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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

It is important to check fees and the suitability of your platform

The Financial Conduct Authority (FCA), the regulator of the financial services industry, has been busy recently kicking the tyres of the pensions and investment markets to ensure they are delivering value for money for investors.

First, its asset management market study assessed the value for money investors are getting from fund managers. The regulator then turned its attention to pension companies through the retirement outcomes review.

In its latest 110-page tome, the FCA focuses on platforms – online offerings like AJ Bell Youinvest, The Share Centre  and Interactive Investor that  are designed to help people  save and invest.

Here are a couple of the key lessons DIY investors can learn from the regulator’s latest paper.

SHOPPING AROUND

The fees platforms charge vary significantly. Indeed, according to the FCA charges on a pot of £5,000 investing in a Stocks and Shares ISA can be as low as 0.2% or as high as 2.4%. Over five years that could equate to an extra £650 in returns (assuming a 5% annual growth rate) at the lowest end of the fee range.

Furthermore, the platform that represents the best value  for you might depend on how much you have to invest. Some charge a percentage of your fund, some charge a flat fee, and some charge a combination of the two.

Some also wrap things like trading into a single fee, while others charge you each time you buy and sell stocks and shares. Platforms also have different levels of service and functionality which might be important to you – although in the FCA’s study most consumers cited price as the key factor affecting their choice.

It’s therefore worth your while shopping around the market and comparing service and charges to find the right platform for you.

Firms such as the Lang Cat, a platform consultant, have useful ‘heat maps’ to help you compare platform prices based on the size of your portfolio.

ORPHAN CLIENTS

According to the FCA, there are just over 400,000 so-called ‘orphan’ clients in the UK. In simple terms, these are people who have previously had an adviser – and so are on a specialist adviser platform – but who no longer receive advice. This might be because they have parted company with their adviser, or because the adviser has retired or gone out of business.

If this is you, it’s worth considering either appointing a new adviser or moving your money onto a more appropriate DIY platform.

Adviser platforms tend to be designed to suit the needs of advised clients and so are unlikely to be appropriate to a direct customer.

Some adviser platforms also levy extra charges for orphan clients to cover extra administration costs.

Tom Selby, senior analyst, AJ Bell

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