Modern means for managing your money
YOU’VE probably changed the way you buy airline tickets and car insurance over the last decade, and it’s likely that you shop around on the internet or buy through price comparison sites. But what about the way you invest your own money?
Some of us do it ourselves, some leave it to a trusted adviser, but most of us give it as little thought as possible. According to our recent research, there are 6.5m active private investors in the UK and the number of people who choose to do it themselves is increasing. There is a view that we all need to take more interest and have more control over our long-term financial security. If that means managing your investments online, what are the options and which approach is right for you?
Self-directed investors often use “platforms” or “fund supermarkets” and most services will include the ability to buy and sell investments, and to take advantage of tax savings in pots like individual savings accounts (Isa) or self-invested personal pensions (Sipp). As well as showing users what they’ve got, they usually offer information and guidance to help them make investment decisions.
Asset managers will sell their own funds directly to you through their websites, but it may not always save you money compared to buying through your Independent Financial Adviser. Most won’t give you access to other asset managers’ funds or enable you to manage other investments. However, some have decided to offer open architecture, where you can buy other companies’ funds on their platform. Fidelity was one of the first with FundsNetwork, which is a comprehensive proposition with some slick tools. Alliance Trust Savings has a more basic website but takes a different approach to pricing.
Discount brokers offer funds directly to the self-directed investor at a discount, by rebating back some of the commission that would ordinarily be paid to an IFA. Some, like Cavendish Online, are undoubtedly cheap but limited in their scope. At the other end of the spectrum, Hargreaves Lansdown offers a very comprehensive investment proposition with high levels of customer service, but are not as highly discounted as some of their discount broker peers. It is, in our view, the market leader for self-directed investors, with almost 400,000 clients and are at the forefront of assisting customers to consolidate all their pensions into Sipps – an approach that Bestinvest would also like their clients to take.
Stockbrokers have traditionally specialised in listed securities, like stocks and shares, but these days they are making it easier and cheaper for their clients to include funds in their portfolios. Barclays Stockbrokers re-launched their proposition in February, with more focus on funds and more competitive pricing. Interactive Investor has done the same and has a website jammed full of information and tools for engaged investors.
But what about the millions of people who don’t enjoy managing their investments? Barclays and HSBC have both launched simple investment propositions over the last year, so you can see your investment portfolio next to your online banking. New entrants, like InvestorBee and rplan, offer new thinking using the “wisdom of crowds” and slick planning tools to guide your decision making.
So which platform is right for you? It very much depends on your experience and your level of engagement with your investments but there are plenty different propositions for different types of people – horses for courses. Do you want simple, sophisticated, hand-holding or ultra low cost? Are you a long-term saver or a short-term trader? Figure out what’s important to you and there are good options to put your money on. Try www.which.co.uk for further tips, or look at www.candidmoney.com which has guides to using fund supermarkets and Isa discount brokers – including the costs involved.
Jeremy Fawcett is head of new platform channels at The Platforum.