Platform Charges Too High

Platform Charges Too High.

We are increasingly being approached by new clients who are being recommended to a platform where all their investments, pensions and particularly SIPPs are in one place and you have a huge choice of funds for your pensions and investments.  Is there hidden pitfalls to these seemingly fantastic services?

Yes, in our professional opinion there is.

How do platforms work?

• Your pension, investment, ISA or bond sits on one platform.
• This is an access point that you can log into and select a range of investment funds from many different providers and fund managers.
• The positive side is everything is in one place.
• The range of funds to choose from.

Platform Charges – A typical platform service

So who is involved? Platform provider, Fund Manager and Financial Adviser.

Each of the above wishes to charge and be paid for the services.

So what is a typical charge for an average platform:

1. Platform provider say 1.0% pa.
2. Fund Manager charge say 0.3% pa.  Some funds, that need a high degree of research such as property funds or ethical funds could even have charges of 1.0% pa. 
3. Financial Adviser charge say 1.0% pa.

So before you even start to receive any growth on your investment, you fund must grow by 2.3% pa to 3.0% pa to stand still.

Compare this to a simple, retail investment or pension or ISA with annual charges only of between 0.4% pa (pension) and 1.5%pa on ISA.

On a £100,000 pension fund, a SIPP platform, ISA or investment account, this may mean higher charges, in the above example of up to 2.6%pa i.e.  £2,600 per year.

We suggest you should only use a platform if you are going to actively use it or if your financial adviser is.  Beware of platforms, some charges are too high for the benefits that you receive.