10 things your investment platform isn’t allowed to tell you

Did you know that there are many things your investment platform isn’t allowed to tell you? George Sweeney takes a look at ten key things they can’t do.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A young woman sitting on a couch looking at a book in a quiet library space.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

These days, there are loads of companies out there offering different ways for you to invest your money. But did you know that there are certain things that your investment platform might not be telling you?

Read on to find out exactly how and why you might be kept out of the loop when it comes to your investments.

[top_pitch]

How investment platforms work

The easiest way to think of an investment platform is as a go-between. It provides a safe and secure way for you to invest in stocks and other assets. Doing this saves you the trouble of trying to invest directly.

However, because your platform facilitates your ability to buy and sell investments, it is not allowed to give any personal advice unless it’s paid for. In some areas, it can feel like a poorer service because the platform’s hands are tied. This is because sometimes it has to keep you at arm’s length, even if there is a simple solution available.

Sarah Coles, personal finance analyst at Hargreaves Lansdown explains the relationship between you and an investing platform: “If you’re managing your own investments on a platform, it can provide guidance, but unless you specifically pay for it, it can’t offer any advice.

“On the surface, this makes perfect sense. However, your dealings with the platform mean that while it doesn’t know everything about you, it’ll know about your investments and your investing habits. It can also see if there’s a strong chance you’re doing something that’s not necessarily in your best interests.

“Unfortunately, if it contacts you and mentions any of the things it knows about you, it crosses the line from guidance to advice.”

Things your investment platform won’t tell you

Regulations mean that there are certain things your investment platform is not able to tell you. Here are ten things Sarah Coles says cannot be shared. Some of them might surprise you.

1. Portfolio diversification

If there is too much concentration in your portfolio, your investment platform may send you diversification messages or reminders. But it can’t tell you there is too much weighting in a particular industry or country.

2. Tax efficiency

If you hold your investments in a general investment account, your platform cannot tell you that you should consider a more tax advantageous account like a stocks and shares ISA.

3. Cheaper options

For those of you who are passive investors, your investment platform won’t mention whether there are cheaper index funds available. So you may find yourself paying a higher cost for a similar investment.

4. Idle cash

Most investment accounts will let you hold cash, which can, of course, be helpful. But if that cash sits stagnant for a long period, your platform can’t remind you or let you know about the potential risk inflation could have on your savings.

5. Fee efficiency

If you’re not using a cheap share dealing account, the fees can sometimes add up. But if you’re spending a lot on trading fees, your investment platform cannot suggest a more efficient approach.

[middle_pitch]

6. Risk warnings

As an investor, you get to decide how much risk you’re happy with. However, if the majority of your portfolio happens to be made up of a few high-risk investments, the platform can’t give you any warnings about the risk you’re taking. 

7. Portfolio rebalancing

Portfolio allocation means deciding how much of your total balance you want to invest where. As investments all perform differently, you may find that over time your portfolio strays from your original investing strategy. If this happens, your investment platform can’t let you know that you should consider a rebalance.

8. Open banking

If you happen to use open banking, your platform can see some of your other finances. It might seem that you don’t have a sufficient emergency fund, but it is not allowed to warn you about the risks of investing without proper savings.

9. Retirement withdrawals

Open banking also means that your investment platform could see how much you should be withdrawing from your retirement pot, but regulations prevent them from saying whether you’re taking too much or too little.

10. Investing goals

Your platform might ask you about your goals and timeframe for investing. This is somewhat pointless because if your investments aren’t suitable, the platform can’t tell you!

Where to find a good investment platform

Finding the best investment platform to use can take a lot of work and research. Why not start by taking a look at MyWalletHero’s top-rated share dealing accounts?

Just remember that when it comes to investing, you may get out less than you put in. So make sure you’re on top of the rest of your finances before you consider putting money to work elsewhere.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »