current broker is recommending an investment platform, with a selection of funds he has chosen himself. Should I consider this service, or just use an offthe-shelf investment portfolio that the life assurance companies offer? James, Naas, Co Kildare. WE have started to see some growth in the investment platform market in Ireland in the past five years. It is a very fast growing sector in the UK, and is starting to dominate the market there. Platforms offer you an easy to use service which gives a wide range of investments across multiple investment providers. This gives investors more choice and flexibility than the traditional investment with a single life assurance company, who may offer 20 of their own funds and a very limited range of external, third party investment managers. Some brokers will research the wider market and design their own model portfolios within these platforms.
Before actually investing in one of these portfolios, I would ask the broker to explain how he selected the funds, and also how he will manage those portfolios on an ongoing basis. The main problem I see with these self-selected portfolios is ongoing management. There is significant administration requirements to make sure these portfolios are efficiently rebalanced every year and the strategic and tactical asset allocation is reviewed.
There are also some potential tax pitfalls with using a platform. Life assurance companies offer a ‘wrapper’ service, which allows fund switching without any tax charge. In platforms, I have seen portfolios where each individual fund within the portfolio is taxed separately and this can be very inefficient. A full service offering with a broker/platform can be expensive, and the life assurance companies provider similar portfolios, often for significantly less cost.
I like the platform services, and they can offer very cost effective and transparent access to global portfolios, there is just more scope for problems so the investor needs to spend some time understanding the proposal. If they don’t have time to do this, I would recommend considering an off-the-shelf solution model portfolio service with the life assurance companies.