What is an investment platform?

You’ve decided you want to start investing? Amazing! But where do you turn to help make it happen? We touched on this a little in our how to choose an investment account article, but felt the subject of providers, or ‘platforms’, deserved a little more attention. So here goes.

Just a quick tip on terminology: investment platform, provider, app…whatever you want to call them, they all more or less do the same thing – offer you accounts and investments. To keep things simple here, we’ll stick to ‘investment platform’.

Your investment platform should offer all you need to let you safely hold and easily manage your investments within an online account. There are usually two main roles your platform will play to help you do this: administrator of your accounts and dealer of your investments.

As your administrator, your platform will sort out the paperwork for your investment account, like your stocks and shares ISA or self-invested personal pension. They’ll keep its contents safe and recorded, and make sure authorities, like HMRC, have all the info they need for it.

The slightly more glamourous side of the job for an investment platform is being a modern-day stockbroker. It’s where you can place your orders to buy and sell the investments you hold in your accounts.

Alongside both the admin and dealing sides, is the support available. You should have full behind-the-scenes access to your account and be kept up to date on all its goings-on. This is where the ‘human touch’ makes a difference. Easy access to a support team, over the phone or online, to help you get to the bottom of an issue, is something we can all appreciate the value of.

Of course, different platforms carry out these roles differently – and at different costs to you. Some have all sorts of fun extras they add onto their service, like market research and analysis tools, useful educational content and even – in the case of AJ Bell – a financial magazine subscription!

Investment platforms: a (very!) brief history

Who likes history lessons?! It’s a short one, promise!

Flick back a few decades and investment platforms as we know them today didn’t exist. Instead of logging into an online account to view and manage your investments, you’d have to call up a real-life stockbroker and trust that they’d get the best deal for you. Then they’d take a 2% cut of the deal for themselves. Understandably only those with serious time, money and inclination decided to go through this hassle!

The advent of the internet really shook up the investing scene, and massively improved accessibility. It brought us electronic trading of investments and the convenience of keeping everything ‘online’. Fast-forward to today and your investments are no longer waiting for you on a sturdy old desktop at home, instead they’re in your pocket – on your investment app.

It’s easier than ever to invest, and cheaper than ever too. The investment platform competition has heated up and that means charges have been driven down, which is all great news for our investment returns and means more people than ever can build their wealth this way.

Using and choosing your investment platform

When it comes to how you access an investment platform there isn’t a ‘one-size fits all’ solution. Maybe you fancy going down the direct route and choosing your own investments? Or perhaps you’d prefer to get specialist human or even ‘robo’ advice on what to put your money into? Let’s look at the options.

Doing it yourself

Just like doing up your house, the cheapest way to invest is usually doing it yourself. But it does mean you have to make the big calls on what to invest in, how much and how regularly you do it – all without anyone else’s input.

It may sound a little scary, but you wouldn’t be alone. According to Boring Money’s 2022 online investing report there’s now over 9 million of us with a DIY investment account. That’s loads! And the reason there’s so many is because it’s really not as scary as it sounds.

There are plenty of tools, guidance, and information out there to get you doing it all yourself. Plus, there are different levels of DIY-investing. Some (not me!) hand pick shares to build up their own mix of investments and monitor their portfolios daily. But many others let fund managers do the hard work and invest in ready-made options that match their feelings about risk, like the AJ Bell funds.

A half-way house

While access to investments has massively evolved over the past few decades, so too has the world of financial advice and direction on choosing those investments. It’s no longer all or nothing, there’s now a middle ground where the affectionately named ‘robo-advisers’ hang out.

Always digital and usually app-based, your robo-adviser asks you a series of questions to build a picture of your financial goals and investment style. They then plonk your money into a fund or group of funds that best matches this style.

Not an alternative to full professional human advice but this very modern alternative does appeal to people who love a bit of efficiency and are willing to pay a little extra for it than picking their own mix of investments.

Full fat advice

Maybe you’re willing to pay the relative ‘big bucks’ to get personalised recommendations and advice on your investments. A lot of people who can afford to sit in this bracket because, let’s be honest, it’s easier and less time-consuming to get an expert to do the work.  

Human advisors – yes, I said ‘human’! – either offer their own in-house investment platform or they’ll use an external platform – like AJ Bell’s Investcentre, where you can log in and see how your accounts and investments are doing under the watchful eye of your adviser.

Whatever your route, trust is key

No matter the route you take to investing and using an investment platform, make sure you’re in safe hands. Investment platforms, providers and advisers in the UK should have authorisation from the Financial Conduct Authority (FCA), just like the banks do. Read up, use comparison sites and see what others have to say about who you’ve shortlisted. Make sure they offer exactly what you’re after and at a price you think is worth it.

Sometimes the biggest step to getting started investing is understanding the world you’re putting your money into, and trusting it. Whatever you choose, always make sure your provider is approved and regulated and that you know exactly how your investments are being chosen and looked after.