What makes a quality investment platform? And which firms are delivering the most rounded proposition?
There was a time when you had to rely on financial advisers and fund managers to decide how your money was invested.
But the rise of investment platforms has given investors across the nation the chance to take a more hands-on approach with where their money goes.
Whether it’s individual stocks and shares, specific funds, or even something a little more exotic, as investors we now have the chance to make those decisions ourselves.
But with a number of different platforms to choose from, what makes the best ones stand out?
6 questions you must ask before investing
Standing out from the crowd
The consumer champions at Which? have now dug into the investment platforms on the market today, to get a better idea of who delivers the best value for money to those investors hoping to be a bit more proactive with how their money is being used.
In total, 11 platforms were analysed based on six criteria: online tools, customer service, investment information, whether it met the customer’s needs, value for money and customer score.
And leading the way were both Vanguard and AJ Bell Youinvest, scoring 77% and 72% respectively. It’s worth highlighting that these aren’t flash in the pan results either, with both firms named a recommended provider by Which? for three straight years.
So what makes them such good options? Vanguard was praised by users for being both straightforward and efficient, and notably was the only platform to receive the full five stars for value for money.
With Vanguard it’s important to remember that you will inevitably have a more limited range of investments. The platform only allows you to back Vanguard’s own funds, though there are 75 to choose from.
Crucially, this limited selection comes with a huge perk in the form of the fees on offer. Vanguard’s fees come to just 0.15% per year, capped at £375 for accounts over £250,000. There is no fee for trading funds, and the funds themselves have very low ongoing costs.
These low fees are a massive selling point as it means that far more of the returns from your investments end up in your pockets, rather than those of an investment manager.
Making your money work harder
AJ Bell Youinvest was praised for both its easy-to-navigate website and “excellent” range of investment options.
There’s certainly far greater choice here, with more than 2,000 funds and shares across 24 stock markets. What’s more, investors benefit from a bounty of investment information, from guides and tools to fund rankings from Morningstar.
While AJ Bell Youinvest users do have to cough up a little extra than Vanguard users ‒ paying 0.25% on the first £250,000 of funds, then 0.1% on any amount up to a million ‒ they are still incredibly competitive, helping investors’ money to go further.
A question of trust
Of course, the big name in investment platforms has long been Hargreaves Lansdown. Indeed, it’s the platform I use myself.
There’s no denying that the platform itself is excellent, and that’s reflected in the scores it got in the Which? Survey. Overall it finished sixth, with a score of 66%, but won praise for its “first-class” customer service and online tools.
But there are two big downsides to reflect on. The first is the price. With an annual fee of 0.45%, you can’t avoid the fact that Hargreaves Lansdown is a pricy choice. Over time those fees can eat into your returns to a painful degree.
And then there’s the question of trust. Hargreaves Lansdown has clearly suffered from the Woodford affair, with the Woodford Equity Income fund remaining on the platform’s best buy list until the day it was suspended in June 2019.
This form of guidance carries big weight with some investors ‒ the FCA reckons that about 17% of investors who use platforms and don’t get advice on where to put their money use these recommendations to help them make their investment decisions.
So having guidance that you can trust is obviously a big draw.
Bottom of the table of investment platforms, for the fourth year in a row, was Barclays Smart Investor. It racked up a score of just 48%.
The platform was criticised by customers for issues including high charges, a limited range of investments and an overly complicated website.
There’s no ‘best’ platform
What’s important to bear in mind is that there can be no such thing as a standalone ‘best’ platform, as they service different parts of the market, different types of investors.
The best platform for me, as someone with only a few quid in stocks and shares and a very limited investment appetite, is rather different to someone with a massive portfolio, or who is putting away a big chunk of cash on a monthly basis.
In order to work out the best platform for you, you’ll first need to work out what type of investor you are, and then look at which platforms are best suited for you.
Studies like this from Which? are a very handy guide as they flag up some of the big strengths and weaknesses of different platforms, but ultimately how important those strengths and weaknesses are will vary between different investors.