What is an investment platform?
An investment platform, sometimes called a fund supermarket, is a website that allows investors to buy and hold a range of funds from a host of fund management companies together in one portfolio.
Fund supermarkets often provide extensive research and information on each fund, including which companies each fund manager is invested in, historical and recent performance figures and analysis of the investment styles adopted by fund managers. Most allow you to invest over the phone.
The crucial point is that investment platforms are designed for people who are making their own investment decisions. This is referred to as ‘execution only’.
Our video guide to fund supermarkets explains how they work.
What does 'execution only' mean?
The Financial Conduct Authority describes 'execution only' as a 'transaction executed by a firm upon the specific instructions of a client where the firm does not give advice on investments relating to the merits of the transaction and in relation to which the rules on assessment of appropriateness do not apply.'
In simple terms, this means you're wholly responsible for selecting and buying investment products, and that an investment broker will only place your money into the products you choose, rather that telling you which investments to pick.
A broker will not recommend products based on your personal circumstances, and will only give you information that could help inform your decision.
What investments can I buy on a platform?
Some fund supermarkets will only offer unit trusts and OEICs (open-ended investment companies).
You may even be able to carry out spread betting or manage your pension through a fund supermarket.
What products can I use on an investment platform?
As well as offering access to funds and other investments, fund supermarkets allow you to put your investments inside a tax-efficient wrapper - normally a stocks and shares Isa or a self-invested personal pension (Sipp).
Within these tax-efficient wrappers, dividend income is untaxed, even if it exceeds the annual dividend allowance (£2,000 for 2018/19).
Interest from corporate bonds and gilts, and from funds that invest in these assets, is tax free. There is no capital gains tax on any investment profits within either Isas or Sipps.
Outside of these tax-efficient accounts, you can also hold a general investment account, useful if you've used up your Isa allowances.
What are the different types of platform?
Low cost, 'no frills' fund supermarkets
There are more than 20 investment brokers in the UK, and, while all offer DIY investors 'execution-only' services without advice, some provide more than others when it comes to bells and whistles that might help you reach informed decisions.
Cavendish Online is a prime example of a 'no-frills' broker, offering a low-cost, basic service, with limited assistance to help you choose funds. We haven't included it among our reviews however, because too few members use it to provide a reliable customer score.
Alternatively, lots of brokers provide investment research and analytical tools to help you make decisions on which funds to buy.
Other features that premium fund supermarkets provide include example portfolios, fund suggestion lists and portfolio analysis tools.
What will I be charged for using an investment platform?
When investing through a fund supermarket, the charges displayed by a fund manager are not the only ones to consider.
Rules introduced in 2014 mean that fund supermarkets must now charge a separate fee for their services. These come in two forms: flat, fixed fees and percentage fees.
This is a percentage of the value of the investments you hold. Many platforms reduce this fee as your portfolio gets larger.
So, you may be charged 0.5% on the first £100,000, then 0.3% on the next £150,000. Others will reduce the fee altogether as you hit a higher tier of investments.
These types of platforms tend not to charge you for withdrawals or trades.
Some brokers levy fixed annual fees in pounds and pence. Most aspects of using the services of these platforms will be chargeable - so you'll pay a fee to trade funds and shares, withdraw money and may face other account fees.
Most platforms charge you exit fees for closing your account.
Find out more about about these fees, as well as our unique comparison of charges for a range of portfolio sizes, in our investment charges compared guide.
Can I get financial advice from an investment platform?
Investment platforms provide execution-only services, meaning you make your own investment decisions.
But some of these brokers also offer regulated financial advice for an additional fee. Hargreaves Lansdown, for example, runs its fund supermarket, Vantage, offering clients generic information through regular newsletters and online updates, as well as the standard fund data.
But investors who do want individual advice can contact an adviser and obtain this for an extra fee. Bestinvest also offers advisory options.
Where can I read reviews of investment platfors?
To help you find the right fund supermarket, Which? has created unique review pagesfor the major providers in this market.
Our reviews tell you how the different companies charge - and how much - and this is complemented by our unique customer satisfaction ratings, in which over a thousand Which? members have rated fund supermarkets for customer satisfaction and other aspects of this service.