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Cash interest explained

You will receive interest on balances in your platform cash account at the prevailing rate.

Embark Investment Services Limited acts as the custodian for investments on the Willis Owen platform and is one of our strategic partners that provides our Willis Owen ISA, GIA, Junior ISA and SIPP.

Embark places cash with a number of banking partners for safekeeping and to provide the potential for you to earn interest on money in your platform cash account. By managing cash in this way, it aims to provide better protection and a higher overall level of interest than if all funds were placed with a single bank.

The rates of interest paid by banks will vary. Embark retains a portion of the interest earned to cover its costs in managing platform cash.

Current Interest Rate

The table below shows the current customer interest rate payable on cash balances along with the amount of interest retained by Embark. The customer interest rate shown is that after accounting for interest retained by Embark:

Date From	Customer Interest Rate	Interest retained by Embark
25th March 2024	2.46%	1.75% - 2.00%

Embark can change the rate of interest at any time and it reviews the position at least quarterly. Interest is calculated and accrued daily and is credited to your account on the first of each month. If you transfer out, accrued interest is applied at the point of transfer. We will inform you if and when the interest rate changes as soon as is practicable.

Interest retained

The table below shows the yearly equivalent rates of interest Embark expects to pay based on a range of possible yearly interest rates it may earn.

Interest Embark expects to earn	Customer Interest Rate	Interest retained by Embark
0-1%	0 – 0.46%	0 – 0.54%
1-2%	0.46% – 0.94%	0.54% – 1.06%
2-3%	0.94% – 1.46%	1.06% – 1.54%
3-4%	1.46% – 2.02%	1.54% – 1.98%
4-5%	2.02% – 2.61%	1.98% – 2.39%
5%+	2.61%+	2.39%+

Historic Interest Rates

To see details of historic customer interest rates, along with the amount of interest retained by Embark, click here.

Date From	Customer Interest Rate	Interest retained by Embark
6th October 2023	2.16%	1.70%
17th July 2023	2.00%	2.05%
19th April 2023	0.99%	-
17th March 2023	0.49%	-
2nd February 2023	0.43%	-
22nd November 2022	0.29%	-
1st November 2022	0.22%	-
1st August 2022	0.10%	-
24th April 2020	0.00%	-
1st September 2018	0.55%	-
1st May 2018	0.40%	-
13th November 2017	0.15%	-

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1. Why invest? 2. Learn about investing 3. Learn about accounts 4. Plan and review

Guide to ETFs

Want to know how ETFs can work for you?

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Introduction to exchange-traded funds (ETFs)

What is an exchange-traded fund (ETF)?

An ETF is a type of collective investment scheme that pools money from different investors. It is used by a professional fund manager to invest in a basket of securities, such as shares and bonds.

They are like funds in terms of what they invest in, but because they are listed securities in their own right, they can be traded at any time during market trading hours (as opposed to funds that are typically traded only once a day).

ETFs are typically passive investments that seek to replicate the returns of a chosen index but offer a high level of transparency as they publish their holdings daily.

Types of ETFs

The global ETF market is huge and worth trillions of pounds. There are also many different types of ETFs in the market, below are the most common:

Index ETFs - aim to replicate the performance of an index by holding the constituents of the index. Index ETFs are the most common form in the market
Active ETFs - seek to outperform an index. Active ETFs are very similar to active funds
Stock ETFs- funds that are managed by professionals who use their judgement to decide where and how to invest, in line with the fund's objectives
Bond ETFs (also known as fixed income ETFs) – these invest in a basket of bonds that can be grouped by region, type of bond or credit rating
Commodity ETFs - ETFs that seek to track the price of physical assets such as gold, oil, and wheat. You may also hear the term exchange-traded commodity (ETC) used. While they are not strictly ETFs, ETCs track the value of a commodity by buying and physically storing it (physical ETCs) or using derivatives to match the returns of the commodity (synthetic ETCs)
Strategic beta ETFs (also known as smart beta ETFs) – these employ a mix of active and passive investing strategies as they track an index that has been weighted to maximise a specific factor. Examples include ETFs that target growth stocks, high dividend payers or quality stocks. There are also multi-factor strategic beta ETFs that provide exposure to several factors
Thematic ETFs – ETFs that invest in line with a specific theme or trend. These ETFs target companies that can benefit from a significant structural trend in the global economy. Examples of themes and trends include artificial intelligence, clean energy and copper mining .

Pros

Targeted exposure – the ETF universe is wide-reaching and some ETFs invest in very specific stocks or bonds. If there is a particular area of the market you want to invest in, there is most likely an ETF out there for you
Diversification – due to the wide array of ETFs in the market, you could potentially diversify your portfolio even further than if you just bought funds
Low cost – ETFs are generally low cost, especially when compared to active funds
Easy to trade – ETFs are traded throughout the day when markets are open, unlike funds which are usually only traded once a day
Transparency – ETF holdings, performance and costs are published daily, which helps investors know exactly where their money is and what they are paying for
Tax efficiency – when buying and selling ETFs, investors aren’t subject to stamp duty and certain other levies that investors would normally pay if they were buying shares in individual companies or investment trusts, for example

Cons

Concentration risk – because many ETFs hone in on a particular theme, index or subsection of an index, it means they can experience higher volatility at times. The more specialist the ETF, the higher this risk.
Complexities around intraday trading – the ability to trade throughout the day is a key feature of ETFs, and brings with it both higher risks and opportunities. If you are an active trader, you might be able to take full advantage of sudden price movements, but equally you could get stung by these if you buy at the wrong time.

