Interactive Investor

Our guide to the best investment platforms for beginners

10th May 2016 14:57

by Edmund Greaves from interactive investor

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Working out which investing platform is right for you needn’t be complicated. Here’s the lowdown on everything you need to consider when you’re getting started

Investing platforms have transformed the way we buy and sell investments. While once you may have had to pick up the phone and ask a broker to trade for you – and pay them a hefty commission to do so – now you can buy or sell shares, bonds, funds and investment trusts online at the click of a mouse.

Collectively, platforms have opened up DIY investing to a whole new group of ordinary investors. Individually, they vary considerably.

Pick the right one, and you could enjoy a great way to hold your investments and receive the information you need to make the best investment choices.

Pick a dud, and you could see your investment savings eaten away by administrative fees, trading charges and exit penalties.

Here’s our guide to picking the right platform for you whether you plan to invest for the long term or trade stocks and shares more frequently.

What is a platform?

A platform is an online service that helps investors to:

  • choose what to invest in;
  • buy, hold and sell investments – this includes funds and some offer shares and investment trusts as well; and
  • monitor the performance of your investments.

Each platform offers different levels of fees and charges based on the size of your portfolio and the number of times you want to trade your holdings.

Each interface also offers varying depths of information and different tools and features. This means you do need to do your homework to find the best one for your needs.

What charges will I pay?

Platforms can charge a number of fees using different pricing structures.

Some charge an ongoing administrative fee as a percentage of your total investment. Others charge a flat fee on a monthly or annual basis. The size of your portfolio will largely determine which of these will result in a lower fee for you.

However, this is not the only cost levied. Some providers will charge you up to £10 every time you make a trade, while others have no ongoing fund-dealing charges at all. Therefore the frequency with which you trade will also help determine which platform offers the best value.

Most platforms charge an exit fee when you switch to another provider. This is typically around £25 per fund, but some, such as Fidelity and interactive investor (Moneywise’s parent company), do not have any exit charges.

Many also offer bonuses and freebies to entice you to sign up, and this can be a useful way to make some extra cash. But make sure you don’t lose out in the long run by picking an account that charges higher ongoing fees just because it offers a sign-up bonus.

Over time, the amount you pay in fees can differ by tens of thousands of pounds depending on which platform you choose. For example, research by the lang cat found that investors could save more than £30,000 in charges over 30 years using interactive investor’s new pricing model, when compared to its largest competitor, assuming an average Stocks and Shares Isa balance and annual top-ups.

See the table (below) for the annual charges for a Stocks and Shares Isa on the main platforms.

Stocks and Shares Isa annual fee by portfolio size

Portfolio size£5,000£25,000£50,000£100,000£250,000£500,000
AJ Bell Youinvest£19£69£131£256£631£881
Alliance Trust Savings£120£120£120£120£120£120
Aviva Consumer Platform£20£100£200£375£900£1,525
Cavendish Online£13£63£125£250£500£1,000
Charles Stanley Direct£18£88£175£350£875£1,375
Close Brothers A.M. Self Directed Service£13£63£125£250£625£1,250
Fidelity Personal Investing£45£88£175£350£500£1,000
Halifax Share Dealing£63£63£63£63£63£63
Hargreaves Lansdown£23£113£225£450£1,125£1,750
Interactive Investor£120£120£120£120£120£120
The Share Centre£88£88£88£184£184£184
Willis Owen£20£100£200£350£650£1,025

Note: Assumes four deals a year within an Isa, no investment growth. Figures rounded up to the nearest £1. Additional fees, e.g. fund fees, may apply. Source: the lang cat, May 2019

What else should I consider?

It is not just price you need to consider when picking an investment platform.

Great customer service is key so that you have the support you need to manage your account and help on hand if something goes wrong.

There is also huge variation in the user experience offered. Some platforms offer rafts of information about the basics of investing and lists of recommended funds to help you get started. Others have a more limited offering.

Some platforms are easier to accesss on a desktop computer, while others have smartphone apps and are easier to use on a tablet or mobile phone.

