Is price all that matters with platforms?

Mary_McDougall

Hi, just wondering when picking which platform to invest with - should I just go for the cheapest? Or are there other service attributes that should be considered? which is best? Many thanks

Alice_Holt

https://www.moneysavingexpert.com/savings/stocks-shares-isas/

https://www.which.co.uk/money/investing/fund-supermarkets

"There is no one size fits all solution. There's an awful lot for you to consider. Do you want a platform that offers slick tools and calculators, a helpline and a mobile app to manage your investments? Or do you want a no-frills service that simply allows you to trade with minimum fuss?
How much are you investing?
ISA or SIPP or GTA?
How important is customer service to you?"

https://www.boringmoney.co.uk/learn/investing-guides/product-guides/online-investment-platforms/

https://monevator.com/compare-uk-cheapest-online-brokers/

Etc.

Google is your friend,

MarkCarnage

All of the above. Price isn't everything.

You need to do two things. Work out how much each platform will cost in money terms for your expected portfolio size, structure and dealing frequency. By structure I mean what proportion you expect to hold in funds, ETFs, individual shares (including investment trusts).

Secondly, what weighting in money terms do you give to the less tangible add ons including good and knowledgeable service and online information and tools.

Some platforms are known for being 'cheap' or 'expensive', and in some cases that reputation will be true, but if you apply the above you might find some differing results.

I use HL, they wouldn't be the cheapest for my portfolio, but as I don't use funds much, they aren't as expensive as many think, and the quality of service has been very high, unlike a couple of others I've used. That's worth something to me. I also got a £500 cashback for transferring two other platforms to them, which more than paid for the transfer costs.

eskbanker

One other factor to consider (probably mentioned in the above links but IMHO worth highlighting) is the fact that not all platforms offer all investments (e.g. IWeb doesn't offer all the L&G Multi-Index range), so be clear about what you want to invest in before choosing where to do so....

Albermarle

ISA or SIPP or GTA?

To expand on this - as a general rule the well known lower cost platforms are better/cheaper for ISA's .
However they normally add an extra charge for a SIPP, and another extra charge for drawdown.
The two main 'all in' platforms -HL & Fidelity , charge the same for an ISA, or a SIPP in drawdown, making them uncompetitive for the former, but more in the running for the latter.
Also the two mentioned + A J Bell, cap charges where you invest in exchange traded products rather than funds .

shoulder_to_shoulder

For a start, I prefer not to have all accounts with the same provider. I.e. I want ISA, SIPP and GTA (Grand Theft Auto? that sounds a bit too high risk!) in different places. So I ignore cheaper deals for putting all accounts in one place.

I also ignore any platforms that seem too unstable (e.g. very new and loss-making, or just too small). The clue's in the name: a platform is supposed to hold things up, not fall down! If you're having building work done on your home, you don't need gold-plated scaffolding, but you want it to do the job properly.

Then there is a big trade-off between administrative competence and cheapness. Is it becoming irritating how much can go wrong, or how mistaken customer services can be about things I feel they ought to know?

Also, how does that trade-off change if I avoid open-ended funds in an account (i.e. only hold ETFs and investment trusts)? This restriction on possible investments is less of a problem if you are mostly passive, because one tracker is much like another (for the same region/sector/etc); and if you tend to prefer investment trusts to active funds anyway.

It's taken me quite a while to figure out which platforms work best for me.

bowlhead99

The very first filter is do they have what you want to buy. For me, the whole point of opening an account with a platform or brokerage service is because it enables you to buy the things you want to buy.

Then you can consider if they are well established with deep pockets, as you would not want them to run out of money and cease trading, causing you to be without access to your assets for an unknown period while it got sorted out. The larger and better funded groups may also be better equipped to provide good operating infrastructure, customer service, resilience to fraud and error etc, than some fly-by-night operator with bargain basement fees trying to build a client base from scratch before selling that customer base onto a bigger group.

After checking if the platform has the investment product(s) you want for your portfolio and the credibility you want, you can then see if they are affordable. Some good operators have relatively high fixed fees and ongoing transaction-based fees which could be a relatively expensive way to invest small amounts of money on a monthly basis. Whereas others may have a percentage-based annual fee which is great for small investors but can be a large amount of pounds for people with big balances.

If the fee is in the right ballpark for a service you want, you can further consider the 'nice to haves'. Like, if I'm a frequent trader I may not begrudge paying £50 more each year for a neat smartphone app where I can place and monitor trades and orders and check values and exchange secure messages with the customer service people. But I wouldn't want to pay £500 extra for it.

Likewise I might be interested in being able to hold foreign currency cash, or trade on extended settlement, or having the tax relief pre-funded, or being able to switch funds or share classes with limited time out of the market, or being able to pay fees by direct debit instead of out of your ISA allowance etc etc. Or low FX commissions on occasional foreign currency trades. Can I view my family's accounts from my own login? But if I don't do those things often they may not be deal breakers. Less valuable are things like a 'research centre' with basic filtering tools and short term performance graphs of the different funds or shares they sell, as I could get that sort of thing elsewhere online.

