How to pick the best platform for your Isa

There’s been plenty of activity among investment platforms since the publication of our 2021 Isa supplement, with heightened competition bringing you cheaper and better options to consider. A review of the private investor platform market by consultancy Platforum found that direct platform assets increased 30 per cent in 2021, with customer numbers up by 300,000. 

Most of the changes have centred on inexperienced investors, or those looking for a bit more guidance. This is because more people are looking to take control of their finances (partly down to pensions freedoms) and lockdown-induced stock market enthusiasm has left platforms with more customers to compete for.  

Last November AJ Bell announced that it would launch a new app called ‘Dodl’ in the first half of this year, with an annual charge as low as 0.15 per cent – the same as Vanguard's. The app will have a narrow list of options – 50 blue-chip stocks and 30 funds – to start off with, and is designed for anyone looking for a low-cost, easy-to-use investment app.  

Bestinvest has lowered its dealing fee from £7.50 to £4.95 and scrapped its surcharge for high-value deals. It also cut the starting account charge on its ready-made portfolios from 0.4 per cent to 0.2 per cent, lowered its one-off advice fees and introduced free coaching sessions if you want a portfolio health check. This follows Vanguard’s launch of an advice service with an ‘all-inclusive’ fee of just 0.79 per cent last year.

Hargreaves Lansdown, for its part, has announced a £175mn investment spread over five years to "automate the hell out of everything", as chief executive Chris Hill put it at the company's Capital Markets Day last month, to improve customer service and cost efficiency as the company moves to target the broader wealth market. 

Plenty of new platforms have launched, too. Tillit launched to the public late last year, offering a selection of exchange traded funds, investment trusts and open-ended funds. It won Boring Money’s 'Best New Investment Platform' prize last month for those investing without an adviser ahead of other new providers InvestEngine, InvestorAI and ChipX, which have all entered the fray in the past couple of years.

Yet for seasoned stockpickers, the landscape for now looks similar to previous years. When picking an appropriate platform, start by considering what is most important to you. For many, it will be having an easy-to-use website with a responsive customer service team. Others will want the cheapest platform possible, while some might want access to exotic exchanges – in which case the list of options shrinks quite quickly. 

You might also want to consider using multiple platforms to spread risk, as we noted in How much money should I have with one platform? Unless the platform is acting illegally, your money will be segregated, so if the platform falls into administration you will get your money back but the wind-down process could take months. In the case of fraud and lost money, the Financial Services Compensation Scheme (FSCS) would pay out, but this is limited to £85,000 per investor. 

User experience and service

Ease of use and platform stability are the primary concern for many investors. Hargreaves Lansdown “still has the edge on ease of use, services and things not breaking”, according to Holly Mackay, founder of Boring Money. But the gap is closing, with rivals AJ Bell YouInvest, Fidelity Personal Investing and interactive investor now offering pretty comprehensive research and product options, too. Vanguard’s platform provides great educational materials and a simple, easy-to-use website. However, it only offers Vanguard funds. 

Some of the newer platforms have slicker apps, such as Freetrade, which now has more than 815,000 users and access to more than 6,000 securities. The app shows the time-weighted performance of your investment portfolio, which is a useful feature that traditional platforms (apart from Fidelity Personal Investing) don’t have, but it doesn’t have nearly as much research as more established peers, nor as many investment options. Users are also unable to deal on its website. 

If you value being able to speak to someone on the phone, you’ll have to opt for one of the more established platforms. Boring Money’s testing found that phone pick up times across the major platforms were 75 per cent quicker last year, customer service teams having struggled in the first year of the pandemic. It’s testing found AJ Bell to have the fastest response time, followed by Hargreaves Lansdown and interactive investor, who all had pick up times of under one minute.  

The FCA’s complaints data can be worth checking to get a feel for a company’s service levels. Complaints for investment platforms spiked considerably over the pandemic, rising from 8,431 in the second half of 2019 to 17,090 in the first half of 2021. When analysing complaints per 1,000 customers, Hargreaves Lansdown’s complaints are notably lower than its peers. 