Also, when investing in an ETF you can’t sell without a buyer, which might force you to hold onto an ETF for longer than you’d like, as opposed to investing in open-ended funds, when you sell units back to the fund management firm.

Even professional investors struggle with timing the market so accurately. If, like most retail investors, you tend to take a medium to long-term view of your investments, intraday pricing isn’t something you’ll likely be monitoring that closely.
Complexities around pricing – unlike funds, which are generally single-priced, you will most likely buy an ETF at a higher price than its current sale price. The spread between those two prices will be affected by factors like market volatility for instance, or the liquidity in the underlying stocks. In ordinary funds you don’t see this because transaction costs are just absorbed in the fund and shared out. In ETFs, you see this much more directly as it’s reflected dynamically in the spread.

It’s also worth remembering that the price of an ETF won’t necessarily reflect its net asset value (NAV) , which means they can trade at a discount or premium, depending on market demand at the time.
Limitations on upside potential - ETFs typically seek to only track an index, so there is no opportunity to outperform the index through active management.

Terminology

Investing in ETFs can be quite confusing for novice investors, not helped by the large number of terms that aren’t often used when talking about funds and other types of shares. Below are some key terms to understand before you decide whether to buy ETFs for your portfolio:

What does all the terminology mean?

What does all the terminology mean? Hide the detail

Glossary of Terms

Bid/ask spread

ETFs have two prices, like shares, investment trusts and some unit trusts. This means there is one price at which shares in an ETF can be bought and a different price at which they can be sold. The difference in the two prices is the bid/ask spread (sometimes called the bid/offer spread). Generally, the lower the bid/ask spread, the more liquid the ETF.

Net asset value (NAV)

The total value of assets minus total liabilities in the ETF, divided by the number of shares. The NAV gives an indication of the fair value of a single share in the ETF and is usually calculated once a day.

Indictive net asset value (iNAV)

This is the same calculation as the NAV, but is calculated every 15 seconds, increasing transparency for investors.

Physical replication

This is where an ETF will replicate an index by buying the same stocks or bonds as the index in the same proportions.

Synthetic replication

This is where an ETF will replicate an index by using derivatives, such as swaps.

Securities lending

The process where the ETF lends out the stocks or bonds it holds to a third party in return for a fee. The ETF will typically buy other assets to protect itself from the risk of loss. The process allows the ETF to generate extra revenue and lower its costs.

Total expense ratio (TER)

This is like the ongoing cost for a fund and is the combined total of fund management charges and other administration costs, divided by the total fund assets.

Tracking error

This is applicable to index ETFs, as an ETF’s tracking error indicates how closely the ETF is following the index. The lower the score, the tighter the ETF is tracking the index.

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How do you trade in ETFs and what are the costs?

ETFs are priced throughout the day during market trading hours, between 8am and 4.30pm. When buying or selling during this time, investors are presented with a live quote to accept before the trade is placed. Trades placed outside of these hours can be dealt 'at best' which means at the next available opportunity when the market reopens.

The main cost associated with trading in ETFs is a trade fee, which is applicable when buying or selling shares in an ETF.

Access full details about fees and charges.

Previous: Multi-asset investing Next: Investment Trusts

Also in Learn about investing

Investment Trusts

An investment trust, or investment company, is like a fund in that it invests in multiple underlying securities but is a listed public company whose shares can be bought or sold.

Shares give you a stake in a publicly listed company that trade on a stock exchange, through which you can buy and sell.

Morningstar ratings

Take advantage of the world-class research available from our partner, Morningstar, to help you choose your investments with confidence.

We don’t provide advice as to whether an investment is suitable for you. Before investing you should make sure you understand the risks involved and, if you’re unsure, seek expert financial advice.

Past performance of an investment is not a guide to future performance, the value of investments or income from them may go down as well as up and you may get back less than you originally invested. Tax treatment depends on your individual circumstances and may change.

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Willis Owen Limited is authorised and regulated by the Financial Conduct Authority and is registered in England (No.3283706) at Ground Floor, 507 (Unit 2), Centennial Business Park, Elstree, WD6 3FG. The information and content of this site is intended for UK consumers. The Willis Owen Smart Savings service is not regulated by the Financial Conduct Authority. Smart Savings is provided (on behalf of Willis Owen Limited) by Raisin Platforms Limited, which is authorised and regulated by the Financial Conduct Authority (No. 813894).

Cash interest explained

Introduction to exchange-traded funds (ETFs)

What is an exchange-traded fund (ETF)?

Types of ETFs

Pros

Cons

Terminology

Glossary of Terms

How do you trade in ETFs and what are the costs?

Also in Learn about investing

Investment Trusts

Shares