What is an investment platform?

Following Alan Hudson’s recent announcement that AFH will scrap platform fees, it raises the question, what actually is an investment platform?

Those considering investing via an investment platform will naturally have questions regarding their essential functions. However, the Investment Platform Market Study conducted by the FCA notes that even those currently investing via a platform are still unsure of the specifics of how their investment works. Here we provide a breakdown of the key facts of investment platforms.

How does an investment platform work?

An investment platform is essentially an online service which allows you to buy, sell and hold funds. It’s possible for you to do this yourself directly on a non-advised basis via a D2C (direct to customer) platform, or on an advised basis using a financial adviser who will invest on your behalf.

Platforms have become very popular over the years as it can be a tax efficient way to hold investments. It’s possible to gain access to a wide fund range, which can sometimes be offered at a discounted rate - although, it’s important to note that the funds offered can vary between providers. Investors also have the convenience of managing multiple products under one roof as many platforms allow you to hold an
ISA, a GIA and a SIPP simultaneously. Having online access also allows you to view and monitor the progress of your investments at any time. Depending on the type of platform service you choose, this could mean that potential adjustments could quickly be made in line with market changes.

 

What charges would I pay?

This appears to cause the greatest amount of confusion amongst platform users. The FCA study notes that 29% of platform users were not aware of the charges they were paying. The types of charges will vary between platforms but some of the most common fees include fund dealing, admin, exit and ongoing adviser charges. The rates of these fees will differ amongst each platform and may not always be applicable. You may also find less common ones such as ‘set up fees’ when you first open the account. With so many potential charges, it really does pay to do your research before signing up for anything. It’s important to be aware of exactly what you’re paying for and the impact that this can have on your investments. 

 

What’s the best platform for me?

It’s important to note that there is no ‘ultimate’ platform. It all depends on what type of products you’re looking to hold, how you want to manage them, what service you’re expecting and what you’re looking to invest in. If you wish to manage your investments yourself, it’s worth doing your research online in order to find out what the best deal is based on your personal scenario. If you wish to use a financial adviser, it’s useful to discuss with them what you want out of your investments so they can make the most appropriate recommendation.

 

If you would like to gain further insight into investment platforms, or to discuss your investments, please give us a call or fill in our contact form to speak to an independent financial adviser.

 

This article is for generic information only and is not suggesting a suitable investment strategy for you. You should seek independent financial advice that takes your individual circumstances into account prior to proceeding with any course of action.

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