
Yes, you can.
Remember that one of the little know rules of ISA is that you can you can split your annual allowance (currently £20,000) between the following:
- Cash Isa;
- Investment (stocks and shares) ISA; and
- Innovative Finance ISA.
You can’t invest in more than one Innovative Finance ISA during the same tax year, however. In other words, you cannot invest in Just ISA and the House Crowd ISA in the same year.
How risky is Just ISA?
Any investment carries risks, you know that.
Given the way in which litigation case selection behind Just ISA is organised and the track record of 90% success rate in court cases (this means wins with pay out) it seems to me that, from this point of view, the risk is moderate to low.
What increases the investment risk a bit, I believe, is that Northern Provident Investment Limited, the company behind Just ISA, is not covered by the Financial Services Compensation Scheme. This means that if the company fails, you won’t be able to claim compensation.
How much money I need to open Just ISA?
The minimum investment to open a Just ISA is £2,000.
How does Just ISA compare with other ISAs?
Here is how Just ISA compares with Cash ISA, Investment ISA and Innovative Finance ISA (peer-to-peer) according to:
Returns. What are the returns on investment.
Risk level. What is the risk to your investment/savings.
Fees. How much are the fees of the ISA?
Predictability of returns. How predictable are the annual returns of your investment?
Diversity. How diversified is your investment?
Effort. How much effort from you does the investment require.
|Cash ISA||Investment ISA||IFISA (peer-to-peer)||IFISA (Just ISA)|
0.5% to 2%
|Depends, could reach 10-15% on some funds||
4% to 8%
|Fees||Charges for early withdrawal and for transfer
|Between 0.8% and 4.7% of amount invested*||Charges for early withdrawal||Low, fixed charges for specific actions|
|Predictability of return||High||Low||High||High|
|Low to High depending on account||Low||Low|
Selecting an ISA account is a very personal thing. In this review of Just ISA, I told you about its key characteristics. Using The Money Principle formula for ISA selection:
Ideal ISA = (Relatively) low risk + high (potential) returns + low fees + high diversity
I’d say that Just ISA is a contender for my attention. In any case, it is no worse than other IFISA provisions and it beats the hell out of cash ISAs.
Like with all financial instruments, however, there are things about Just ISA that I loved and others I am not too keen about.
What are the things I loved about Just ISA?
#1. Just ISA is set to yield a return of 8% per year. This, in simple terms means that, hypothetically speaking, if I max out my Just ISA this year, in five years I’ll have £28,000. Imagine creating ‘bond stairs’ (e.g. investing in Just ISA every year for a number of years).
#2. I like the predictability of return. Yes, theoretically things can go wrong. I reckon that this is less likely than the stock market. (Okay, this is a bit like the difference between playing the lottery and playing poker well – winning in the former is a result of chance while the latter wins result, largely, from skill.)
#3. I like the fact that my investment will be used to bring justice to ordinary people. Yep, I do keep my emotions out of my investing as much as possible. Still, combining financial gain and doing good, where possible, is an irresistible combination for me.
What are the things I would watch?
#1. Having my investment tied up for five years. I have been aiming to maintain, and grow, liquidity in my portfolio and appreciate having access to my cash. Not being able to withdraw cash for five years can be offset by careful planning – you put in only what you seriously wouldn’t need to touch under any circumstance.
#2. No clear statement about fees. It turned out that there is clarity about fees; the problem is it took so long to find out what this is that I would have given up opening an account. This, however, is easily remedies but amending the information on the website (and the brochure.)
For me, the positives about Just ISA win.
It is over to you, friend.