Investing money in equities or funds can be a scary proposition for many ordinary people who have worked hard to save some cash but have no idea how stock markets operate.
Many look to financial advisers to help – but find a significant amount of their savings are can be spent as fees.
Some armchair investors may decide to try the markets alone and they will probably look to reduce their trading and fund management costs with a platform or fund supermarket.
Fund supermarkets have a wealth of information about shares, markets and fund performance but will not offer advice.
Much like shopping for food in a supermarket, everything you want is available but the final spending decision is down to you, whereas a financial adviser is very much a personal shopper who will guide you through the money maze.
Investment platforms
A fund supermarket or platform is a warehouse where the shelves are stocked with just about every type of financial investment you could want to choose from.
The service is split in two – one part is a detailed dashboard holding your trading account information, so you always have an up-to-the-minute snapshot of your portfolio, the value and a graph tracking any ups and downs.
Most big fund platforms lag the markets by 15 minutes or so.
You can search thousands of shares, commodities, currencies and funds across different stock markets.
Buying and selling is at a click of a button and many of the funds and trades attract modest charges – certainly much lower than those of a financial adviser or stockbroker.
Most fund supermarkets will let investors access tax wrappers, like ISAs and pensions, including Self-managed SiPPs.
Fees and charges
Watch out for fees on products like unit trusts. Until April 2014, fund supermarkets could accept commissions for selling some of these products, but the Financial Conduct Authority (FCA) banned this and the platforms have 24 months to switch to a charging service on new business.
Many fund supermarkets have already switched over to the lower charging model and the move is expected to generally bring down prices to make self-investing more competitively priced for consumers.
Fund managers have had their charges cut in half.
Before the charging switch, fees of 1.5% of the fund value or more a year were normal. Now, investors should expect to see fees of no more than 0.75% – but there will be other charges for executing transactions.
Of course, financial advisers will continue to add a fee for their services on top of these charges as well.
