The Best Investment DIY Platform To Hold Your 2020-21 ISA
For the modern day investor an investment platform gives you control of your investments, however the difficult part is often deciding which one as they all have strengths and weaknesses.
Dependent on your investment goals this blog will hopefully give you a flavour of some of the key aspects to consider before making a choice.
The Best Investment DIY Platform To Hold Your 2020-21 ISA
In considering a DIY platform for your 2020-21 investment ISA, the following should rank highly in your decision process:
- Cost - Picking the “cheapest” is not as clear cut as it sounds, as each DIY platform has its own policy on costs and how these are broken down making like for like comparison challenging. If you know what type of investing you are going to do this can make the process a lot easier e.g. if you are someone who buys and sells shares on a frequent basis then a platform geared up for low cost trading is more likely to be a better choice than one that is focused on funds. The amount you are going to invest can impact what DIY investment platform is best for you. If you setting up a regular monthly investment ISA out of income, then the platform that is right for you will be probably different to someone investing a £250,000 lump sum.
- Functionality - DIY platform providers are investing heavily in better functionality for their clients all the time, as they know that keeping you as a customer is key to their business model. As well as DIY research and analysis tools, some providers offer webinars on trading strategies and market trends to help you in your decision making. Access to global markets is now fairly standard, and the ability to trade in different currencies. Fund "best buy" recommendations are either done inhouse e.g. Hargreaves who have their own investment experts, or through independent investment commitees such as Interactive Investor who use both inhouse staff and fund analysts and external financial journalists to come up with their choices. Mobile apps are increasingly becoming important with providers investing in improving functionality in helping to keep clients engaged. A number of DIY platforms allow you to set up virtual portfolio accounts, where you can set up watchlists, track performance of international shares and funds, and join up to investment forums where you can discuss and review investing strategies.
- Tax wrappers offered - Not all platforms offer an ISA, Junior ISA, Lifetime ISA or Self Invested Personal Pension (SIPP) accounts (or wrappers) for your investments.
- Investment choice - Its good to be clear on what you actually need from a platform provider. Choice is great but be realistic on what you actually need. A number of fund DIY platforms offer model portfolios making it easier for you to invest based on your risk profile and timeframes.e.g. Fidelity offer a fund selection tool called pathfinder which helps you choose funds based on a risk profile from 1 to 5, the amount you wish to invest and timescale.The tool then gives you an estimate based on poor, average, good market conditions over your selected time frame what you investment might be worth at the end of the term.You can decide on how you want your money to be managed; either on a "expert focus" where your money is spread across a best of class fund managers or a "cost focus" where your money is invested across global markets whilst keeping costs down.
How do you choose a DIY platform?
The features on offer from DIY platform providers vary widely, and so do the costs.
It is worth spending a bit of time reviewing what each provider has to offer as once you have made your choice like setting up a bank account this is not something you are probably going to revisit every year.
Top 10 criteria you’ll want to consider:
1. Do you know already the investments you want to invest in?
If you are looking to trade shares only then a platform that offers low cost dealing fees may be a priority. A number of platforms offer advanced research trading tools to entice you to them e.g. Level 2 with options to hold and trade in different currencies.
Or you may want buy foreign shares (not all platforms cater to this) or trade in ETFs ( exchange-traded funds – usually tracking an index).
If you are more interested in collective funds then this again may determine who you go with. Charging structures for funds held on the platform will vary. Over time the impact of such charges can be significant.
2. Are you a true DIY investor or do you prefer to have someone else do it for you?
Not everyone has the time or inclination to manage their own investments. Your answer to this will depend on:
- How confident are you about investing?
- Will you enjoy getting underneath the bonnet?
- Do you have enough time to be an active manager?
- Would you mistrust someone else making these decisions on your behalf – or have more confidence in their market knowledge than your own?
3. Do you want to invest just in funds, or shares and funds?
Check what’s on offer, if you want to have the flexibility: some platforms don’t offer both.
4. Do you want your platform to be independent or fund-owning?
Do you want to be able to invest in independent funds, or are you happy investing via a platform provider such as Legal & General that offers just its own funds?
5. Do you have a self-invested pension?
You may want to look for a platform that can manage your self invested personal pension or SIPP as well: not all of them can.
6. Do you want to do a lot of trading?
Active investors will want to look for a platform that offers the best research, and the lowest fees for volume trades in funds, and stocks and shares. See a list of sharetrading DIY platforms for your ISA here.
7. How easy is this DIY platform to use: what kind of tools and customer service does it offer?
These are often the criteria that count most highly with users, so do some research and read the reviews.
- Many investors are prepared to pay a bit more in fees for a platform that offers really useful apps and services.
8. How much are you investing?
You will want to look at the fee structures, and the thresholds for reduced fee charges.
- Platforms that charge flat-rate fees typically work better for large investors with £50K or more in their portfolios.Interactive Investor are one of the few fund platforms that work on a fixed flat monthly fee basis, currently £9.99 pm
9. How has this platform performed?
This is a key consideration if you’re looking at having your investment managed by the platform, rather than going DIY.
You’ll want to look at the kind of returns that its investors have been getting: read the reviews and compare the results of the platforms you’re considering.
10. And finally… how much will it cost?
If you’ve worked through the other decision criteria first, you’ll understand that you shouldn’t choose solely on cost. However ultimately cost is often what drives our decision making.
Some of the more expensive platforms are highly rated by their clients for usability and client support, or show consistently good returns.
Interactive Investor operate on a flat fee basis charging £9.99 pm. Fidelity, Hargreaves Lansdown, AJ Bell for example, charge tiered account management fees which are higher than others, but they’re rated highly by investors for ease of use and good customer support. Based on how much you are looking to invest this may sway your decision. Fidelity fund supermarket offer the same service fee across all your investments. So they charge a service fee of 0.35% pa on the first £249,999 held and then 0.2% after that. So if you held £300,000 with them they would charge 0.2% pa on the whome amount.
- Choosing active management of your investments isn’t always cheaper than DIY: there are some price advantages to trading in scale.
- There has been a push to get platforms away from commission-based charges towards “clean pricing” annual fees.
- You need to be looking at annual administration charges, dealing fees, and any other costs, including exit charges.
You can choose from:
DIY with me investment platforms and DIY do it for me investment platforms
Many fund platforms platforms offer both. Catering for first time investors through suggested fund options or strategies through to experienced investors where the focus is on providing advanced tools to allow independent decisions.
You get a range of active investment management, from advice and assistance to completely hands-free:
Platforms that do both:
See below 4 of the largest platforms in the market: