Set out your investment goals before choosing an online platform

Thirty-odd years ago, when I first entered the world of financial services, investment platforms were very much in their infancy. According to some definitions, they didn’t even exist. 

Today millions of individuals in the UK invest online. Some do so through platforms that allow them to work alongside their financial advisers, others through platforms that enable them to make their own decisions. 

Proving that success breeds competition, the marketplace is becoming ever more crowded. This ought to be good news for investors, who should benefit not only from sheer choice but from newcomers and incumbents constantly compelling each other to up their game. 

However, this cosy ideal assumes every platform is wonderful, which isn’t necessarily the case. Some 47 per cent of financial advisers questioned in a survey last year thought a platform could fail before the end of 2027, according to Scottish Widows. 

Such fears might be unduly pessimistic, but it’s at least right to say the landscape is complex. To quote the Platform Association’s recent Platform Horizons Report, this arena “represents an incredibly diverse set of firms, serving a range of products to a broad base of different types of clients”. 

So what should you look for when surveying the ever-expanding array of options? Wherever you sit on the investor spectrum — from DIY hobbyist to professional — the process of elimination can perhaps be split into three phases. 

The first is to ask yourself exactly what you hope to accomplish. This requires you to articulate your personal idea of “investing”, which might sound a bizarre task but is pivotal to whatever follows. 

For example, you may feel investing is the act of trying to build a secure financial future over time. This outlook arguably removes numerous platforms from the list at a stroke, since many — most notably day-trading apps — might be thought of as more in keeping with short-term speculation, if not spur of the moment gambling. 

The second phase is to grasp the fundamental attractions of a platform that genuinely nurtures a sensible, long-term approach. Curiously, the more congested the market becomes, the less frequently these key features get mentioned amid all the noise. 

Very simply put: the purpose of a platform is to look after your money, help it grow and then give it back. To do this, a platform must make investing easy, demonstrate efficiency, foster trust through transparency and deliver value for money. 

This brings us to the final phase, which is to consider in more detail how a platform might tick the above boxes. Given the current market landscape and the trends shaping it, technology seems the obvious first port of call. 

With the AI revolution still gathering pace, tech has inevitably become a big differentiator in this sphere. Disquiet over the continued use of sub-optimal software and systems is undoubtedly on the rise. 

The basic problem is that some of the tech still being employed was designed years ago. Unfortunately, that’s an eternity in this game. As a result, it can hardly cope with the demands made of it today. 

Equally, it’s also possible to be too far ahead of the curve. Attention-grabbing bells and whistles don’t always translate into real-world utility. As the Platform Horizons Report observed: “Platform businesses should prioritise optimising processes before capturing further scale.”

This taps into the wider notion of robustness and resilience. Plenty of platforms can significantly enhance access to a range of investment opportunities, but how many do so while maintaining a focus on due diligence and stability? 

Regulation has become a way of life for platform providers — and rightly so. Above all, the Financial Conduct Authority’s Consumer Duty standard is highlighting the supreme importance of good consumer outcomes across the board. 

Nonetheless, it may be worth looking for evidence of rigorous investment procedures, clear-cut asset-allocation guidelines and in-depth fund analysis when making your pick. Factors such as oversight and structure can make a sizeable difference. 

Again, this is really a matter of what you think of as “investing”. Remember that platforms should help you make sense of the investment universe, not encourage you to strike out in all directions in the hope of getting lucky. 

Remember, too, that a platform has to suit your unique needs. Familiarise yourself with the diverse offerings — direct-to-consumer, adviser-accessed, adviser-owned, discretionary fund management and so on — and be sure to select the one you’re most comfortable with. Professional guidance may be useful in this regard. 

Thirty-odd years ago I could scarcely have dreamt this space would become as vibrant and as varied as it is today. Even for a wizened industry veteran like me, its development has been remarkable to witness. 

Yet we have to recognise a fast-growing, fiercely competitive market almost always brings challenges. This is the stage at which we now find ourselves, which is why the bottom-line lesson for platform investors is that it can pay — both figuratively and literally — to choose wisely. 

Steve Andrews is chief executive of Novia Global, a platform that specialises in international markets.