All You Need to Know When Choosing a Trading Platform

The million dollar question! Choosing your trading platform is one of the main things which holds people back from starting their investment journey. The key with finding a trading platform is finding one which is right for you and your particular circumstances. What is right for one person, may not be right for another!

WORDS BY
Lisa Meller
Published
June 3, 2024
(Image: Nick Fancher)
Tags
Investing
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Disclaimer: This article does not provide financial advice and although some platforms are mentioned these are only examples and the platform offering in the UK is in reality much wider than the list this article is limited to. Capital at risk. 

There are 5 key metrics to consider when choosing a trading platform: 

  1. Offering: What and how many investments are being offered by the platform? 
  2. Fees and charges: What are the fees and charges?
  3. User Friendliness: What is the format of the platform and how easy is the platform to use? 
  4. History and Ownership: How long has the platform been around for and who founded it? 
  5. Joining Incentives: Any joining incentives such as referral bonuses offered? 

Before we deep dive into the platforms themselves, bear with me a second as I want to mention this very important starting point: If you have not yet used your ISA allowance and you are eligible for it, then a Stocks & Shares ISA is a good starting point rather than a general investment account. A Stocks & Shares ISA is a tax wrapper for a general investment account (there are otherwise no changes to the offering!) and it allows you to contribute £20,000 in a tax year (runs 6 April 2024 to 5 April 2025) whilst not having to pay any tax on dividends or gains received on your contributions. 

Now that we have got the type of account out of the way, hopefully it is clear that we are looking at ISAs first and foremost and general investment accounts (GIAs) only after using your full ISA allowance or if you are not eligible for an ISA.  

(Image: Mackenzie Freemire)

Offering

The main reasons to check the investment offering and more specifically how many funds are on a given platform are that 

  1. this will give you a great overview of how much or little choice of investments you have; and
  2. if you are considering a transfer from a different ISA to this new ISA, the chances of the new platform offering the same funds that you are invested in and you therefore being able to transfer your existing investments without selling them is higher when there is a bigger investment choice. Of course you will still need to check that (i) the specific funds you are looking for are available on the new platform and (ii) the old platform allows you to transfer out and the new one allows you to transfer in.

Finally, you will also want to ensure that the platform has the type of offering that you are interested in. For example, some platforms specifically focus on investments in funds like InvestEngine or Vanguard and others focus on stocks, like Trading212. Some platforms have specific offerings for sustainable investments as well whereas others may only have two to three sustainable funds available. 

According to their website, InvestEngine’s offering comprises 620+ ETFs (but no stocks!). In comparison, Hargreaves Lansdown offers over 3,000 funds and AJ Bell offers over 2,000 funds. 

Choosing the right platform is a matter of personal choice

Three fees to be aware of

There are generally speaking three types of charges on your investments:

  1. Platform charges - this is a charge for holding your funds;
  2. Fund charges - these are charges for the management of the specific funds you are investing in. They can be broken into (i) initial charge, (ii) annual management charge and (iii) exit charges; 
  3. Dealing charges - a charge you pay for buying and selling your investment

1. Platform charges

Platform charges are typically charged as a percentage of the money the platform holds for you. They are taken out of your platform holdings and are most frequently charged on a monthly basis. Charges often range from 0.25% (the likes of AJ Bell and Barclays) to 0.45% (Hargreaves Lansdown) of your investments, depending on how much money you have to invest. 

Often if you reach a certain threshold, for example above £200,000 in holdings on a platform, the platform will reduce the percentage fee you pay as does Barclays for example to 0.05% on investments over £200,000. 

(Image: Mackenzie Freemire)

By way of example, if you invested £20,000 on a 0.25% charge, you would pay £50 a year in platform fees (£20,000 X 0.0025 = £50) whereas if you invested £200,000 on a 0.05% charge, you would pay £100. In this example, you would only pay double the amount in charges even though you are investing 10 times the amount of money. Consequently, what is right for someone with £200,000 to invest may not be right for someone with £20,000 to invest!

A less common method of charging is a flat fee. This is offered for example by Interactive Investor. They charge a fee of £4.99 per month on their ISA equating to £59.88 a year. If you compare this to a platform fee of 0.25% on an investment of £20,000 instead, the Interactive Investor offering is slightly more expensive (by £9.88). However,  if you were to invest £30,000 for example, it may work out more cost efficient (£30,000 x 0.0025= £75 against a flat fee of £59.88). 

2. Fund charges 

You can search for the key features document together with the fund name and ISIN (each fund has an identification number) on Google and a one to two page pdf will come up which will detail any fund charges. 

3. Dealing charges

Looking then at the third charge that platforms add, dealing charges, are typically charged as a monetary amount rather than a percentage. These are most commonly priced between £1.50 for funds and £5 for shares (AJ Bell) and £11.99 (Hargreaves Lansdown on 0-9 deals per month). 

Some platforms like InvestEngine or Trading212 do not charge any platform fees or dealing charges at all and make money by using offer spreads (commission taken on the difference between the purchase and the sale price).  

In addition to the charges we discussed above, some platforms also charge foreign exchange fees if you invest in funds in a different currency, inactivity fees and withdrawal fees for the funds you take out of your trading account. 

(Image: Daniel Farò)

User Friendliness

User friendliness is of course all about personal preference. You might want to start by checking whether the platform has an app that you can download to purchase, sell and view investments on (examples are: AJ Bell Dodl, InvestEngine, Trading212) or is a desktop based platform (examples are: AJ Bell YouInvest, Vanguard). 

