DIY investing: how to pick a platform
Top points to consider and a run-down of the major players in the execution-only space.
In recent years the number of online execution-only investment platforms has risen dramatically, and while this provides the DIY investor with more choice, it can make it hard to separate the wheat from the chaff.
Platforms allow you to buy and hold different assets – like shares, bonds and funds – within tax wrappers, like ISAs and SIPPs, or outside of them as singular investments.
Part of the benefit is that you can conveniently hold your investments in one place, making it easier to monitor performance and make time sensitive decisions while on the go.
Most modern day execution-only platforms offer access to company details, thorough research and easy to manage online trading tools.
But with such variety on offer, the key to selecting the right platform is to understand what type of an investor you are, and what you require.
For example, will you be a buy-and-hold investor or an active investor?
This is very important as if you plan on being an active investor, dealing fees and charging structures will matter greatly to you.
But if you plan on buying and holding over a long period, you may want to consider low-cost tracker funds, with the option to drip-feed when you want or put in a lump sum.
Five points to consider before picking a platform:
- Cheapest is not always best: You need to think about a combination of price and service – it is worth paying for quality but make sure you are actually getting that and it is worth reviewing this yearly as service can fade.
- What will you invest in:Different dealing fees for shares, investment trusts and funds mean you will need to consider how you will invest and tailor your choice accordingly.
- Tools and research:Take a careful look at what tools and research facilities are available to you. As a DIY investor, not having access to the latest information will hinder the success of your portfolio. However, before you settle on one platform, play around with the tools – because regardless of how snazzy a site looks, it’s no good if you can’t navigate your way around easily.
- Charges:Charging structures vary between each platform but look at admin fees as well as how much it will cost you to buy/sell your investments. Also make a note of how much it will cost for you to reinvest dividends and whether you will receive a discount for a certain number of trades a year.
- Clean funds:New commission rules mean there has been a shift to clean funds with lower annual management charges. Is the platform you are considering offering this yet? Will they move you over to clean funds if things change? What are their plans for clean funds?
A rundown of the big players…
Alliance Trust Savings
This is a clean, no-frills tool especially suited to more confident investors who know their way around investment terms and acronyms. The platform charges £10 per month for a standard investment account or Isa, which includes four online trades per year. Pensions are slightly higher at £17.50 per month. There is a loyalty discount of between 10% and 25% for long-term customers.
One of the more established platforms, Barclays Stockbrokers has made a real effort to make the website more user friendly; however the site is still more suitable for the more confident investor with a mix of shares and funds. Trades are charged at £11.95, on a tiered basis, reducing for more frequent traders.
Bestinvest’s Select Service is an easy to use platform with a good range of funds and some useful tools to help those looking for investment ideas. Charges are 0.4% per year for portfolios up to £250,000, plus around £7.50 per trade.
Charles Stanley Direct
One of the oldest and most reputable stockbrokers has brought their offering into the modern online world of choice, transparency and tips. It caters for the less confident right through to the savvy stock and fund pickers. There is an annual charge of 0.25%, plus dealing charges of £11.50.
This big name is considered one of the best platforms for funds investors, and also has a low cost equity-only platform for investors who want to concentrate on individual stock picks.
Investors opting to use Fidelity’s Personal Investor will be charged 0.35% for investments up to £250,000 and 0.2% on all investments between £250,000 and £1m.
There will be no service fees on investments above £1m. Customers will only pay the annual management charge (AMC) levied by the fund manager. There are also no exit fees, no additional fees and customers wanting to switch to Fidelity will have their provider’s exit fee reimbursed by Fidelity should they be charged it.
The biggest fund spuermarket in the UK with 500,000 customers, HL is by no means the cheapest but prides itself on strong customer service. The fact that this FTSE 100 company is rarely out of the headlines often means it has to constantly refine and update its service to the benefit of its investors. The site itself suits more confident investor, but has plenty of tips and ideas. Share dealing starts at £11.95 on a tiered basis.
For those looking to invest in funds through the HL Vantage platform, Hargreaves will charge annual fees of 0.45% for investments of up to £250,000. That will fall to 0.25% pa for investments of between £250k-£1m, and 0.1% for investments over £1m.
Investments over £2m will have no charge. In addition, the platform said its Wealth 150 funds will have an average AMC of 0.65%.
This site is a great option for people who genuinely enjoy investing – engaging, good choice of assets and loads of commentary from fellow investors. However the experts pointed out that the constant emails may leave the more reluctant or infrequent investor a little weary.
This platform charges £10 per trade, or £5 with the frequent trader rate, £1.50 with regular investing. The group also recently took over TD Direct Investing.
The Share Centre
This platform offers a clean, simple and to the point service. It charges 1% on trades (minimum of £7.50). It can get pricey if investing upwards of £1,000, so may be worth considering the frequent trader account if you plan to invest large sums or trade more often. There are also small monthly administration fees (£4.80 per month for Isas).
Chelsea Financial Services
This platform has been highly rated for its user-friendly options, though investors should note that they are unable to buy individual stocks and shares through the platform. Chelsea charges a service fee of 0.4%, plus a platform fee of 0.2%.