Fund platforms – are they a risk?

The fund platform market is now becoming increasingly competitive. James Dees looks at how fund platforms work and the risk of putting your investments into them.

fundplatform280In a nutshell, fund platforms are more of a professional service than an actual product, providing guidance and self-help. They are an efficient way of managing all of the investor’s holdings in one convenient place, normally electronically via the internet.

Investments made within the platform are on a non advised basis, as the investors retain a professional adviser or IFA to provide them with the advice at an additional cost.

It is therefore important to note that fund platforms are more suited for investors that are more experienced and confident in making their own decisions.

It is also fair to say that some wealth managers and brokers also provide a similar service. They support a wide fund universe and have relationships with custodians, nominees and transfer agents, both onshore and offshore, and can handle multi-products, including ISAs, NISAs, SSAS, SIPS.

Fund platforms are a marketplace to buy and sell, as well as switch and transfer investments and then hold them securely in nominee names to protect the investor and the intermediary. This also covers all management of data, documentation, tax certificates including income and capital gains tax, periodic statements, interest and dividend payments without incurring punitive costs.

The risk of putting your investments into a fund platform is clear – it is a fully regulated service and in effect your money is safe. Should the platform collapse, the holder is protected for up to £50,000 per fund provider.

The fund platform market is becoming an increasingly competitive area and not all platforms are the same. RDR has resulted in a more transparent charging scene and this does not spell the end of the special relationship between IFA and client or the end of the professional adviser platform. There are a range of different services available, each with its own range of fees, advantages and disadvantages and client offerings.

What does this mean for Grovelands and its associates?

With the increase in demand for the fund platform services and an increase in providers, the market for this area is growing. With this, more work will certainly come about for Grovelands to complete. Will it be in the form of a review? Will it be an increase in demand for fund managers?

All we know is it is an exciting time for the Wealth Management department of Grovelands, and an excellent new area to explore.

– James Dees

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