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A short guide to investment platforms

Heard of investing through a platform account? Not sure what that even is?

Read on for a short guide to the in's and out's of platforms.


What’s a platform?

In simple terms, an investment platform is an administration service that offers an extensive menu of investments wrapped up in a single account.


In order to achieve adequate diversification many people invest directly in a number of managed funds or shares, resulting in a deluge of paperwork. Instead, investing via a platform simplifies the management of multiple managed funds in your portfolio.


Some investors also choose to invest through a platform to gain access to a range of investments that may not normally be available to retail investors.


Platforms have been around for decades but have evolved to offer greater individual control as technology has developed.

Who offers them?

Almost all, if not all, financial advisers use platforms to reduce administration. But it’s also the case that many advisers are owned by the financial institutions who provide the platforms. Which is another reason to work with an independent adviser, one not owned or linked to another financial institution.


Many of the established platforms such as BT, CFS and Macquarie are offered by major banks. But they’ve been joined in recent years by specialist providers such as HUB24, Netwealth, and OneVue. All these, except Macquarie, appeared in Investment Trends’ latest top five for platform functionality.


What are the benefits?

The potential benefits of platforms are:

  • Investment choice. Depending on the platform, you typically have access to ASX-listed securities, margin lending, more managed funds than you could ever want, a wide range of term deposits and cash facilities. Often there is access to investments not normally available to individual investors. About the only thing you can’t get on a platform is direct residential or commercial property.

  • Simplicity and efficiency. Platforms gather your investments in one place. At the end of the year you receive one statement with all the paperwork, corporate actions, tax treatments and cash flows covered. You also receive regular updates and online access to your portfolio. In addition, the use of a consistent reporting style enables you to compare 'apples with apples' when analysing the performance of your investments.

  • Access to investments that would normally be outside your reach. Wholesale and specialist funds often have a high minimum investment of $500,000. You may be able to invest via a platform for a much lower upfront amount and take advantage of the lower fees for wholesale investments.

In some ways, platforms are like a SMSF without the legal and administrative hassle. You can choose your investments, typically with the guidance of your adviser, and pursue your personal investment strategy.


What’s the downside?

In theory, platforms could reduce overall fees, but pricing can be complex and multi-layered. Fees may include administration fees, fees for moving money in and out, management fees for investment options, and service fees.

Since the banking royal commission, the spotlight has been on fees with many platform providers lowering costs to stay competitive. Even so, you need to understand what you are paying for.


Who needs them?

Platforms have been forced to innovate over the last decade in response to the rising popularity of SMSFs. SMSF investors are often driven by the desire to control their own destiny. Many show a preference for direct shares and listed funds.


But if you would rather spend your retirement travelling, playing golf or just about anything other than poring over trust deeds, then platforms may be attractive.


Platforms are potentially more cost effective than SMSFs for investors with a relatively low account balance. This is because SMSFs have high annual fixed costs for accounting, reporting and administration.


Conversely, for people with higher account balances, SMSFs may be more cost effective because super wraps often have an administration fee based on asset size.


Things to consider?

If you're thinking about investing through a platform, it's important to consider how much involvement you want to have with the day to day management of your portfolio and whether you want to outsource this in part or in full, the types of underlying investments you want to utilise, and the kind of features that will be important to you.

At WCG, we have experience with most of the major investment and super platforms in the market and one of the ways an adviser can assist you is in working out which platform will best suit you.

If you need any help, don’t hesitate to reach out to us for a chat.


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