Apart from the obvious format of the platform, you should also consider whether:

  1. the platform allows regular investing? This is an important aspect if you are keen to use strategies such as dollar cost averaging where you are investing the same sum each month and want to feed this into a portfolio; 
  2. the platform allows you to build a portfolio with percentages? (InvestEngine yes; AJ Bell Youinvest: no). This is particularly important if you want to make regular contributions and you want to ensure that you can be a passive investor without having to calculate how much money should go into each fund; 
  3. how easy is it to navigate to the different investments? You could watch a video here on some of the platforms to see how easy it is to find the investments you are looking for but also how easy or difficult it is to understand the research tools for investments on a particular platform.

Also do check what their reviews on Trustpilot say and how you would contact the customer support team if needed. 

History and Ownership 

You may also want to consider the history and ownership of a platform and in particular how long the platform has been around for. For example InvestEngine was founded in 2016 whereas Hargreaves Lansdown has been around since 1981. 

Looking into the ownership gives us an idea of the context in which the particular platform was founded. For example InvestEngine notes that it was founded by the co-founder of Gumtree, Simon Crookall who was the director of an independent investment services firm before launching the platform and Hareagreaves Landown by Peter Hargreaves and Stephen Lansdown, both of whom trained as accountants. 

(Image: Mackenzie Freemire)

Joining Incentives

Finally, if you are just starting your investment journey, you may want to consider joining incentives that you can share with your family and friends. By way of example, InvestEngine offers a £10 referral bonus for ISAs. 

Platform comparison

We have picked nine platforms that we compared below for your ease of reference. Please note that this information has last been updated on 23 April 2024. Please refer to the provider website to check the figures remain up to date. 

AJ Bell You Invest Stocks & Shares ISA
Minimum Investment: £500 initial lump sum. £25 per month for regular investors
Transfer in existing ISAs: Yes, both Cash ISAs and Stocks & Shares ISA can be transferred at no charge
Fees and Charges: Deal from £1.50 online and never pay more than £5 per online deal.
Account Management: Online & phone
Customer Service Provision: Regular investment articles posted on the AJ Bell website. UK based helpdesk and online chat support

Interactive Investor Stocks & Shares ISA
Minimum Investment: £25 a month
Transfer in existing ISAs: Yes. There are no fees to set up an account with Interactive Investor, transfer to them, or to transfer out should you choose to leave.
Fees and Charges: Pay £3.99 per trade standard rate and a monthly fee starting from £4.99 based on the Investor Essentials Service Plan. Commission free regular investing, additional trading fees apply.
Account Management: 24/7 online account access across desktop, mobile, tablet & mobile trading app
Customer Service Provision: UK-based customer service team on hand to answer your questions by phone and secure messaging. Interactive Investor generate daily intelligence fresh everyday, so you can be ahead of the game. They also publish the dates of earnings reports for major companies.

Moneyfarm Stocks & Shares ISA
Minimum Investment: £500 (lump sum)
Transfer in existing ISAs: You can transfer existing ISAs from other providers with a bank transfer.
Fees and Charges: Tiered annual management starting from 0.30% to a maximum of 0.75% based on investment amount. The individual costs of the different funds that make up your portfolio and the annual trading costs are covered.
Account Management: Manage your account online or through via app. Investment consultants can be reached by phone, via email or using the chat function
Customer Service Provision: Moneyfarm's UK-based investment consultant teams are available to answer your questions by phone, email and instant chat.

Nutmeg Stocks & Shares ISA
Minimum Investment: Start with as little as £500
Transfer in existing ISAs: Yes - transfer in as many as you like at any time.
Fees and Charges: Management fees of 0.70% to 1.01% depending on how much you invest. Please see Nutmeg's fees page for more details.
Account Management: Choose from 5 investment styles, including socially responsible, select your desired risk level and let Nutmeg do the rest. Access and manage your account any time via web or app.
Customer Service Provision: Live chat, secure Nutmail, phone or chat to Nutmeg's London-based support team, or read their investor tools and guides.

Hargreaves Lansdown Stocks & Shares ISA
Minimum Investment: £100 (lump sum) or £25 per month.
Transfer in existing ISAs: YYes, both Cash ISAs and Stocks & Shares ISAs.
Fees and Charges: Tiered annual management fee up to 0.45%p.a. reducing the more you hold. Maximum of £45 annual charge to hold shares, investment trusts, ETFs and corporate bonds. No charges to buy and sell funds.
Account Management: Online, phone, App and by post.
Customer Service Provision: UK based helpdesk able to answer your questions online, over the phone or by post.

Barclays Stocks & Shares ISA
Minimum Investment: £50
Transfer in existing ISAs:Yes.
Fees and Charges: Platform fee 0.25%. Low-cost investing, with no charge to buy or sell funds.
Account Management: App (if you have a current account), online, phone or branch.
Customer Service Provision: Contact in the app or by phone.

InvestEngine Stocks & Shares ISA
Minimum Investment:£100
Transfer in existing ISAs:Yes.
Fees and Charges: 0.25% for the managed portfolio service. No fee for the DIY service.
Account Management: App.
Customer Service Provision: Website form or Email support.

Vanguard Stocks & Shares ISA
Minimum Investment:For single investments, you can start at £500 and for monthly installments, these start at £100 per month.
Transfer in existing ISAs:Yes.
Fees and Charges: At 0.15%, Vanguard’s platform fee is one of the lowest on the market, and its fund range is also known for its rock-bottom fees.
Account Management: Online.
Customer Service Provision: By phone.

Trading212 Stocks & Shares ISA1
Minimum Investment: £1
Transfer in existing ISAs:Yes.
Fees and Charges: None.
Account Management: App.
Customer Service Provision: By phone.

No matter which platform you choose, please remember: Your capital is at risk, please be aware the value of your investment can go down as well as up and you may get back less than you invest. ISA and tax rules apply.

Tags
Investing

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