Investment platforms UK: how to invest, fees, risks and more
Older savers are taking on more risk in order to beat sky-high inflation. If you want to do your own investing, you're probably going to need an investment platform. Here's who they are and what they do.
Older savers are choosing riskier options on investment platforms in order to beat inflation, new data has found.
With the rising cost of living outpacing all but one savings account, over 50s are willing to take a little risk with their money in the hope of boosting their income.
Almost half of the 10,000 investors polled by financial firm Saga found just one in 10 opted for the most defensive investment portfolio, while three in 10 chose a portfolio offering both income and growth as they strive to make their money work hard for them.
If you’re tired of miserly savings rates and are looking to invest, read on to find out how investment platforms work, the fees to watch out for and the risks involved.
How to choose an investment platform
The ways private investors can invest and manage their investments has changed radically in recent years, mainly due to the internet and the development of investment platforms.
The advent of online fund supermarkets, where investors could cherrypick their own investments, was the precursor to the explosion of platforms.
Platforms still offer the ability to shop around but now offer a range of other investments too.
There is also an increasing number of platforms that will create and manage a portfolio for you.
Start investing today: compare your options with lovemoney.com
The big platforms
The bigger platforms offer a range of investment opportunities including shares, funds, corporate bonds, Government bonds (also known as gilts), venture capital trusts (VCTs), spread betting and more.
Many investments can be held within a stocks & shares ISA or self-invested personal pension (SIPP), which shield them from tax.
The big names include:
- Hargreaves Lansdown
- Fidelity
- BestInvest
- TD Direct Investing
- Barclays Stockbrokers
Smaller platforms
There has been a rash of smaller platforms launching in recent years.
They generally offer a slightly smaller range of investments, but are often cheaper than their larger counterparts. Like the big players, they will also usually offer a general account (which isn't tax free) and investments via an ISA or SIPP.
Some, such as Nutmeg, will offer you a portfolio based on how much you have to invest, your financial situation, your attitude to risk and how long you want to invest for.
Others, such as rplan, will grade your investments based on independent risk ratings to help you see how much risk you're carrying and how that compares to how much you'd actually like.
From ISAs to SIPPS: compare your investing options (capital at risk)
Charges
These platforms all have different charging structures, although they have been forced by the financial regulator to separate the fees paid to use the platform and management fees paid for investments.
Previously, there was only one charge, which was split between the platform and investment provider. Providers would then often pay a commission back to the platform.
This change has been implemented to supposedly stop platforms from promoting investments that pay them the most commission. This so-called 'unbundling' has led to the creation of what are known as 'clean' investments.
Some platforms now also offer 'super-clean' funds, which offer a discount on the investment's annual management charge.
However, many platforms still recommend investments, in the form of a 'favourite' list of managed funds or index trackers. Some also offer ready-made portfolio suggestions designed to cater for people's different appetite for risk or life stage.
Following the regulatory change, there are now more fees and charges to be aware of.
You should weigh these up before you sign up to a platform. For the latest information on fees and charges if you're thinking about a stocks & shares ISA, take a look at The cheapest investment platforms for stocks & shares ISAs.
This article has been updated
More on investing:
Beginner's guide to stocks & shares ISAs
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Comments
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I've used JarvisIM successfully for a decade. http://www.jarvisim.co.uk/ @£9.50 flat trade They also have cheaper versions: http://www.sharedealactive.co.uk/ http://www.x-o.co.uk/ They also execute CFD's.
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I'm with The Motley Fool - www.foolsharedealing.co.uk - who charge £2.00 per trade and a small annual management charge. There is no ISA closure/transfer fee, but £25 per holding if you want the investments transferred electronically to another stockbroker.
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I did most of my dealing with Selftrade which, I notice, is not listed here. In the last two years or so, since they revamped their site, the quality of service has deteriorated; prices are often wrong on their watchlists (ok if you are in the process of buying or selling); it is impossible to find where you want to get to on the site - I often have to exit the site and then log in again; and standing instructions to buy or sell at a set price are sometimes ignored. It would be useful to have a report on how to move shareholdings and ISA holdings from one platform to another operator. I have no idea how to do it except for selling everything, transferring the cash and re-buying on the new site. How does one transfer multiple ISA investments, bought at different times but in one ISA wrapper? This information would really be useful. If I have a problem, I am sure there must be others with the same problem. r.
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31 March 2014