Investors have been empowered by the emergence of platforms and digital services over the past two decades. The number of investors using platforms to build and manage their portfolios is rising all the time, and the market continues to evolve.
There are a vast range of services available under the platform umbrella, which means there’s something for everyone. But what are the actual advantages of using an investment platform?
Lower costs
We know that charges have a drag effect on investment performance, eating into returns over time. Even slightly higher charges than you need to pay can be costly in the long run. So while costs aren’t the only consideration, they’re very important. The platform market has become highly competitive, with some cheaper for those investing modest amounts and others keeping costs down for bigger investors.
Some investment platforms (such as interactive investor) charge a flat fee for running your money, which can work well for large portfolios, but most charge a percentage of the amount you invest. Recent times have seen the emergence of 0% commission brokers that don’t charge commissions for the trades they execute on behalf of clients. Whether you’re thinking about switching to a new platform or looking to use one for the first time, it’s well worth comparing costs using our free comparison tools!
Investment ranges
The biggest platforms offer thousands of active and passive funds, UK and overseas shares, bonds, investment trusts and other vehicles, while the 0% commission firms tend to offer only exchange-traded funds (ETFs). You can split your portfolio between different funds run by different managers but hold them together in one place and it is quicker to switch between funds when you want to make changes to your investments.
Ease and convenience
Investors running their own investments without using a platform can spend a lot of time researching investments and making trades. Platforms make it quicker and easier to buy and sell funds and shares, and they typically have low minimum investments that mean you can get started with as little as £1 a month (though £25 is more commonplace).
Transfer ability
Platforms allow you to transfer existing investments into your platform account. This means you have a better overview of your finances and can monitor the progress of all your investments in one place. Transfer times have improved over the past few years. You can either opt for an in specie transfer, where it’s arranged by the platform you’re moving and your money doesn’t spend any time out of the market. But if the funds you hold aren’t offered by the platform you’re transferring to, you’ll need to sell the investments and move your money over as cash.
Diversification
The range of investment options available on platforms, allied to the technology they use, makes it easy for users to maintain diversified portfolios by spreading their money across different asset classes. Most platforms offer access to global markets as well as assets including equities and bonds.
Account options
Platforms typically offer stocks and shares ISAs and general investment accounts, while a good proportion also offer cash ISAs, junior ISAs, lifetime ISAs and self-invested personal pensions (Sipps). Only the biggest platforms offer all of them, however, with relatively few providing cash ISAs or Lifetime ISAs.
Support for DIY investors
While some platforms let investors create and run their own portfolios, others offer varying degrees of help for those who don’t feel able or willing to make their own decisions. This ranges from calculators, tools and the recommended fund lists promoted by larger platforms such as AJ Bell, Hargreaves Lansdown and interactive investor, to digital investment services that use algorithms to help you choose and manage your investments.
Check out the top platforms for investors who want a helping hand and find out more about the pros and cons of digital investment services.
Ease of use
Most platforms have user-friendly and intuitive interfaces that make them accessible even for those without experience of online investment services. The best are easy to navigate, have a good blend of text, data and images, and make it clear what they can and can’t do. Most have customer support options through phone, email and live online chat, though some of the smaller platforms only offer the last of those channels.
Access to sophisticated tools
Technology previously restricted to professional investors (such as fund managers) has become widely available over the past 15 years or so. Many platforms provide forecasting software, real-time market monitoring tools, risk profilers, portfolio tracker apps and fund screeners, while it’s now possible for investors to change, manage and rebalance their portfolios automatically based on predefined criteria.
Information and guidance
Those tools are among the increasingly vast pool of resources offered by investment platforms. Most provide some form of information and education, including articles, guides, fund statistics and videos. The bigger platforms offer daily market insights and news, investment tips, investment ideas, blogs, podcasts and inspiration, often written by in-house experts or professional financial journalists.
These are just some of the benefits of using platforms. Everyone is different, so it’s about finding the platform that works for you. Check what to consider when choosing an investment platform by heading to our brief guide. To find the best platform for your needs and circumstances, run your own comparison using our free comparison tools!
