Discover how investment platforms can serve as a one-stop shop for investors who do their own investing.
What exactly is a platform for investment?
An investment platform, sometimes known as a fund supermarket, gives investors the ability to buy and hold a variety of assets in a single location online, and in some cases through the use of a mobile application on their smartphones.
Investing platforms typically give substantial research and information, including investment news, historical and recent performance numbers, and analysis of the investment styles employed by fund managers. Examples of this type of information and research include: Investing through phone is an additional method that is supported by some platforms.
The first important thing to understand is that investment platforms are intended to be used by individuals who are in charge of their own financial decisions. “Execution only” is the term used to describe this scenario.
What exactly does it mean when it says “execution only”?
The Financial Conduct Authority defines “execution only” as “a transaction executed by a firm upon the specific instructions of a client where the firm does not give advice on investments relating to the merits of the transaction and in relation to which the rules on assessment of appropriateness do not apply.” In other words, “execution only” refers to a “transaction executed by a firm upon the specific instructions of a client where the firm does not give advice on investments relating to the merits of the transaction.”
This means that you are wholly responsible for selecting and purchasing investment products, and that an investment broker will only place your money into the products you choose rather than advising you on which investments to select. To put it another way, an investment broker will only place your money into the products you select.
Consequently, you will need to be familiar with your financial objectives and have an understanding of your tolerance for risk.
What exactly is meant by the term “do-it-for-me” platform?
Do-it-for-me platforms, often known as robo-advisers, provide an alternative to traditional forms of financial advising while maintaining the advantages of traditional investment platforms.
In order to recommend a bespoke portfolio of funds, gilts, and bonds, the majority of financial advisors will inquire as to the goals you have for your investments and use a questionnaire to evaluate your level of comfort with taking risks.
While it is not possible to generally specify the specific investments that you want to hold, many platforms do provide themed portfolios. For instance, ethical investments or investments in technology are both examples of themed portfolios.
Nutmeg, Moneyfarm, and Wealthify are examples of well-established service providers; more recently, though, Barclays has introduced its own own Plan and Invest service.
What kinds of investments are available to me on a platform?
Some online investment services exclusively provide access to unit trusts and OEICs (open-ended investment companies).
However, a great number of others provide access to investments that are listed on stock exchanges, including shares, investment trusts, and exchange-traded funds, in addition to bonds and other types of investments.
Before you sign up for a new account, you should first make sure you understand what all is included.
Which individual retirement accounts (Isas) do investment platforms offer?
In addition to providing access to funds and other types of investments, investment platforms give you the ability to encase your holdings in a manner that minimises your tax liability.
Investing in stocks and shares Isas are self-invested personal pensions and savings accounts (Sipps)
Isas for children Isas for life Junior Isas (not all platforms)
Even if the dividend income exceeds the yearly dividend allowed (£2,000 for 2020-21 and 2021-22), it will not be subject to taxation if it is received through one of these tax-efficient wrappers.
It is not necessary to pay taxes on the interest earned on corporate bonds, gilts, or funds that invest in these types of securities. Profits from investments that are held in an Isa or a Sipp are exempt from any kind of capital gains tax.
In each of our reviews of different platforms, we provide specific information about which ones offer certain features.
You can also have a general investment account in addition to these tax-efficient accounts, which is beneficial if you’ve used up your Isa allowances and don’t have any more room in your Isa.
When it comes to planning for retirement, the majority of financial platforms provide you the option to either buy an annuity or manage your pension through an income drawdown plan.
What other kinds of services do investing platforms provide?
When contrasting different investing platforms, customer service and cost should be of the utmost importance.
However, you should also take into consideration the following:
The latest on investments
Some platforms provide daily updates on investments via their websites and newsletters, and these updates frequently include commentary from industry professionals. Some people have begun producing their own films and podcasts in recent years.
Although this can be helpful, you should avoid making fast judgments and instead concentrate on the long-term investing goals you have.
Be on the lookout for intelligent lists of funds and shares that can be filtered in a manner that is tailored to your preferences.
It’s possible that some platforms will use ratings derived from Morningstar and/or other data suppliers; nevertheless, before placing too much stock in these ratings, you should make sure you fully comprehend what they represent.
There are many platforms that provide access to blended or portfolio funds, which are, in essence, funds that are composed of other funds.
They are helpful if you are aware of your comfort level with risk but do not wish to select specific funds on your own.
Most blended funds are designed to cater to investors with a particular risk appetite.
For instance, the Vanguard LifeStrategy 80 Percent Equity Fund is composed entirely of equities; as a result, it is ideally suited for investors who are willing to accept a higher level of risk.
Lists of suggested investments
The majority of platforms make use of analysts to compile lists of funds that are recommended, best buy, or considered “favourite.”
Inclusion on a list is often determined by a fund’s historical performance as well as the opinions of analysts regarding the fund management; however, some lists include only particular kinds of funds, such as Interactive Investor’s ACE 40 list of ethical funds.
When using recommended fund lists, use extreme caution because these lists are not customised to your risk tolerance or financial objectives. Historically, lists have had a tendency to favour more costly active funds over less costly passive funds, despite the fact that performance does not typically justify the additional fees.
Because the removal of a fund from the list may be an indication that something has gone terribly wrong, you should take precautions to ensure that you will be notified in this event.
How much will it cost me to use a platform that facilitates investments?
When using an investment platform to make investments, it is important to keep in mind that the fees listed by a fund management are not the only ones to take into consideration.
Because of new regulations that came into effect in 2014, investment platforms are now required to charge a fee in addition to providing their services. These can be broken down into two categories: percentage fees and flat, fixed rates (although some platforms charge neither).
Cost based on a percentage
This is expressed as a percentage of the total value of the investments that you now hold. There are a lot of platforms that lower this cost as your portfolio grows larger.
It is possible that you will be taxed 0.5 percent on the first £100,000, and then 0.3 percent on the subsequent £150,000. Others will waive their commissions and fees on investments that meet a specific minimum value.
Costs That Are Constant
Some brokers charge clients a flat annual fee that is denominated in pounds and pence. You will be required to pay for the majority of the services offered by these platforms, which means that you will have to pay a fee to trade funds and shares, withdraw money, and possibly pay other account fees.
In our guide that compares investment fees, you may find more information not only about these fees, but also about our one-of-a-kind comparison of charges for a variety of portfolio sizes.
Transferring investments from one platform to another could result in fees being assessed against you.
On the other hand, a number of platforms have done away with these fees entirely, and others offer to pay for users’ switching costs as an incentive to join them.
If you have a significant amount of assets under management, you might discover that the continued savings you get from the lower costs more than make up for the switching fees you’ll have to pay.
Where can I find reviews of several platforms for making investments?
we crafted one-of-a-kind review sites for the most prominent service providers in this industry so that you may select the investing platform that best suits your needs.
Our reviews will tell you how different companies charge, as well as how much, and they will be supplemented by our one-of-a-kind customer satisfaction ratings. More than one thousand users of have assessed investment platforms for customer satisfaction and other areas of this service.