Investing is a lot easier with the right platform

IT IS important for investors to pick solid investments that perform well over time. Equally important, however, is how you choose to buy, manage and monitor them.

Many online platforms have sprung up that can help you with the process. They allow you to buy and hold different assets – like shares, bonds and funds – within tax wrappers, like individual savings accounts (Isas) or self-invested personal pensions (Sipps), or outside of them.

Part of the benefit is that you can conveniently hold your investments in one place, making it easier to monitor performance. Some platform providers also offer online tools and research, which you can use to optimise your portfolio, and ensure that you are investing in suitable products. Although charging structures vary, many providers offer discounts on fees.

But with such variety on offer – from both established providers like Barclays Stockbrokers, and newer firms like Nutmeg – the key to selecting the right platform is to understand what type of an investor you are, and what you require. Are you a buy-and-hold investor who invests for the long-term? Or are you an active investor that trades frequently?

ACTIVE INVESTORS
Dealing fees for shares and investment trusts typically begin at between £10 and £15 per transaction – when you buy and sell. The cost of trading can add up and eat away at your returns. So investors who trade frequently should ensure that their platform offers a good deal for individual trades.

For investors buying or selling more than 10 times per month, Interactive Investor charges a very competitive £5 per transaction (£10 per transaction for those that trade less). But like some other platforms, it levies a fee for using its service – £20 per quarter (although this charge is waived for Sipp investors).

However, this fee is credited against the commissions that you pay, meaning that you will effectively get your first two trades commission-free. But costs like this can still make a platform unappealing to those who prefer to manage their portfolio less actively.

BUY-AND-HOLD
Long-term buy-and-hold investors often lean towards low-cost tracker funds, which can be invested into regularly, or with a lump sum. Trackers are cheaper than actively-managed funds, and some platforms have enticing deals. For example, Hargreaves Lansdown offers a range of trackers that cost just £2 per month to hold.

But be cautious of other fees, like annual management charges for certain investments (like open-ended investment companies and unit trusts) held within an Isa. Alliance Trust Savings charges a flat fee of £10 per quarter (plus VAT), and Hargreaves Lansdown caps it at £45 per year.

This doesn’t mean that buy-and-hold investors should ignore actively-managed funds – some have delivered respectable returns. But they are more expensive. Again, look for discounts: Bestinvest, Alliance Savings Trust and Hargreaves Lansdown all offer discounts on initial charges for some funds, which can be up to 5.5 per cent of the invested amount. They can also offer discounts on the annual management charges, potentially saving you another 0.5 per cent.

RESEARCH AND MONITORING
Many investors will want a platform that offers research about investment performance, and how different investments match with their own risk profile. Most platforms provide information of this sort. But it is important to realise that they do not offer bespoke advice based on your own circumstances, only offer guidance. Under new FSA rules you must pay a regulated adviser for tailored financial advice.

But you needn’t solely rely on your platform. Online portals like Morningstar and FE Trustnet have extensive fund research, and offer their own assessment of fund performance, as well as giving fund manager ratings. This can help you to find top performers that work within your portfolio.

And while platforms can offer a convenient place to monitor your portfolio’s performance in one place, it could also be worth using independent online tools like Rplan. This not only allows you to check performance, but also gives an assessment of the fees that you pay.

DON’T BE TIED
You needn’t be tied to one platform either. It is clear that some have different advantages, and target different types of investors. There is no harm in using more than one, as long as you keep an eye on the costs.

However, beware of costly transfer fees associated with switching between some providers. Transferring your funds and investment from one platform to another can be subject to administration fees – usually a one-off, flat-cost – and they can vary between providers.

Before you transfer, ask a provider if it has any incentives for switching over. Barclays, for example, offers clients £150 per account to switch over (capped at £500). It also provides other financial incentives of up to £1,000 (depending on the size of your account) to transfer across. Although it can be soporific, it is always worth reading the terms and conditions – you don’t want to encounter nasty costs down the road.

But the one cardinal sin is to be shackled by inertia – putting in a little hard work could save you money, and enhance your portfolios performance.

PLATFORM PROVIDER PARTICULAR BENEFITS

Interactive Investor Share trading accounts have low transaction charges for regular investors (£5 per transaction)

Hargreaves Lansdown The platform levies no annual management fee on over 2,400 funds held within its Vantage Isa

Bestinvest Bestinvest First offers discounts of up to 5.5 per cent on initial charges for fund purchases

Alliance Trust Savings Alliance Trust Saving’s Isa wrapper charges a competitive £10 per quarter (plus VAT)

Selftrade Offers a wide range of research, including independent analyst notes of varying sophistication

Barclays Stockbrokers Barclays Stockbrokers’ Funds Market offers loyalty bonuses to long-term customers