The costs of holding and trading investment companies on platforms differ widely. Our new research reveals the full picture.
Many investors struggle to choose a platform for their investment company holdings as the pricing structure is a minefield. To help, we have published research on which are the most cost-effective platforms for holding and transacting investment company shares. Conducted by the lang cat, a platform consultancy, the research shows the costs of holding portfolios of investment companies between £5,000 and £1 million on 26 different direct-to-consumer platforms. It also throws light on which platforms offer special rates for regular monthly investing or automatic dividend reinvestment.
Platform charges are split into ongoing costs (also known as admin costs or custody costs) which are charged regardless of how much you trade, and transaction costs for buying or selling investment company shares. Ongoing costs vary widely. Six platforms have no ongoing costs when you hold investment companies; seven have fixed fees that vary from £20 to £120; and the remainder have charges based on a percentage of your assets that may or may not be capped.
Standard transaction costs vary from £5 to £12.50, though 12 of the 26 platforms offer much lower fees (typically between £1 and £2) if you invest regularly.
Commenting on the research, Annabel BrodieSmith, Communications Director of the Association of Investment Companies said:
“Platform charges can be complicated, and working out which platform offers the best deal can be bewildering for investors. We have launched this research with the lang cat to help investors compare costs and make an informed decision.
“However, when choosing a platform, there are many other factors to consider besides costs, such as the level of service, which investments can be held, and whether the platform offers the features and functions that you need.”
Steve Nelson, Head of Research at the lang cat, which conducted the research, said: “We were heartened that our work with the AIC highlighted a wide range of platforms which cater for investment companies. For the particularly cost conscious, there are significant savings to be made if you shop around. For example, many providers cap their ongoing platform charge (and some don’t charge for custody at all) if you invest outside of mainstream open-ended funds.
“But of course, price is only one aspect of platform selection. How much help you need choosing investments, how much importance you attach to online functionality and how much you value a big brand name are some of the other things you may want to think about.”
What’s in the research
The research includes a table detailing the costs of holding investment companies on each of the 26 platforms.
To make comparisons easier, the lang cat has also produced ‘heatmaps’ to show the annual costs (as a % of your invested assets) of investing on each platform, based on portfolio sizes ranging from £5,000 to £1 million, and assuming four buy or sell trades are made per year. The colour of each cell indicates relative cost, where green is cheaper and red is more expensive.
The research will be regularly updated and is available on the AIC’s website.
* The heatmap looks at the cost of investing on each platform for one year. Calculations include ongoing platform fees, any additional wrapper charges and trading where applicable. It is assumed that the investment is within an ISA, with 100% held in investment companies and four transactions (buys or sells) made in the year. Data is based on publicly available charging structure information with some details verified via conversations with platforms in August 2017. Aviva Consumer Platform and Santander do not offer investment companies.
Source: AIC/the lang cat.