Most investment platforms try to help investors by whittling down the universe of around 5,000 collective investments to a much shorter list of 50 to 100 ‘rated’ or ‘recommended’ investments. They do this using internal or external fund research analysts, looking at factors including past performance, fund manager experience and charges.
However, the platforms offer no guarantees they will pick funds that deliver top performance, or that they will avoid the funds that lose investors money. What's more, the concept of ‘best buys’ is not without controversy – Hargreaves Lansdown notably recommended Woodford Equity Income fund right up to its demise, while platforms sometimes fall short of customers' expectations due to their poor communications surrounding the addition and removal of funds.
The Financial Conduct Authority has scrutinised these best-buy lists in the past for signs of conflicts of interest, but research conducted by the regulator has also shown these funds outperform non-recommended funds on average.