Our guide to the best investment platforms for beginners

So you’ve decided to invest? Before you dive in and start picking funds, you need to choose your investment platform. This may seem like a minor decision, but making the wrong choice could cost you hundreds of pounds a year in fees.

There is no single best platform as each offers different levels of fees and charges based on the size of your portfolio and the number of times you want to trade your holdings. The
amount you invest can be as little as £50 a month, and there are often cheaper options available for those with a large lump sum.

Plus some platforms are designed for total beginners, while others offer vast amounts of in-depth information.

What is a platform?

At a basic level, a platform helps investors do five things:

  1. Choose which funds to invest in.
  2. Buy funds.
  3. Hold these funds.
  4. Monitor the funds’ performance.
  5. Sell funds in the future.

 

What charges and fees will I pay?

If you’re not used to investing, the choice of platforms can seem overwhelming. A good way to start your search is to think about what type of investor you’ll be. Will you be trading your funds (buying or selling) on a weekly or monthly basis or are you happy to sit back and make changes less often, perhaps once or twice a year?

Pricing structures vary widely across the market, so this is not a decision to be taken lightly. Some providers have no ongoing fund dealing charges while others can charge up to £10 each time you make a trade.

Our analysis presumes you make four deals a year within an individual savings account (Isa) wrapper, but some investors will make many more. Those investing in a self-invested personal pension (Sipp) will also usually face much higher charges – especially when taking money using a drawdown scheme.

Most platforms charge an ongoing admin fee, which is a percentage of your total investment, although some will charge a flat fee on a monthly or annual basis.

Analysis for Moneywise (see table below) compiled by The Lang Cat shows how different providers are competitive in different parts of the market. For example, someone making a £50,000 lump sum investment would pay £225 a year in fees to use Hargreaves Lansdown, compared to £45 with iWeb. Interactive Investor (Moneywise’s parent company) charges a
flat fee of £80 a year, which is uncompetitive for people with a £5,000 lump sum, but much more attractive to bigger investors.

If you’re investing £5,000, the cheapest options are Cavendish Online and Charles Stanley Direct, which cost £13 a year. These charges assume no investment growth.

In addition, platforms usually charge an exit fee if you switchyour Isa to another provider. This is typically around £25 per investment fund within the Isa wrapper but some, such as Fidelity, do not have any exit charges.

See the table below for the annual charges for a Stocks and Shares Isa on the main platforms (click on the image to enlarge it). 

How do I find the right platform?

There are platforms out there for everyone. Some platforms – such as Hargreaves Lansdown – offer rafts of information on the basics of investment and have lists of recommended funds.

Others, such as AJ Bell Youinvest and Interactive Investor, have much more detailed notes on each recommended fund and are most suited to experienced investors.

Many platforms offer bonuses and freebies to entice you to sign up, and this can be a useful way to make some extra cash. But ensure you won’t lose out in the long run by picking an account that charges higher ongoing fees just because it pays a sign-up bonus.

Remember, you can only open and subscribe to one Stocks and Shares Isa in each tax year, but you can have more than one Isa if you’ve invested on different platforms over the years. If you don’t keep your investments in an Isa wrapper, you can open as many investment accounts as you like at any time.

If you do have multiple holdings, it might make both financial and practical sense to keep them in one place as some companies charge fees on a sliding scale. This means the more you have invested, the lower fees you are charged. But this isn’t always the case, so check with your preferred provider first.

Robo-investing is another option. So you could also consider using newer firms, which offer ‘robo- advice’. MoneyFarm, Nutmeg and Wealthify aim to replicate traditional wealth management services more cheaply by using computers. They don’t let you pick funds yourself, but instead allow you to choose a suitable risk profile. Their computer algorithms – the ‘robo’ element – then manage this portfolio on your behalf.

What else should I consider?

Platforms have been slow to offer mobile apps and on-the-go functionality, but the situation is improving. Hargreaves Lansdown, Interactive Investor and TD Direct have smartphone and tablet apps, so users can make trades and manage their holdings without using a desktop computer.

Providers such as Fidelity and The Share Centre allow you to check your account, research investments and track the market using their app. Charles Stanley Direct even has a smartwatch app that enables you to monitor your funds from your wrist.

Some providers do not offer a full range of Android, iPad and iPhone apps, so make sure you check what’s available if you want this kind of access. In addition, many platforms do not offer any mobile functionality at all, something which consumers used to comprehensive high street banking apps need to keep in mind.

Moneywise’s platform picks

The platform you pick depends on how much money you want to invest and how experienced you are.

Moneywise has selected five platforms for different types of investors after asking Justin Modray, founder of Compare Fund Platforms, and Rodolfo Crespo, senior analyst at Platforum for their expert views.

