What is an investment platform?
An investment platform, sometimes called a fund supermarket, allows investors to buy and hold a range of investments in one place.
Investment platforms often provide extensive research and information, such as investment news, historical and recent performance figures and analysis of the investment styles adopted by fund managers. Some platforms also 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’.
Video: how investment platforms work
Our video guide to investment platforms 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.
- Find out more: finding a financial adviser explained
What investments can I buy on a platform?
Some investment platforms will only offer unit trusts and OEICs (open-ended investment companies).
Bear in mind that some platforms such as Vanguard offer a more restricted range of investments. Make sure you know what's on offer before opening an account.
What products can I use on an investment platform?
As well as offering access to funds and other investments, investment platforms 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 2019-20 and 2020-21).
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' investment platforms
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.
Vanguard is a leading example of the no-frills approach. It offers a limited range of funds, very little advice, with all investments managed online. In exchange, it charges extremely low fees.
Alternatively, lots of brokers provide investment research and analytical tools to help you make decisions on which funds to buy.
Other features that premium investment platforms provide include example portfolios, fund suggestion lists and portfolio analysis tools.
These platforms can still have markedly different costs and provide excellent value, so it's worth comparing between them.
These offer a halfway house between investment platforms and traditional financial advice.
Most ask you for your investment aims, and assess your attitude to risk, in order to recommend a tailored portfolio of funds, gilts and bonds.
Whilst you generally can't specify the exact investments you wish to hold, many platforms offer themed portfolios, for example of ethical investments or investments in technology.
Established providers include Nutmeg, Wealthify and Wealthsimple, whilst Barclays has recently launched its own 'Plan and Invest' service.
Some regular investment platforms offer blended funds for specific risk appetites, but you'll need to understand your own attitude to risk first.
- Find out more: compare investment platform fees
What will I be charged for using an investment platform?
When investing through a investment platform, the charges displayed by a fund manager are not the only ones to consider.
Rules introduced in 2014 mean that investment platforms 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.
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.
Find out more about these fees, as well as our unique comparison of charges for a range of portfolio sizes, in our investment charges compared guide.
Where can I read reviews of investment platforms?
To help you find the right investment platform, Which? has created unique review pages for 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 investment platforms for customer satisfaction and other aspects of this service.