If you have multiple holdings, it might make both financial and practical sense to keep them in one place, as some platforms may charge a lower fee if you have a larger portfolio. But this isn’t always the case, so check with your preferred provider first.

Our guide to the best investment platforms for beginners

Moneywise’s platform picks

To help you pick your perfect platform, Moneywise asked Chris Bredin, analyst at platform research firm the lang cat, and Holly Mackay, chief executive of platform comparison site Boring Money, for their views on the best platforms for investors with small portfolios, larger portfolios, those holding shares as well as funds, and those investing regularly.

Best for smaller portfolios (£5,000-£50,000)

If you have a small lump sum to invest, you will want to ensure a chunk of it does not disappear in fees.

Mr Bredin says: “Those with smaller portfolios will be better going with a provider that charges a percentage fee.

“AJ Bell and Fidelity Personal Investing both offer lots of ideas, as well as a wide range of investments at a reasonable price. We like Fidelity’s recent redesign, which makes it much easier to navigate with useful guidance and tools.”

Ms Mackay is a fan of Hargreaves Lansdown’s customer service for beginners with small portfolios, although “relatively expensive with a platform fee of 0.45%, but for smaller portfolios it can be argued that the fees are still good value and worth the excellent service”.

“For a beginner, the ability to speak to someone in less than 10 seconds is very reassuring,” she adds.

Best for larger portfolios (£50,000+) and frequent traders

Larger portfolios can benefit best from platforms that offer a fixed fee, as increasing your investments doesn’t increase the cost. Both Mr Bredin and Ms Mackay favour interactive investor.

Ms Mackay says of interactive investor: “ii is updating its pricing from 1 June 2019 to a subscription model with a choice of three different price plans. Customers on its core plan will pay a flat fee of £120 a year (£9.99 a month). This also gives them 12 free trades a year of funds or shares at the standard rate of £7.99 a trade.”

Mr Bredin agrees: “interactive investor is good for share trading and those looking for a broad range of investments and although the site isn’t the best for beginners, it is definitely improving with more information and the new Super 60 recommended fund list which includes investment trusts and ETFs [exchange-traded funds],as well as unit trusts.”

Best for holding a mixture of shares and funds

If you’re thinking about buying and selling both shares and investment funds, then the cost of trading becomes a key consideration.

interactive investor offers two monthly service plans for those who trade more often: its ‘funds fan’ and ‘super-investor’ packages. Share dealing is as low as £3.99 with a flat fee of up to £19.99 a month.

Mr Bredin recommends AJ Bell Youinvest as it “offers a wide range of shares, ETFs and investment trusts at a good price, alongside a wide range of funds and ready-made portfolios for those looking for an off the shelf solution as well as some share dealing on the side”.

He adds: “Share dealing is well priced at £9.95 and platform fees at 0.25% (capped at £7.50 per quarter). Share dealing is half that price at £4.95 for those trading 10 or more times the previous month. There is lots of help available for investors looking to invest in funds or in shares.”

Ms Mackay adds that Charles Stanley Direct is a solid choice too: “It has a fixed platform fee of 0.35% for funds, with no fund-dealing charges. For shares, it has a trading fee of £11.50 and a platform fee of 0.35% which is waived for any month when you make one or more chargeable trades. Customer service and a decent app are continually improving.”

Best for regular investors (£1,000 plus £100 regular deposits)

If you are starting out investing and don’t have a large savings, but would like to build up a portfolio over time with regular small investments, then a platform’s regular investment fee will be an important consideration.

A percentage rather than a flat fee tends to be better value for those without an existing large pot who start to invest regularly.

Mr Bredin says: “Although Hargreaves is one of the more expensive percentage fee platforms, it does offers good value for those with small pots and the service and information it provides is excellent, especially for beginners.”

Meanwhile, Ms Mackay also likes AJ Bell and Hargreaves Lansdown, but adds Fidelity as an alternative.

“The minimum regular investment is £50 a month and trading funds are free. Fees start at 0.35% for those with a regular savings plan, regular share trades are £1.50 and standard share trades are £10,” she says.

This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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