My road test can be a platform for your investment
SELF-INVESTING via an online fund supermarket is growing in popularity, despite recent stock market falls. But choosing a provider can prove a minefield.
Last month, I road-tested 13 of the largest platforms that allow investors to trade shares and funds at the click of a computer mouse and hold them inside a tax-friendly Individual Savings Account or Self-Invested Personal Pension.
Each was scored on 40 criteria, with the key issues being ease of use, cost, service, security, choice, help and research.
I assessed the relative costs for ten sizes of portfolio, recorded the time taken to answer calls and grilled the customer service teams behind the platforms.
I also reviewed the robustness of the password and security arrangements, detailed the time taken to set up accounts and trade, assessed the range of available investments and scrutinised the quality of research and general investor support.
Finally, each platform was allocated a score out of 100 based on my investigations.
Hargreaves Lansdown comes top, followed by Fidelity and Bestinvest in joint second position.
Hargreaves Lansdown is the country’s biggest fund platform, looking after more than £50billion for do-ityourself investors. Imagine the investment equivalent of a slightly pricier John Lewis and that is what you get with Hargreaves Lansdown. It’s good and reliable.
Here’s the rub though. It imposes a rather expensive annual fee of 0.45 per cent. So, for every £10,000 you invest, it will cost you £45 a year. And if you are holding investment funds, expect to add about £75 a year in fund management charges. Compare that with rival Fidelity where the online platform costs £35 per £10,000 invested, plus fund manager charges. Broadly speaking, online investing generally costs you between 0.25 per cent and 0.5 per cent a year, with an additional 0.75 per cent payable to the fund managers you use.
So if you use funds – instead of shares – expect to pay between £100 and £125 in fees for every £10,000 you invest.
The best cost solution will depend on how much you have to invest and how often you trade, but here are some rules of thumb.
If costs are your bugbear, Charles Stanley provides a decently priced service – with a fee of 0.25 per cent. If you have north of £75,000 to invest, look at those providers that levy an element of fixed charges. They will tend to be cheaper. They include Alliance Trust Savings, AJ Bell Youinvest, Interactive Investor and The Share Centre.
If you are not familiar with stock markets and the idea of selecting individual investments is daunting, I found Hargreaves Lansdown, Bestinvest, Trustnet, Fidelity and The Share Centre to be the best in helping you choose and research investments.
A final thought. Although we are likely to see further stock market falls over the coming months, now may be a good time for newcomers to invest small amounts of money for the long term. On this basis they are buying ‘cheap’.
And if you think you need loads of money to get started, think again. Hargreaves Lansdown will accept a direct debit from £25 a month, while Fidelity and Bestinvest will open accounts from £50 a month.