We are increasingly being approached by new clients who are being recommended to a platform where all their investments, pensions and particularly SIPPs are in one place and you have a huge choice of funds for your pensions and investments. Is there hidden pitfalls to these seemingly fantastic services?
Yes, in our professional opinion there is.
How do platforms work?
Platform Charges – A typical platform service
So who is involved? Platform provider, Fund Manager and Financial Adviser.
Each of the above wishes to charge and be paid for the services.
So what is a typical charge for an average platform:
So before you even start to receive any growth on your investment, you fund must grow by 2.3% pa to 3.0% pa to stand still.
Compare this to a simple, retail investment or pension or ISA with annual charges only of between 0.4% pa (pension) and 1.5%pa on ISA.
On a £100,000 pension fund, a SIPP platform, ISA or investment account, this may mean higher charges, in the above example of up to 2.6%pa i.e. £2,600 per year.
We suggest you should only use a platform if you are going to actively use it or if your financial adviser is. Beware of platforms, some charges are too high for the benefits that you receive.