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Fund platforms allow you to hold funds from a variety of fund managers in one place. This makes holding and trading a wide range of funds very straightforward, especially within Individual Savings Accounts ISAs and pensions. The more advanced platforms also allow shares to be held. Without a fund platform Your funds are held via individual fund managers.
You deal with each directly and receive separate valuations - you'll need to combine these to see your overall position. Shares will need to be held separately via a stockbroker.
With a fund platform Your funds are held within a single platform account, so you only need to deal with the platform. Funds from different managers can also be combined within a single platform ISA account. As there's only one valuation containing all your funds, keeping track of your portfolio is straightforward.
Some platforms also allow you to hold shares. While you can hold investments on a platform directly i. In the normal course of events holding investments via a platform should be very safe.
Your investments will be held in a 'nominee' account, which means you're not the legal owner but are entitled to receive what you're owed. For example, suppose customers of Platform A each buy 1, units of Fund Z, then the nominee company i. The nominee account's terms and conditions will state that the customers are the 'beneficial' owners of 1, Fund Z units each.
Put simply, a nominee company owns the funds or shares but promises to pay customers what they're owed i. Nominee companies are separate entities from the platforms that set them up. It might take a while to get the assets re-assigned to you, but they'll be safe. However, if the stockbroker or fund platform illegally dips their fingers into the nominee company then you could lose money. If you hold bank accounts or funds within a nominee account then these will normally be covered individually too, i.
When you buy funds and shares via a platform there are various charges that may apply. Comparing the overall impact manually is complex, hence the comparison tool on this site. But it's nevertheless useful to understand what these charges are. Funds have historically included initial charges to pay for upfront sales commissions. Given commissions are now banned for new sales and most platforms waive upfront commissions where they still can be paid on pre 6 April sales , the majority of funds have nil initial charge via platforms.
Nevertheless, there are exceptions, so worth checking. Funds charge annual management fees, which you'll still pay via platforms. On sales after 5 April platforms must offer funds that do not pay sales commissions and platform fees, which usually means a lower annual charge called 'clean' fund versions. An ongoing annual charge for as long as you hold your platform account.
Either a percentage or fixed fee, the latter is obviously preferable on larger sums. This is sometimes paid via higher fund charges on pre 6 April purchases. You can always expect to pay a dealing fee when buying and selling shares. However, some platforms also levy these fees when buying and selling funds. If you only trade occasionally they won't have much impact, but they can mount up for active traders. And bear in mind that switching between funds counts as 2 deals i.
If you decide to move from one platform to another, the platform you're leaving might hit you with 2 charges. Firstly there may be a fixed fee for closing your account. Secondly you might have to pay a fixed fee per investment if you want to move them 'as is' called 're-registration' or 'in-specie' , rather than selling everything and transferring cash. When it comes to annual charges, fund platforms normally now use cheaper 'clean' or 'institutional' fund versions without commissions and platform fees built into charges.
However, on funds sold pre 6 April platforms can still take their from annual fund charges of which, depending on platform, some or all might have been rebated back to you usually into a platform cash account. The figures below show a typical breakdown of charges. Offshore based funds are still not that well represented, although this is unlikely to be an issue for most UK based investors.
You may find some smaller niche funds are only featured on a few platforms, if at all. Some platforms allow share trading, often restricted to the London Stock Exchange. This means you can usually hold shares in UK listed companies, investment trusts and exchange traded funds ETFs. You may also be offered share dealing in overseas markets, although this tends to be restricted to electronic versions of overseas shares which can be traded on usual UK systems in pounds - called 'Crest Depositary Interests' CDIs.
Exchange traded funds ETFs are normally only available via platforms which offer share trading, although starting to make an appearance on some fund-only platforms. Platforms include a cash account, which is where any un-invested monies sit while you decide what to do with it.
Unfortunately most platforms pay appalling rates of interest, quite often zero, a nice earner for them! If you hold income producing investments on a platform e. When platforms receive income, they normally give you 3 choices of what to do with it:. You can choose to have whatever income the platform is holding for you paid to your bank account via BACS , usually once a month.
If your income balance is too low, it'll be rolled over to the following month. You can re-invest dividends back into your investments. However, buying further shares will incur dealing fees, as will funds on some platforms.
Although such dealing fees might be lower than normal, they can make small re-investments prohibitive, so always check how much you'll pay. If you plan to re-invest fund income, select 'accumulation' 'Acc' units to avoid potential dealing fees. Acc units increase in price to reflect the income rather than paying it out, hence avoiding any dealing fees. The income is still taxed in the same way as usual though, even though it hasn't physically been paid out.
Platforms have a cash account, where money not invested is kept. You can leave income payouts here, but bear in mind interest rates are usually negligible, if not zero. A key attraction of using fund platforms is viewing all or most of your investments in one place. Various tools might be available to further help monitor and analyse your investments.
All platforms offer online valuations, allowing you to see how your portfolio is doing at a glance. At the cheaper end of the market this is typically all you get, although this may well suffice depending on your expertise and needs.
Some platforms offer tools to help analyse your portfolio. At their simplest it might just mean highlighting bad performers, but more sophisticated tools can make suggestions based on risk, performance, your objectives and how your underlying funds invest. Suggested 'model' fund portfolios for a variety of different objectives e.
Also beware they may duplicate funds you might already hold. Hands on investors can benefit from good investment research and data. The extent and quality varies between platforms - from none at all to just performance data to full blown qualitative fund research.
The latter is obviously expensive to produce, so don't expect to find it on cheaper platforms. Yes, you can use as many as you like. However, using more than one dilutes some of the key benefits - simplified administration and easier portfolio monitoring. Yes, you normally have 2 options: Transferring investments 'as is' is commonly referred to as 're-registration' or an 'in-specie transfer' - platforms have been compelled to allow this since 31 December However, you may face a charge per investment for doing so in addition to any charges for closing your account and the platform you're moving to will need to offer identical versions of the investments, which isn't always the case.
If you instead sell investments then repurchase on the new platform, you may incur dealing fees and run the risk of your money being out of the market i.
Unless you're planning to change investments anyway it's usually the less preferred route. And a few companies that have traditionally been discount brokers also run their own platforms, namely Bestinvest and Hargreaves Lansdown. And to further confuse matters, some platforms aimed squarely at the public offer discounts that compete with discount brokers.
Which is the best option? It doesn't really matter provided you're happy with overall charges and service. Using fund platforms is generally a good idea, but there can be drawbacks. Here's a quick summary of the potential pros and cons. If you want to read more about investing in general please visit the investing section on the Candid Money website. Candid Money Limited accepts no liability whatsoever for any errors. Please carry out your own research before investing.
Sitemap Contact Us Press. About Fund Platforms What are fund platforms? A one-off fee when opening a platform account, either a percentage or fixed amount. Investment trusts may be held on platforms which offer share trading. Re-registration Transfer as cash.
Reduces administration and paperwork. Makes switching between funds simpler and quicker. Can be the cheapest way to buy funds. Easier to monitor your investments when held in one place. Tools can help analyse your portfolio. Scope for ISA and pension tax wrappers.