7:30 a.m. March 25, 2022
I have an investment portfolio recommended to me by my former financial advisor, which contains a combination of different investment funds. My advisor retired a few years ago and I haven’t signed with anyone else since. I thought my wallet worked just fine as it was. I just received a statement that details various fees and charges and I can see the “platform fee” listed in addition to the fund fees. Can you explain what it is, please?
Richard Barker of Smith & Pinching responds:
An investment platform is an online facility where you can hold investment funds and manage the overall content of your investment portfolio. It provides the structure for your investments, in tax packages such as ISAs or pension funds. Importantly, it also provides the functionality for you to buy and sell funds in your investment portfolio.
Different platforms may have different billing structures, but here are the details of the most common charges you may encounter. The annual platform fee is a base fee charged by most platforms for using their services and will either be a percentage of the value of your investments or a flat fee. In addition to these annual fees (which may be paid on a monthly basis), you may have tax wrapping fees for the pension structure or ISA your investment is in. Again, the tax wrapper fee can be a percentage of your investments or a fixed fee.
If your platform buys or sells investment assets for your portfolio, the provider may charge a separate trading fee for each transaction. Platform fees will appear as a separate fee from the annual management fees associated with the funds you hold in your portfolio.
You say your portfolio is “doing very well”, but I think that if you hadn’t seen it for a while, you would benefit from independent financial advice on an ongoing basis to ensure that your investments are meeting your objectives and that the fund and platform fees remain competitive. Markets, funds and platforms have changed significantly over the past few years and providers are under increasing pressure from the Financial Conduct Authority to reduce fees.
The opinions expressed in this article do not constitute advice. The value of an investment and the income from it can go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than your initial investment.
For more information visit www.smith-pinching.co.uk