When you've considered how good the overall proposition seems to be, you may decide that you will 'tweak' your requirements and priorities to accommodate some failings of a platform that's strong in other areas.

For me the compromises would generally be within the 'nice to haves' which might swing the choice from one provider to another if costs and reputation are similar. However, some people will go as far as compromising step number one "do they have the investments I want to buy" in order to get a lower fee or some of the nice to haves. If a platform ticks a lot of boxes, you might decide that it wouldn't be the end of the world if you bought Fund A instead of your preferred Fund B, because Fund A could perform pretty much the same and your first choice platform doesn't carry Fund B. But if I really want to buy shares in Tencent in an ISA, I'm not going to buy Amazon shares in a general investment account just because the first choice broker doesn't deal on the Hong Kong market or doesn't do ISAs. I would find a solution that allowed me to buy what I want.

There are lots of platform comparison tools that allow you to see which ones might be better from a cost perspective based on your likely portfolio, tax wrappers and trading habits. They don't all cover the things that aren't quantifiable in pounds and pence. The Lang Cat, a consultancy, has some quite good info in its periodic 'state of the market' reviews.

LHW99

Another factor is that if you are fairly new to investing, and don't have too much cash to invest, a platform that offers plenty of information, is easy to use and offers customer service that is good at "hand holding" may be worth considering even if like HL it has a % fee - because in £ terms it won't be much. When you have more invested, and some years experience under your belt, there is always the opportunity to transfer to a different platform to reduce costs, because you know what you're doing and don't need too much support.

seacaitch

LHW99 wrote: »

Another factor is that if you are fairly new to investing, and don't have too much cash to invest, a platform that offers plenty of information, is easy to use and offers customer service that is good at "hand holding"

Assuming you're not paying for regulated advice, then from what I can see the "hand holding" you refer to is largely just a sales channel focused on new customer acquisition. It may be that some of this comprises "educational" material with general application, while the rest will just be marketing bumpf aimed at getting you to feel cozy with them.

The canniest would simply consume this educational/marketing material and then, having formed a plan of what to invest in and platform functionality required, would find the most suitable provider for them with price as a key consideration.

Of course, the hope for eg. HL is that if their expensive shiny marketing succeeds in bringing you onboard as a new investor starting out, you'll stick with them over the long haul, perhaps consolidating your finances with them & maybe eventually bringing other members of your family along with you, making you immensely profitable to them over time. Many customers prove very "sticky", so as a strategy it works (has worked, anyway).

HL results tomorrow so we'll have a timely update!

LHW99

seacaitch wrote: »

Assuming you're not paying for regulated advice, then from what I can see the "hand holding" you refer to is largely just a sales channel focused on new customer acquisition. It may be that some of this comprises "educational" material with general application, while the rest will just be marketing bumpf aimed at getting you to feel cozy with them.

The canniest would simply consume this educational/marketing material and then, having formed a plan of what to invest in and platform functionality required, would find the most suitable provider for them with price as a key consideration.

Of course, the hope for eg. HL is that if their expensive shiny marketing succeeds in bringing you onboard as a new investor starting out, you'll stick with them over the long haul, perhaps consolidating your finances with them & maybe eventually bringing other members of your family along with you, making you immensely profitable to them over time. Many customers prove very "sticky", so as a strategy it works (has worked, anyway).

HL results tomorrow so we'll have a timely update!

Undoubtedly the sales is (a good) part of it, but from experience, if you want to find the right form, set up payments / withdrawals or get help in navigating / using the website, HL's customer services generally have the right answer and can talk you through it. That's not necessarily the case with other platforms I have used.

seacaitch

LHW99 wrote: »

Undoubtedly the sales is (a good) part of it, but from experience, if you want to find the right form, set up payments / withdrawals or get help in navigating / using the website, HL's customer services generally have the right answer and can talk you through it. That's not necessarily the case with other platforms I have used.

"Service" is certainly core to HL's proposition and seems to be the primary component of any possible "moat" the business might possess in a sector that has few barriers to entry.

It was interesting to see that last year Vanguard knocked them into 2nd spot in a Which? customer satisfaction survey:
https://www.etfstream.com/news/7922_vanguard-knocks-hargreaves-lansdown-off-investment-platform-top-spot/
"This is the first time since the survey began in 2013 that Hargreaves Lansdown has not been in first place"

Could amount to nothing or could perhaps be a harbinger.

On the one-hand, there are a whole bunch of major secular tailwinds favouring platforms like HL as people have no choice but to take responsibility for their long term financial security, but on the other hand is the strong secular headwind presented by investor awareness of the importance of fees, and the relentless bearing down upon these fees by others in the industry seeking to grow AUM or AUA.

As/when customers realise they're paying as much as, or (much) more, in fees to the platform than they do to their investment managers, how do they feel about that? How many will prove sticky as it likely becomes ever easier to switch providers? Dunno the answer, but interesting to watch in the years ahead.