Unless you’ve got oodles of money and a dedicated wealth manager at your beck and call, pretty much the only way for the average saver to invest by themselves these days is online.
Anyone looking to start a monthly saving plan into the stock market or even a lump sum is going to need a ‘platform’. There’s a good choice available and, once you’ve spent a little bit of time mastering the jargon and the buttons, it’s easy to run. In fact, you can load up most of your disparate investments (including shares, funds, some pensions, Isas and Junior Isas) on to the one platform and manage them all in one place. They can even supply a free tax report which you can simply forward to HMRC!
Inevitably though these services have a price. And while many people mostly worry about losing money in a stock market crash, they often don’t think about the cost of investing and its long-term effect on their nest-egg. As the money builds up, so do the fees. Therefore it makes sense to aim for the most cost-effective platform when you start out investing to get most of the gains in your own pocket. (It’s also a pain in the proverbial to move platforms, a process which can incur even more charges.)
So I want to share this study, commissioned by Interactive Investor, which passed under my nose recently (see below). Interactive is also a platform and, unsurprisingly, scores close to the top. Even so, it’s a useful comparison of the different outcomes for your money after 30 years invested, depending on what platform you choose. As it could be a whole £33,000, it’s worth taking a look.
Lucky old Halifax comes out on top and the biggest DIY investor site, run by Hargreaves Lansdown, is bottom. The figures look slightly strange because they’ve started from a base point of £51,306, which HMRC says is the average value of a stocks and shares ISA. Other assumptions are that there are no further contributions to the lump sum, that the money grows by 5% a year and that you would make some kind of buy or sell transaction six times a year.
I am sceptical of this last metric. Interactive says it is the average for their customers but I certainly don’t trade six times a year. I focus on picking ‘file and forget’ funds and let them get on with it. Other people do however trade more regularly so their costs would be higher. Similarly, if you never make any transactions, your costs will be lower.
As I’ve been with Hargreaves Lansdown for many years, this study does make me look like a dunce. I do very much value Hargreaves’ telephone helpline which has bailed me out on many occasions. But I’m not sure it’s superior enough to account for a £33 grand hit. Come on Hargreaves, time to massage down those fees!
See our SMM guide to investing in funds for beginners for more information. Website Boring Money, which actually did the study, has lots of other useful stuff.