An investment platform can be called a share dealing account, fund dealing account, trading account, wrap platform or fund supermarket. They are online or app-based services that allow you to keep all your investments in one place, including your trading history and investments you have bought or sold.
Investment platforms are in two broad groups, those that allow you to decide on the specific investments you will make or those that will create a portfolio or wrap investments together for you based on your investment objectives and attitude to risk.
The investment platform selects which investments it will have available. They usually offer share accounts and trading accounts, and the opportunity for you to manage investments in wrappers such as stocks and shares ISAs, Lifetime ISAs, Junior ISAs and self-invested personal pensions (SIPPs) (pension funds).
Many investment platforms will also provide news, interactive tools and forums to their clients. The idea of using an investment platform is that you have control over your investment choices and can tailor these to suit you. However, this means all your investments are made on an ‘execution only’ basis, making you solely responsible for these choices and you will have no protection or comeback if you incur any losses.
You can also choose to use the investment platform to add funds to ISAs and SIPPs.
Investment platforms usually offer the following range of investment choices:
There are many different investment platforms available and you should consider the following before choosing one:
|Provider||Key features||Find out more|
||Find out more|
||Find out more|
||Find out more|
||Find out more|
Find a qualified, independent and regulated financial adviser in your area to help you make the right decisions about your financial future. Quickly connect to over 27,000 experts with the help of Unbiased.co.uk. It’s free to find and connect with financial advisers, visit their site for more information today.
When you invest into an investment platform, your investment is placed into a ring-fenced account held with a custodian. The custodian is a separate entity to the investment platform and is usually a large bank. The custodian makes sure that your investment assets are not muddled with those of the investment platform. This means if the platform fails and falls into financial difficulties, your investment assets will remain separate and cannot be used by the platform, for example to pay its debts.
If the custodian was to fail, then investments would be protected under the rules of the Financial Services Compensation Scheme.
Furthermore, investment platforms are regulated by the Financial Conduct Authority (FCA). You can check if the platform is an authorised company by looking at the FCA register . The regulator is responsible for making sure investment platforms adhere to marketing and advertising rules about financial promotions and that they conduct their business to the required regulatory standards.
Note: there is no protection against poorly performing investments. As you have made all your buying decisions on an ‘execution-only’ basis, you are responsible for these choices.
Yes, but how you are charged will vary between platforms. Some investment platforms will charge you every time you make a trade (i.e. when you buy or sell investments), some will levy a flat fee every month or year and others will charge based on how large your total investment is. Some will not charge you for fund dealing at all but might levy an ongoing administrative fee.
Essentially, there are many different pricing structures, so you will have to do some homework as to which is the cheapest or best value depending on the size of your investments and how often you anticipate trading shares, funds or bonds.
Most investment platforms will charge you an exit fee if you decide to leave, so this should be balanced against the gains to be had from introductory bonuses being offered if you decide to move.
Many people make the mistake of assuming to make investing pay you need to invest huge sums. However, the truth is that many ordinary investors take a ‘drip-feeding’ position whereby they may invest sums as small as just £10 per month and gradually build up their trading portfolio.
The golden rule of investing is this: Don’t invest any more than you are prepared to lose.
While the potential gains of investing can result in a much better return than the low interest rates currently endured by savers, there is always the possibility that your investment can go down in value, perhaps even being lost entirely. Investment is about balancing the potential risk against the potential return.
Remember, high-risk investments could have the potential to pay off handsomely, but at the same time there is a greater probability that you will lose some or all your money.
It’s for this reason that smart investors will have a portfolio with a mix of high and low-risk investments. This takes a balanced approach to earning a decent return but does so by carefully managing risk.
Investing is not a ‘get rich quick’ choice – most experts will tell you that you must be willing to invest for at least five years. If you can’t commit to this, then you will probably be better off with choosing a medium-term savings account or fixed rate bond instead.
Five years is considered a reasonable length of time in which investments can generate decent returns that can ride out any downturns but whether you gain or lose will ultimately be down to the value of the investments when you need to cash them in.
There are three main areas you need to consider when choosing which investment platform is best for you. These are cost, access methods available and the total value of your investments – this last one is closely allied with costs, so we’ll tackle those together:
Costs and portfolio size
The smaller your trading portfolio, the more you need to focus on costs. If you have a modest portfolio – say up to £5,000 – then you’ll want to ensure that any profit you do make is not immediately gobbled up by trading fees and monthly costs.
As outlined above, every investment platform is subject to differing fees and charges. Some will charge per trade, some by flat fee, others on what investments you are selling and finally some will charge you a percentage of your total portfolio value.
Those who are irregular share-dealers or those with a smaller pot of investments should look carefully at costs and make sure that your profits are not wiped out by the cost of an expensive trading platform.
You might want to remember that different investment platforms will give you different investment options, so this will influence the choice that an individual will make. A more experienced investor will probably seek the widest range of investments, whereas for a less experienced investor, a more limited choice may still be acceptable.
The old practice of calling your stockbroker every time you wanted to make a trade is long gone. Now, most people will happily buy and sell through an online provider – either through a smartphone app or via an online portal.
Choose an investment platform that suits the way you feel most comfortable trading with. For beginners, you may want a platform that provides lots of ‘hand-holding’ and tools that enable you to make better decisions, while experienced traders might prefer something that is more responsive.
Next, consider which platform matches how you want to manage your portfolio. Online share-dealing via a laptop or home PC is great if you prefer larger displays and you don’t envisage wanting to do much trading while on the move. Apps have the advantage of allowing you to access your platform while out and about (providing you have a decent 4G signal) but the display is markedly smaller than if you use a conventional home computer.
Basically, ‘execution-only’ means that you will be buying and selling shares without any advice or guidance. Therefore, you will have to rely on your own knowledge and/or research when making a trading decision and you are taking the responsibility for your decisions. This a something of a double-edged sword – while this may not be a good idea for those who are very new to trading, execution-only does mean than you won’t be paying any additional management or advisory fees.
Don’t forget that it’s possible to get a stocks and shares ISA (sometimes called an ISA ‘wrapper’), which, like a cash ISA, will protect your investment growth or interest earned from a certain amount of tax. Currently, you can save up to £20,000 per year tax-free.
Find out more about investment apps that automate financial decisions or provide financial advice without a human adviser.
BALANCED. Moneyfacts.co.uk is entirely independent and authorised by the Financial Conduct Authority for mortgage, credit and insurance products.
FREE. There is no cost to you. Our service is entirely free and you don't need to share any personal data to access our comparison tables.
TRANSPARENT. We only receive payment from product providers and intermediaries for quick/direct links and adverts through to their websites.
COMPREHENSIVE. We research the whole market and scour the small print so you can find the best products for your needs.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.