You may have heard us reference an ‘investment platform’ before, and it’s likely you’ve used one. But what does that actually mean? Our Head of Investment Planning, Bruce Hallman, explains what an investment platform is and where your money is actually held.

What is an investment platform?

In simple terms, a platform account is an administrative service that combines, or ‘wraps’, all of a client’s investments into a single manageable account. Picture it like a parcel, with the wrapping holding all the constituent parts securely inside. This means that your total portfolio can be viewed at a glance. It’s not a product to invest in, but rather, a service.

Traditionally, purchasing investment products involves considerable administration. It also involves a duplication of services between the various parties and an inevitable lack of transparency in the costs to you. Within a platform, such as Transact or Nucleus (which are the two we use here at Wealth Matters), the costs of running your portfolio are completely transparent and available to view.

The wrapper enables you to view your portfolio as a whole, rather than a loose collection of ISAs, Pensions, Unit Trusts, open ended investment companies (OEICs), Shares, and so on. You can use the platform to instruct us to make changes to the various investments without having to go through further paperwork and form filling.
In a nutshell, it’s designed as a one-stop shop window to make your life easier and give you greater visibility over your investment portfolio.

Here’s how using a platform works

Firstly, your adviser, who is independent of the platform, develops a plan to help meet your financial aims. Once this has been agreed with you, your adviser uses the platform to implement the plan.

They’ll set up your account and input your plan. The platform, which has access to thousands of available investments, then takes the plan and does the administrative legwork. This includes opening the necessary wrappers, purchasing the funds or shares detailed within your plan, and displaying it in a clear way for you to view at any time.

Investment platforms provide your adviser with a wide range of investment options with which to build your plan, as well as portfolio management tools and support from highly trained client service managers.

Where is my money held and is it safe?

All your investments will be held in accounts in your name on your selected platform. These accounts will be segregated from the platform’s own funds and will be regularly reconciled to ensure the platform’s records are accurate.

In the unlikely event that you have a complaint against the platform, or if the platform fails, you will also benefit from protection through FOS and FSCS for assets held there. There is also a system of protections in the background governed by rules such as the FCA’s Client Asset Sourcebook (CASS) rules. These are designed with the purpose of keeping client funds safe if an investment platform were to become insolvent and unable to continue operating – this may provide additional comfort to nervous investors. In terms of client cash, the rules require platforms to hold cash in trust accounts with authorised UK banks. These accounts carry a client money designation, and they’re monitored and reconciled daily.

All client assets and investments must be held separately in the name of an authorised third-party custodian. These measures prevent client cash and assets becoming co-mingled with those belonging to the provider, which in turn should make it straightforward to identify and return funds belonging to investors should the worst come to the worst. Providers will typically go over and above in terms of holding the capital needed to satisfy the minimum requirement.

What is the benefit of this?

The main platform we recommend at Wealth Matters is Transact. It was the first wrap service to launch in the UK, in 2000. Over the years they have harnessed systems, technology and their in-depth knowledge of the UK investment market to provide a more efficient and simpler way for advisers to manage clients’ financial portfolios. The result is the highly refined wrap service known as Transact. Their platform offers multiple tax ‘wrappers’, including General Investment Accounts, ISAs, pensions, and investment bonds.
Benefits of using the Transact platform include:

  • Accessible and easy to use – you can access details of your assets and investments as often as you like
  • Accurate and reliable – you can access reports from a single trustworthy source
  • Comprehensive – you and your financial adviser can choose from a wide range of assets and tax efficient wrappers
  • Secure – their secure, award-winning platform will give you peace of mind
  • Clear and transparent – they have a clear and transparent charging structure
  • Adaptable – family members can “link” their portfolios to benefit from lower overall charges.

If you have any further questions about investment platforms, Transact, or where your money is held, please do not hesitate to get in touch via your Client Relationship Manager.