Best for total beginners: Hargreaves Lansdown

This may be one of the more expensive fund platforms – charging 0.45% – but Hargreaves Lansdown is a good choice for beginners, especially if you have smaller sums to invest. The firm’s website is easy to use and offers useful information to help you get started for the first time. The platform also has a reputation for excellent customer service.

Mr Modray says: “The annual platform fee of 0.45% for up to £250,000 of fund investments is steep, so while the impact is minimal on smaller portfolios I would be tempted to look elsewhere once your portfolio exceeds £40,000.”

Also consider: Fidelity Personal Investing – it offers comprehensive guidance for inexperienced investors and has lower charges, typically 0.35%.

Best for smaller portfolios: Cavendish Online

If you have a smaller holding – of less than £50,000 – Cavendish Online is a cheap way to manage your funds. This uses the Fidelity platform, so users have access to Fidelity’s range of low-fee trackers, which puts it ahead of its rivals. Cavendish charges 0.25% for investors with smaller portfolios, and this reduces to 0.2% if you have more than £200,000.

Mr Modray says: “Cavendish Online is a discount broker that has negotiated a very attractive deal on the Fidelity platform. With no charge for fund dealing, this is a very cheap route for small to modest-sized portfolios. Share trading is not available, but this remains a solid choice for investors seeking a cheaper alternative to Hargreaves Lansdown, or even going to Fidelity directly.”

Also consider: Charles Stanley Direct – it also offers low charges of 0.25% and a user-friendly website.

Best for larger portfolios and frequent traders: Interactive Investor

 

Interactive Investor remains a popular choice for frequent traders, thanks to its good usability and mobile trading proposition. Its flat £80 yearly platform charge including two free trades per quarter makes it very appealing f the biggest investors with £50,000 or more. Additional trades cost £10, but trade more than 10 times in a month and you’ll pay just £5 for all further trades that month.

Mr Crespo says: “Interactive Investor offers customised content for active traders and is the only platform that hosts an investing community based around forums where investors share their trading ideas. Finally, Interactive Investor’s trading fees are one of the most competitive for investors who make more than 10 trades per month.”

Also consider: Club Finance – it has no platform fees and a £4.95 dealing fee, although if you make fewer than three trades in any quarter you’ll be hit with a £15 admin fee.

AJ Bell Youinvest is a good all-rounder for those with a big portfolio who trade relatively frequently (more than 20 times a year). It charges a 0.1% platform fee on investments between £250,000 and £1 million, plus £1.50 for fund dealing.

Best for holding shares and funds: iWeb

iWeb’s share dealing has the backing of a major company, as its owned by Halifax. Aside from
a £25 set-up fee the only ongoing charge is a £5 dealing fee for funds and shares. This site is highly complex, so best considered when you’ve been investing for a while.

Mr Modray says: “If you’re looking for a cheap, no-frills fund- and share-dealing service, then consider iWeb. The site is definitely not for beginners, but if you know what you want then iWeb is hard to beat on price, unless you hold just a small fund portfolio or trade frequently.”

Also consider: Club Finance – it has no platform fees and a £4.95 dealing fee for both shares and funds, but you must make three trades a quarter.

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Your Comments

Why hasn't Cavendish Online been mentioned ? It is as cheap as Charles Stanley at 0.25% and gives you access to the Fidelity Network. A double incentive !

Good points, Chris. 

Cavendish Online was in the running for the best for low costs category. It narrowly lost out to Charles Stanley, as the latter charges a lower 0.15% fee for larger investors. 

As you say, Cavendish also offers Fidelity’s cheaper trackers, but inexperienced investors will find more guidance with some of the other platforms mentioned.

Any view on idealing.com ?

Hi Ketts,

We didn't look at idealing.com as we see it as more for experienced traders than investors. 

It tends to focus on trading accounts for people who want to speculate on short term price changes, rather than those who are investing for the long term. 

That said, Idealing.com does offer Isa accounts, but it seems to only let investors buy and sell individual stocks and shares, instead of funds. 

Hope this helps. 

 

Alliance Trust Savings always seems to be ignored in many surveys.
Is it not one of the cheapest for larger portfolios, both in terms of it's ISA and it's SIPP? No percentage charges but fee based and transparent. Online trading is £12.50 per deal; size is not relevant; and I have a loyalty reduction which brings deals down to £9.38.
You can invest in virtually anything the Government permits and, whilst it does not offer advice, I find the Staff to be both knowledgable and cheerful.

Thanks Symon. We've not included Alliance Trust Savings in this guide for beginners as it's one of the most expensive for smaller portfolios. 

You're right that it's one of the cheapest for larger portfolios, but that's only for people with six figures or more.