Money Means* guides are brought to you by FSCS, the people who protect your money from £1 up to £85,000 in UK banks, building societies and credit unions. Find out more.
Fund supermarkets, also known as platforms, act as a place to buy, sell and hold all your investments whether you’re buying individual shares, or funds where money is pooled with that of other investors, holding lots of different shares.
There are more than 30 fund supermarkets to choose from and all offer slightly different services, have separate charging structures and research features. As a result, choosing the right one can be tricky.
Here are the things you need to know:
1. How fund supermarkets work
A fund supermarket is a platform that allows you to buy, sell and hold investment funds. Your account - which can be an individual savings account (ISA) a self-invested personal pension (SIPP), or a general investment account- is usually managed online, although some offer a phone service.
Popular fund supermarkets include AJ Bell, Bestinvest, Fidelity, Hargreaves Lansdown and Interactive Investor.
Each one is slightly different and can vary on charges and the amount of choice. Some are better for people with lower volumes of savings and others cater better for those with substantial pots.
Investing isn’t free. You need to pay for the running costs of running the investments. It’s important to remember that fees will eat into your returns, so you don’t want to pay more than you have to.
All platforms charge in different ways so it’s important to pick the platform that suits how you invest and how much you have.
Choosing the right one depends on the size of your pot and how you run your investments, as some platforms charge a flat fee for running your money - others a percentage. Some also charge per trade, which will be expensive if you tend to buy and sell lots of funds during the year. If this is the case, look for a platform where trades are free - bear in mind they will charge a higher administration fee. Expect to pay an annual fee of 0.8% of your investment pot.
3. Type of investment
Funds, exchange traded funds (ETFs), investment trusts, shares and corporate bonds are all available on platforms. But not all offer each and every one so make sure you check before setting up an account. You don’t want to have to open up more than one account and double up on administration fees.
3. A helping hand
Consider whether you need help choosing your investments. Fund supermarkets don’t offer independent financial advice. If you need that level of support, look for a qualified and regulated adviser.
If you’re happy to go it alone, many fund supermarkets offer a level of useful portfolio building tools and information about investments offered and how to go about choosing funds. Some are packed with information from in-house advisers and analysts, offering comprehensive shares and fund data. There might also be a choice of ready-made portfolios on offer, designed for people with particular needs.
4. Customer service and usability
Top customer service and top notch technology is a must for some. Yet no nonsense websites will suit others. There are plenty of platforms offering both – those that pride themselves on a high standard of customer service and will most likely charge higher fees and those offering cut price fees and a no-frills service. Make sure you get what you pay for if you’re paying extra.
It’s no good investing with a platform which has a difficult-to-navigate website.
If you want to be able to track your investments on an app, consider this in your search.
5. Making the choice
Comparing fund supermarkets can be easily done using comparison website comparetheplatform.com.
The calculator takes you through a series of simple questions about your investment requirements: how much you have to invest now, how much you are likely to invest in the future, what kinds of investments you would like to make (and if you don’t know, it can make some assumptions for you), and whether or not you would like to actively trade in stocks and shares.
Based on the kind of investments you wish to make, it then reviews the fees for the relevant investment fund supermarkets and gives you a summary of their costs. It will also show rankings for customer service and usability. For example, it ranks Hargreaves Lansdown highly for having a 'rich seam of research and guidance’ and names Hargreaves Lansdown, Fidelity and Saga's Bestinvest service are among the easiest to use.
Remember, if you are unsure about choosing an investment portfolio yourself an adviser can talk you through the options. They can find the most appropriate investments to choose from and ensure you do it tax efficiently. If you don’t have an adviser, you can search for one in your area at unbiased.co.uk or through vouchedfor.co.uk where clients leave reviews of their experiences with adviser firms.
FSCS Investments Protection information
With investments, the level of protection is £50,000 per person, per authorised firm.
For example, if you lost money because an authorised firm gave you bad advice or negligently managed your investments, you would be covered for up to £50,000 if the firm fails.
Crucially, you are not protected if the companies you invest in go bust. The same applies if you buy a fund and it performs poorly. FSCS does not cover this. That’s the investment risk you take.
*The views expressed in money means are of the writers and not of the FSCS and should not be regarded as advice