What you need to know about investment platforms

A single place for managing your portfolio, investment platforms are an important tool in your financial planning. David Browne, Independent Financial Adviser at Ascot Lloyd, explains more.

What is an investment platform?

Put simply, an investment platform is a single destination online that enables you to buy, sell and hold a range of different investments including funds, shares, trusts and bonds. Crucially, it provides access to certain tax wrappers that are relevant and work best for our clients, most commonly ISAs and pensions. You can easily log in to monitor your performance and values. 

Why use an investment platform over purchasing specific products with a provider?

The main reason to use platforms, rather than specific products such as having an ISA with one company and a pension with another, is because of the access it provides to everything in one place. As independent financial advisers, we want to have access to all the funds that may be right for our clients. That's generally what a platform offers – a lot of choices through access to the whole market, meaning there are no barriers to us making the right decisions for our clients. 

The sky's the limit in terms of investment opportunity within a platform, as opposed to being limited to the funds of one specific provider. Platforms also provide opportunities for reducing the costs involved in investing. Generally, it's cheaper to buy funds on platforms rather than through the open market, so as advisers we get clients in the right investments at lower costs.

What is the fee structure for investing through a platform?

The platform charge tends to vary based on the platform used and the level of funds you are investing, but the platform charge tends to be around 0.2 to 0.3% per annum, in addition to fund and adviser charges.

What is the value of advice?

Investing in line with your risk profile is just one area of robust financial planning so the value of advice lies in all the additional things we look after for you. This includes effective tax planning, retirement planning, estate planning and legacy planning. Some of these can be very complicated and we can add a lot of value when the likes of inheritance tax must be considered. 

All of these areas combined are where the value of advice comes in, and it’s what you’re not able to get with a do-it-yourself approach to investing or a robo advice platform. If the advice fee is 1% per year, simply leaving an investment in the wrong place for even a week could see a 1% drop in value, or if you make a mistake in your tax affairs that could easily add up too. When you go over inheritance tax limits, 40% will go to the taxman. Good planning can reduce those costs. 

What is a robo advice platform?

Robo advice is a kind of watered-down version of traditional advice. You go through an online risk profile questionnaire and the platform then narrows the selection of funds down based on your answers. It's very much simplified in that respect, whilst it might help you select funds according to your risk level, you won’t get any of the important wrap-around advice I mentioned such as tailored tax planning, whole-of-market investment strategy and wider financial planning. 

How do you decide what's the best platform for your clients?

There are hundreds of investment platforms, and it can be difficult to decide which is the best for you and your financial objectives. The main aspects to look at are the costs and the capabilities in terms of ease of access and general administration. Most platforms tend to do what they say in terms of allowing you to invest, but if you are looking to withdraw money regularly or do something with your money, that’s often where issues come in. That’s why working with an independent financial adviser is also valuable because at Ascot Lloyd we conduct due diligence on platforms across all these factors so you can be assured we’re using the best one for you.

If you're invested in one investment platform how easy is it to move to another?

The only reason we would have to look at moving platforms is if it’s going to work out better for a client based on cost, service, or functionality, and this would be reviewed and discussed at a clients annual review. If there are no taxation issues with transferring, such as if you’re only invested in an ISA or a pension, it’s fairly easy, however, if you've got a general investment account with capital gains in the portfolio, it gets a little more complicated as this could cause tax concerns. To help manage this, you can generally complete an in-specie transfer which moves the funds to the new platform while remaining invested rather than being sold to cash first.

If you are interested in discussing how you can maximise your investment returns with an independent financial adviser, get in touch to arrange a free callback.