Be Careful and Monitor Investment Platform Charges
Published / Last Updated on 23/07/2024
What is an Investment Platform?
- Think of this like a supermarket or hypermarket.
- You walk in and they have everything that you need from baked beans to carrots to milk to bread to cooking pots.
- There are different aisles for bread, tinned food, preserves, meats etc.
- Now, think of how many different brands and types of baked beans, carrots, milk, bread, meat and kitchen tools you can buy.
This is what an investment platform is: It is usually an investment hypermarket where you can select:
- Different investment vehicle ‘wrappers’ or ‘departments’ such as personal pensions, ISAs and general investment accounts.
- Inside each ‘wrapper’ you can select different asset classes (aisles in a supermarket) to invest in such as the UK Equity ‘aisle’, the European ‘aisle’, the Bond ‘aisle’, the Property ‘aisle’, the North American ‘aisle’ and the Far East ‘aisle’.
- On the shelves in each ‘aisle’, there will many different brands e.g. in the UK equity ‘aisle’, you may have a choice of L&G UK, Standard Life UK, Aviva UK, Royal London UK, Aegon UK etc.
- Your investment platform gives you a huge choice of different products, different sectors and a range of funds within that sector. A funds hypermarket.
With Choice Comes Charges:
Expect
- A platform charge of between 0.3% to 0.6% pa of the value of your funds.
- A fund manager charge of between 0.6% to 1.5% pa of the value of your funds.
- An adviser charge of between 0.5% to 1.0% pa of the value of your funds for ongoing advice. Many advisers charge around 1% pa for ongoing advice services.
This could mean total yearly charges on your funds of say 2.6% pa. This means you have got to achieve 2.6% pa growth just to ‘stand still’.
Managed Portfolio Services (MPS) and Discretionary Fund Managers (DFM)
- Many financial advisers have and are still charging clients on platforms 1% pa ongoing adviser fees, yet they give little or no ongoing advice as MPS and DFM funds are managed by the fund managers with investment decisions made by the fund manager and not the financial adviser. This means some advisers have been charging for a service they have not been delivering.
- The FCA is investigating, and some adviser firms have already set aside £millions for compensation to pay back fees for services that they have charged for and not delivered.
Do you have an MPS or DFM fund? Are you being charged 1% by your adviser?
Consumer Duty
You may be aware that the Financial Conduct Authority launched new ‘consumer duties’ on financial firms in 2023 with one the key pillars being ‘value for money’.
- Investment firms and platforms are hurriedly revisiting their charges to ensure they represent the real costs involved.
- Financial advisers that have been taking an ongoing 1% adviser charge yet have offered little or no yearly advice reviews or simply left clients invested in MPS or DFM funds.
- We do use investment platforms, but we also offer a full advice on the same at regular intervals on the funds that you have invested.
- We do not charge 1% pa of your wealth, but charge set fees (based upon analysed time and costs under Consumer Duties) meaning we could slash the charges you pay on your investment funds platform.
Take a look at our Review and Ongoing Advice Money MOT Services
Initial Review Services: Review Plans and Ongoing Money MOT Services: Money MOT
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