How to Choose an Investment Website (“Platform”)

Click here to see my platform review results

Below are the steps I follow to rate each platform.

Step 1: Check the asset class coverage

I keep my own list of low-cost fundsThese are funds from my Low-Cost Fund list — the diversified, low-cost funds I use to build my model portfolios..

I sort them into eight asset classesThe eight asset classes I use to construct my low-cost, diversified model portfolios.. These are the building blocks of every model portfolioA model portfolio is the mix of asset classes I recommend at each risk level. It’s the target I check a platform’s holdings against.. Examples include UK shares and global bonds.

For each platform, I check whether it gives me access to at least one qualifying low-cost fund in every one of the eight asset classes.

This is a pass-or-fail check, and it’s the single biggest factor in a platform’s rating:

• Superior — the platform covers all eight asset classes. It goes on to the full scoring process below.
• Inferior — the platform is missing at least one asset class entirely. It still gets a score, using the same process below, but it’s built so an Inferior platform can never out-score a Superior one, however cheap its fees.

Step 2: Check the fees

For every platform, I add up three costs:

1. The platform’s own account fee
2. The cost of buying and selling funds
3. The ongoing running cost of the cheapest suitable fund in each asset class the platform covers — this is called the Ongoing Charges Figure (“OCF”)The Ongoing Charges Figure is the yearly cost of running a fund, shown as a percentage of your money invested. The fund charges this automatically — the platform doesn’t.

The number of trades I assume each year depends on the size of the portfolio. A larger portfolio needs closer attention, so I assume more trades.

For a Tier 1I group portfolios into four size bands, called tiers: Tier 1 (£1,000–£5,000), Tier 2 (£5,000–£15,000), Tier 3 (£15,000–£50,000), and Tier 4 (£50,000–£250,000). portfolio, I would only rebalanceRebalancing means buying and selling to bring a portfolio’s holdings back in line with its target percentages, after the markets move them out of line. once a year. That’s a maximum of three trades a year.

For the reviews I provide, I use three portfolio sizes and corresponding numbers of trades, each measured using my Medium Risk model portfolio:

• £10,000 (Tier 2) — I assume eight trades a year, allowing for two rebalances
• £50,000 (Tier 3) — I assume 16 trades a year, allowing for two or three rebalances
• £250,000 (Tier 4) — I assume 32 trades a year, allowing for rebalancing every quarter — four times a year

I then average the total costs of trades and OCFs for the £10,000 and £50,000 portfolios for when I refer to “smaller portfolios”. The “larger portfolios” refer to the trades and OCFs for the £250,000 portfolio.

My thinking is simple: the larger the portfolio, the more important it is to keep it in line with the model portfolio.

If a platform doesn’t cover every asset class, I still calculate its fee score fairly, using only the asset classes it does cover — a platform missing one or two categories isn’t penalised twice over on its fees for the categories it handles well. That gap is already reflected in the Step 1 coverage check.

I then compare each platform’s total fees against all the others, and rank them from cheapest to most expensive.

In a small number of cases, I also apply a manual adjustment, capped at one point on a fee score, where a platform’s pricing is structured in a way that’s likely to confuse rather than clearly show the true ongoing cost. Any such adjustment, and my reason for it, is explained in that platform’s own review.

Step 3: Check the tax wrappers

I check whether each platform offers an ISAAn Individual Savings Account — a tax-efficient account for saving or investing, up to an annual allowance., a SIPPA Self-Invested Personal Pension — a type of pension that lets you choose your own investments., or a general investment account (GIA).

Having all three is best. It means you can pick whichever account suits you and still invest tax-efficiently where possible.

Step 4: Weigh up the result

Asset class coverage matters most, so it forms half of every platform’s total possible score. The two fee checks come next, and between them make up most of the rest. Tax wrapper availability matters least, so it carries the smallest weight.

Here is exactly how the five points are built up:

I add these together, then apply any manual fee adjustment from Step 2, to get the overall rating out of 5.

Because full coverage is worth 2.5 points on its own, and the remaining checks add up to at most 2.5 points more, a platform that’s missing even one asset class (an Inferior platform, scoring at most 2.5) can never out-score a platform that covers everything (a Superior platform, which starts from 2.5 and adds points from there).