Take time to understand new platform pricing

If you use a fund platform - also called a fund supermarket - then check the new pricing structure carefully.

You'll be told that it is more transparent because there will be an upfront fee for using the platform and if you buy into a fund, it will be a 'clean' fund, which means it is free of annual trail commission. Trail commission is worth on average 0.75 per cent of your fund every year.

However, platform customers should be wary of these changes as what platforms are giving up by promoting clean funds will often be raked back by extra fees hidden in the small print. Also, the new transparency on fund platform charges will not make investing in funds cheaper.

From April, most platforms will charge no upfront charges for investing in funds. However, investors will still pay a 0.75 per cent ongoing fund management charge on new clean funds. On top of this, there will be a platform administration fee of 0.25 per cent to 0.75 per cent. Some platforms will change a flat fee. Others will charge a percentage of funds under management.

You also need to check the small print. A whole host of fees can be included that will impact your investments, and marketers will not make these easy to see. These could include fees for using individual savings accounts (Isas) and self-invested personal pensions (Sipps), fees for dealing online or via telephone, fees for switching holdings, fees to send a printed valuation statement, fees for account closure, fees for transferring out stock, plus hefty fees for administering your funds if you divorce or die.

Investors will have to look at their trading patterns and calculate which platform is best value based on their personal circumstances. A platform that is good value for a regular trader may not be good value for someone who drip feeds via a regular savings plan.

Alliance Trust Savings is the latest fund platform to go public on its new charging structure, with the announcement that it is to raise its flat fee annual administration charges significantly from 1 February 2014.

However, the firm continues to cite its fees net of value added tax (VAT), which disguises the true cost. VAT is an extra 20 per cent on the full costs and platforms that quote fees net of this are not being completely transparent.

Alliance Trust Savings' new quarterly administration charge of £18.75 +VAT on its stocks and shares Isa and Investment Dealing Accounts is actually £22.50 a quarter, or £90 a year. That's an 87.5 per cent increase on the current fee of £48.

The new annual administration charge on its Select Sipp of £155 + VAT is actually £186, a more modest increase of 15 per cent on the current charge of £162.

Investors with Alliance Trust Savings face new hefty death and divorce administration charges on its Isa and Investment Dealing accounts of £240 - previously these were only levied on its Sipp.

To its credit, Alliance Trust Savings is offering free transfers until 28 February 2014 for customers who wish to move their investments elsewhere. After this date, there will be a flat fee of £120 for transferring out - although the platform has scrapped its per holding transfer charge of £20, a positive step.

Established frequent trader Sipp charges comparison

Here is how Alliance Trust Savings compares to AJ Bell - another platform that has recently announced its pricing structure - for an investor who trades fairly regularly and has £300,000 in funds and stocks and shares within a Sipp.

Total Sipp portfolio: £300,000

£200,000 across 10 funds - £20,000 in each

£100,000 across 10 stocks and shares - £10,000 in each

The investor spots six opportunities a year to buy or sell his equity holdings, trading on average £2,000 a time.

He also rebalances his core fund holdings once a year, making six trades.

With this type of trading pattern, Alliance Trust savings works out at £53 a year cheaper for his Sipp. If this investor wants automatic reinvestment of dividends, AJ Bell will be cheaper as it charges £1.50 per transaction for this, compared to £5 per transaction with Alliance Trust Savings.

However, if he goes with AJ Bell and later changes his mind and wants to transfer to another platform, he will be charged £25 per holding, which would amount to a fee of £500. With Alliance Trust Savings, he would only pay £120.

Source: Investors Chronicle using information on provider websites.