You can check how resilient a platform is by looking at its accounts. The industry juggernaut Hargreaves Lansdown is one of the most profitable companies in the FTSE 100 and has net cash of over £400mn on its balance sheet, and AJ Bell and IG's results reveal a strong cash position, too. Platforms owned by larger firms, such as Fidelity, iWeb and shortly interactive investor, have sound backing, but the financial statements of the newer apps show some such as Freetrade are not yet profitable. Trading 212’s results show it turned a profit for the first time in 2020, as high-margin derivatives trading gathered pace.

We’ve reported extensively about the difficulty that can arise when transferring platforms, but as we noted in how to smooth the platform switching process, there are certain things you can do to speed the process up if you want to change broker - such as making sure in advance the platform you are moving to supports the securities you own, or moving the money in cash.  

Costs

The cheapest platform for you will depend on what you want to invest in, how much money you have and how often you deal. As you can see from our charges table, platforms have a variety of different fee structures and there can be costs at several steps on the way – account fees, dealing fees, transfer fees and dividend reinvestment fees might all apply.

iWeb is one of the cheapest platforms with a broad range of investment options, but the website is not as slick as some rival offerings. You have to pay an account opening fee of £100, but after that you pay no annual account fee and dealing fees of just £5 for investments across listed securities and unlisted funds. 

If you invest in listed securities only and don’t deal often, Fidelity Personal Investing, AJ Bell’s YouInvest and Hargreaves Lansdown cap their annual account fee at £40, £42 and £45 per year, respectively, which is competitive given their service and product range. Dealing fees are £10, £9.95 and £11.95, respectively, although these start to come down if you trade a lot at YouInvest and Hargreaves. Freetrade is even cheaper, with an annual account fee of £36 per year and no dealing costs. However, it is app only and has a much narrower product range. 

If you invest in funds that are not listed on an exchange, AJ Bell charges 0.25 per cent on the first £250,000 and Hargreaves charges 0.45 per cent. This means that £250,000 invested in funds would cost you £625 on AJ Bell and £1,125 per year on Hargreaves Lansdown. Redmayne Bentley, a more traditional stockbroker, has an annual charge of £60. 

Interactive investor, which is in the process of being sold to fund manager Abrdn, has a flat fee model across all products and all account sizes starting at £120 per year for its investor plan and £240 per year for its Super Investor plan. Dealing fees start at £7.99 for UK and US shares, but investors get at least one free trade per month. Interactive investor says it will continue to operate as a standalone business when the Abrdn transaction completes. 

Vanguard charges 0.15 per cent across all listed and unlisted securities, capped at £375 per year, but you can only buy Vanguard funds. Barclays Smart Investor, Bestinvest, Willis Owen and Charles Stanley all charge a percentage of assets across all products.     

Investing overseas

If you want to invest in overseas listed securities, this narrows the list down. YouInvest, Hargreaves Lansdown and interactive investor have the most extensive lists of overseas exchanges available, but IG, iWeb, Halifax Sharedealing and iDealing have access to multiple exchanges across the US and Europe, too. Most other platforms that offer Isas don’t allow you to buy overseas shares.  

Dealing in overseas shares is more expensive than dealing domestically because you have to pay foreign exchange charges. Platforms with low foreign exchange fees include Freetrade (0.45 per cent) and IG (0.5 per cent), while interactive investor has the highest fee at 1.5 per cent. Trading 212 has a fee of just 0.15 per cent but it is not currently open to new accounts.   

If your portfolio is not in an Isa, interactive investor, IG and iDealing have the advantage of letting you hold foreign currencies in your account, which means you can buy and sell foreign securities without paying a foreign exchange charge on every trade. Hargreaves Lansdown, AJ Bell, iWeb and Halifax don’t have this option. 

However, because Isa rules don’t let you hold foreign currencies in your account, if you hold foreign securities within an Isa on interactive investor or IG you will be charged a foreign exchange fee every time you trade. iDealing lets you buy and sell US stocks in dollars within your Isa without paying a foreign exchange charge, if done within the same business day. iDealing’s standard foreign exchange charge is 1 per cent above the interbank rate.