Nowadays most investors buy, sell and hold funds through platforms. These are websites where you can access different companies’ funds and other types of investments and set up Individual Savings Accounts (ISAs) and Self Invested Personal Pensions (Sipps) and then to monitor all your holdings going forward in one place.
Existing investments, ISAs and pensions can also be transferred and consolidated on the platform of your choice.
Consumer-oriented platforms vary considerably. Some platforms only offer funds, while others give you access to investment trusts, UK and overseas shares, ETFs, corporate bonds and government securities. Some offer lots of tools, research and model portfolios to help you work out the best investments to meet your needs, while others are more basic. However, it is the platforms varying charging structures which can make it most difficult to work out which will give you the best deal. Here are some of the main charges you may have to pay:
A one-off fee when you first open an account. This is quite rare, though it can be quite attractive in the long run. IWeb, part of Halifax share dealing, charges an upfront fee and no regular admin charges after that.
Most platforms make a regular charge, either monthly, quarterly or annually for as long as you hold your account. Some charge a flat fee of, say £75, while others take a percentage of the value of your holdings, around 0.2% to 0.4%. The percentage fee may reduce depending on the size of your investment.
When you buy and sell investments you may have to pay a dealing fee of between £2.50 and £15 for each deal. This is normally the case with investment trusts, shares etc. However, some sites such as Interactive Investor allow you two free trades a quarter, while many do not charge for buying and selling funds.
Depending on how you intend to use your platform account, there are other charges worth taking into account, such as for regular investment (some platforms have a lower dealing charge for regular savings); dividend reinvestment (some platforms charge less for dividend reinvestment, or do a sweep once your dividends reach a certain amount); and for setting up income drawdown.
Platforms normally charge you a fee if you want to cash in or transfer your investments elsewhere. They may make a per holding charge if you want to transfer the funds or shares you hold instead of taking cash.
Generally speaking, a platform with a flat fee is preferable to one with a percentage-based charge if you have a large amount of money. However, these platforms tend to charge you for buying and selling funds, while those which charge a percentage may offer free fund dealing. So if you are an active investor, you may be better off paying a percentage, whereas if you are a buy-and-hold investor, then a flat fee may be best for you. Run the calculator to find out more.
A comparison website such as ours, allows you to input the type of investments and wrappers you hold or want to and could help you work out which might give you the best deal, depending on your requirements. Run the calculator to find out more.