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The platform approach to Isa investment

Make room for the middleman. In most walks of life, if you know what you want to buy, going to the seller direct, rather than through an intermediary, is the best way to get the cheapest deal. But that isn’t generally true if you’re buying investment funds, whether within a tax-free individual savings account (Isa) or on a standalone basis.

In the funds business, the deals that online intermediaries broker with fund managers usually mean that they offer more competitive charges on a given fund than you would get direct from the manager. On these fund platforms, you shouldn’t have to pay upfront or initial fees when investing in the fund and you may also find that the ongoing charges are more competitive.

This is one important reason why online platforms – such as Rplan – are the ideal route for investors as they build up portfolios over time, inside and out of their Isas. The only caveat is that you’ll need to be confident enough to make your own investment decisions – platforms are for DIY investors who are prepared to choose funds for themselves; they don’t offer financial advice.

Still, some platforms are more competitive than others, so compare charges carefully. You’ll need to check what the platform itself charges for its basic service – this will be an annual percentage fee or a fixed cash sum – plus whether there are additional fees to pay when you buy or sell investments on the platform. Then look at any other extra fees – some may charge for providing an Isa wrapper, for example, while others will charge for all sorts of administrative tasks. Finally, you should check the cost of funds bought through the platform – the same fund may cost more or less from one platform to another, depending on what the platform has been able to agree with its manager.

With those comparisons made, you can simply pick the cheapest platform, right? Well, not necessarily, because platforms also differ in other crucial ways, and this may be important to your decision. Does a particular platform offer access to the underlying investments in which you’re interested, for example? Some have a broader range of funds than others, while certain platforms also allow you to invest in other assets, including direct holdings of shares.

Also consider the tools and information available on the platform, since these may be very valuable as you ponder which investments to make. Some platforms run model portfolios – selections of funds judged good-quality and suitable for particular types of investors. Most offer access to research, analytics tools and a range of other data and information that can help you narrow down your choice.

Another factor is the user experience. One big advantage of holding all your investments through an online platform is that you’ve got everything in one place. Not only is that administratively convenient, but also it gives you an opportunity to get a really good overview of your entire portfolio – that will make it much easier to make wise decisions about whether, for example, you’re holding a decent spread of investments, or whether you’re putting too much money into a particular type of asset or stock market. The easier a platform makes it for you to come to such judgements, and to experiment with adjustments, the better your chances of making good decisions.

The right platform, then, can make all the difference to your investment success. It’s the ideal way to organise your Isa investments, and any other investments you have, but don’t assume cheapest will always be best.

on Jan 4 '17
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