The platform functions you need to work

Selecting a platform on which to hold your investments is a tricky process because there are many things to consider, such as fees, customer service, choice of investments and how easy it is to use. Cost is a key consideration as this can make a significant difference to your investment returns over time. However, some of the cheapest trading platforms have limited investment options and are difficult to use, so it is also worth taking these factors into consideration and, in some cases, paying a little more for better service.

“It’s a bit like food shopping,” says Bella Caridade-Ferreira, chief executive officer of research firm Fundscape. “You pay more in [some supermarkets than others] but [maybe] get a better experience.”

The dominance of Hargreaves Lansdown in the do-it-yourself (DIY) investment platform space, with 42 per cent of market share, suggests that investors are prepared to pay a premium for comprehensive service. But a recent survey by ShareSoc and the UK Share Association of their 5,000 members found that their key concerns are total platform costs, low trading costs and ease of use.

And, as the platform market matures, a number of these are improving the service they offer, while a combination of competition and regulation has been driving down costs across the board. So don't pay too much for your investment platform if you don't need to. To help you avoid doing this, we have assessed which functions might be worth paying more for and which probably aren't – depending on what is important to you.

Click here to read our comprehensive guide to platform cost comparison.

Feature number 1: Usability

In studies assessing the importance of different platform features, ease of use regularly comes out on top. Although this is subjective and will vary according to your personal preferences, an easily navigable website, with as few hurdles to retrieving information and placing instructions as possible, is preferable. Research firm Platforum's latest platform review of 13 of the largest private investor platforms found that, generally, the largest ones are the easiest to use. It ranked AJ Bell Youinvest, interactive investor, Fidelity Personal Investing and Hargreaves Lansdown the highest for ease of use.

Some platforms provide tools that will be more useful to some investors than others. For example, one Investors Chronicle reader is frustrated at not being able to see the performance of his holdings over time in his portfolio. He can only see price at purchase and current price. Jeremy Fawcett, head of platform consultancy at Platforum, says that Fidelity Personal Investing is the only platform for private investors that enables you to see performance over time. 

Another investor spoke to Investors Investors Chronicle saying that while she thinks the service from interactive investor is “pretty good,” she finds it frustrating that it does not produce profit and loss statements for capital gains tax purposes at tax year end. This means that she has to record the information herself in a separate spreadsheet. interactive investor says this is a service it is “looking at.”

AJ Bell Youinvest, however, does include profit and loss details for investments sold during the year in its annual tax summary.  

There is a wide range of research available on platforms. Although this can be helpful, consider as to whether it is priced into the service and providing sufficient value. Most investors in any case draw information from multiple sources.

“I generally ignore [favourite funds lists],” says Roger Lawson, former director at ShareSoc, who invests via various platforms. Although he looks to see what funds are included in them, they are not a significant part of his investment process.

Some investors, meanwhile, are concerned about whether investment platforms have any financial incentives for adding funds to their favourite lists. For example, last year fund manager Terry Smith criticised Hargreaves Lansdown for not including Fundsmith Equity Fund (GB00B41YBW71) in its Wealth 50 list on the grounds of the pricing structure. But Hargreaves Lansdown says that although Fundsmith Equity has "an impressive track record," its managers do not make sufficient data available for the in-depth analysis Hargreaves Lansdown analysts need to conduct before being able to include in it in the Wealth 50 list.  

And while some favourite funds lists such as AJ Bell’s Youinvest’s Favourite funds’ and interactive investor’s Super 60 Investments include funds with various types of structures, others such as Fidelity Personal Investing, Hargreaves Lansdown and Bestinvest only include open-ended funds.  

Platforum’s platform survey ranks AJ Bell Youinvest, interactive investor, Fidelity Personal Investing and Hargreaves Lansdown most highly for quality of research and investment guidance.

Feature number 2: Efficiency

If you value being able to speak to someone quickly, the lowest cost, basic platforms may not be the best option. Platforum tested email, telephone and online customer service across 13 of the largest platforms and found that in these respects AJ Bell Youinvest and Charles Stanley Direct came out on top. AJ Bell Youinvest and Charles Stanley responded to emails most quickly in about half an hour.

Selftrade, Barclays Smart Investor and Halifax Share Dealing had a response time of within 24 hours.

Charles Stanley Direct had the fastest telephone response time, followed by Hargreaves Lansdown – both were found to respond in under 30 seconds. Halifax Share Dealing was found to have the longest telephone queues, with an average response time of almost six minutes.

Holly Mackay, founder of personal finance website Boring Money, says that waiting to speak to someone on the phone can be “a great source of irritation”, but you are likely to be be connected almost immediately to someone at Charles Stanley Direct, Chelsea Financial Services and Hargreaves Lansdown.

Platforum says that AJ Bell Youinvest and HSBC Online Fund Platform are the only two platforms offering online chat facilities with live agents. Aviva Online Investments and Barclays Smart Investor have online 'chatbots' – automated online responses – but these can only deal with basic inquiries.

If you need a tax certificate for dividends, Ms Mackay says her testers found that Hargreaves Lansdown, interactive investor, Moneyfarm and Vanguard provided them most quickly.

Another great source of frustration to investors is the difficulty of transferring from one platform to another, which, according to Mr Lawson, can take up to six months. However, the time taken usually depends on what types of assets are being transferred and the provision of accurate information. No platform in particular seems to take longer than others. The Financial Conduct Authority is currently looking into how this process can be made more efficient.

Platforms vary on how easy they make it for you to take part in votes on investments listed on public markets. Some of the larger investment platforms allow you to do this at no extra cost if you email or call them with your voting instructions. The Share Centre and interactive investor have online voting facilities that notify you of all upcoming annual meetings and enable you to vote online.

Feature number 3: Choice of investments

One platform should offer a sufficient choice of investments and ways to hold them for most investors. But when choosing a platform check that it offers the types of securities that you want to invest in, and the tax wrappers such as individual savings accounts (Isas) and self-invested personal pensions (Sipps) that you want to hold them in.

You can see a comprehensive list of what tax wrappers and types of investment products the majority of platforms offer at comparetheplatform.com.

For example, only a few platforms offer flexible Isas that allow you to put money in, take it out and put it back in again within the same tax year. These include The Share Centre, IG and Barclays Smart Investor.

And few platforms offer lifetime Isas that help people save for their first home or retirement. The ones that do include Hargreaves Lansdown, interactive investor and AJ Bell Youinvest.

The larger platforms offer a wide range of funds that should cover the needs of most private investors. 

If you want to hold cash in multiple currencies on your platform, interactive investor could be your best option as it allows you to hold up to nine currencies within its Sipp and general investment accounts at no extra cost. This could save you foreign-exchange costs when you want to convert cash in your accounts to another currency. 

AJ Bell built its brand managing Sipps and regularly wins awards for being the most cost-effective provider.

But some companies outsource the operation of their Sipps to other companies, so if you invest within a Sipp, check whether the platform manages the Sipp itself or contracts it out to another company, and what their experience and reputation of doing this is.