Finding the best deals on investment funds can be overwhelming these days, so I decided to build an exciting new tool to help you compare leading fund platforms and discount brokers..
One of the more popular pages on this site is the ISA discount broker comparison, which highlights the potentially significant savings to be made by using discount brokers and fund platforms that rebate commissions when buying funds. However, it's limited in that I've had to assume a static portfolio, that might be very different to yours. So I decided to build a fully dynamic fund platform comparison tool, i.e. type in your funds and compare costs.
Some late nights and cursing at my computer later, it's now ready to use on a new website www.comparefundplatforms.com. It's built, run and owned by me, just like this site, the reason for a separate site being Candid Money is already quite cluttered.
What are fund platforms?
They're administration services that allow you to physically hold your fund investments in one place. So rather than deal with numerous fund managers, you carry out all your transactions with just one company. This means a single valuation and far less paperwork. For a more thorough explanation read the About Fund Platforms section on the new site.
How does the comparison tool work?
Although complex behind the scenes, it's straightforward and fast to use:
- Choose how you want to hold the funds: directly, ISA or SIPP.
- Select the funds you wish to compare.
- Include shares too if you want.
- Confirm assumptions about investment period and growth rate.
- View results & save if you wish.
The comparison will show a projected value for each platform after all charges and commission rebates, based on the information you enter. It also includes an equivalent overall annual percentage cost along with details of platform and underlying fund fees.
Why's it necessary?
It used to be pretty easy comparing the cost of buying funds, you'd just need to pick the discount broker that rebated the most sales commission.
However, the advent to fund platforms and the FSA's Retail Distribution Review (RDR) has made things rather more complex, albeit potentially better value.
For starters, some fund platforms have been muscling in on discount brokers, by offering competitive, often market leading, commission rebates direct to the public. In return some discount brokers are posing as platforms, either having built their own or using another company to power the service. The distinction has become quite blurred - I include both in the comparison tool for this reason.
But it's not just a case of how much commission they rebate. Platforms charge fees, increasingly taken directly from customers than via fund charges - these can even extend to dealing charges on funds.
And as a consequence of RDR fund managers now mostly offer commission-free (and sometimes platform fee-free too) versions of their funds, with correspondingly lower charges. Some platforms now use these unit classes but some don't, further clouding the charges issue.
So, for one customer a platform that charges explicit fees with generous rebates could end up being cheaper overall than one that appears' free' on the surface, yet for another customer the reverse might be true. It all depends on the investments you want to hold, how much you invest and how often you'll trade.
Try working all this out manually (which I've done in the past) and you'll soon give up the will to invest (if not live). Hence the need for an accurate and impartial comparison tool.
Which platforms are featured?
To kick off I've included Alliance Trust Savings, Bestinvest, Cavendish Online, Club Finance, Interactive Investor and rPlan. In part because they're generally the most competitive platforms/discount brokers and also because they were willing to provide the necessary fund charges data needed to build the tool. A few more competitive platforms will follow over the coming weeks, making the tool more comprehensive still. At the moment it seems Hargreaves Lansdown won't be joining them - they refused to supply the data.
Take a look
Anyway, rather than me rabbit on, go take a look www.comparefundplatforms.com. I'd be very interested to get feedback on what you think and suggestions for any improvements/features you'd like to see moving forwards - just post below or use the contact us page. And, if you think it's useful, please spread the word!
Read this article at http://www.candidmoney.com/articles/266/fund-platform-comparison-site-launch
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