UK's first fund supermarket comparison site launches
Investors can now use a comparison website to find the cheapest online fund supermarket for their ISAs and personal pensions.
The UK's first fund supermarket comparison site - www.comparefundplatforms.com - has been launched by Candid Money, a money website. It is free to use, and features six supermarkets and almost 3,000 funds. It is hoping to add three more supermarkets over the next few weeks.
Investors select whether they hold the funds directly or within an ISA or self-invested personal pension, then type in the name of the funds and how much money is invested in them.
Next there is an option to choose how much money is held in shares, exchange traded funds and investment trusts. On the last page, investors select how many years they want to invest, their expected annual return and how many fund switches they would like to perform a year.
The final result shows how much money the investor would have at the end of their investment period, taking into account the different fees the supermarket would have imposed.
Justin Modray, founder of the website, explains that there is no "single overall best buy platform at present" and that finding the best fund deals has become "increasingly complex".
He adds: "Platforms charge in a variety of ways and cost can also be affected by whether you wish to hold shares and use ISA or SIPP wrappers. Put all this together and deciphering what you actually end up paying can be a minefield, hence my motivation for building an easy-to-use comparison tool."
One reason fee structures are a minefield is due to the Retail Distribution Review, a piece of regulation that will require fund supermarkets to be more transparent about their fees by the end of 2013. Some supermarkets have changed their pricing to comply, while others haven't yet.
The six fund supermarkets currently on the site are Alliance Trust Savings, Bestinvest, Cavendish Online, Club Finance, Interactive Investor and rPlan.
Sippdeal, TD Investing Direct and ICICI will all be added to the website shortly.
According to Modray, one of the UK's biggest fund supermarkets, Hargreaves Lansdown, has refused to supply data so won't be appearing on the site. However, a spokesman for Hargreaves Lansdown tells Money Observer: "The data is freely available, however we declined to provide the data in the format requested."
He adds: "These comparison sites rarely factor in service levels; it's usually just about fees. According to a recent survey we carried out, financial strength and reputation are the most important factors for DIY investors when choosing a provider."
So far the comparison site does not have a 'regular saving' setting; instead users simply insert initial investments.
How effective is it?
I plugged in two different investor scenarios. The first was an ISA with £800 in four different funds, £1,000 held in shares with two trades a year, 10 years to run the comparison, an estimated 6% annual return and four fund switches. The best supermarket was Club Finance, generating a total value of £6,775. Bestinvest took the second spot, at £5,782.
The second scenario was holding £30,000 of shares (including ETFs and investment trusts) directly, with 10 trades a year, one £2,000 fund holding and an average 7% return. After 10 years, the best supermarket would have been Interactive Investor, generating £61,149. The second best was Bestinvest at £60,661.
Qualitative versus quantitative
In a bid to further help investors confused about which fund supermarket is best for them - whether that's cheapest or best customer service - independent research firm The Platforum has revealed the findings of its qualitative analysis of fund supermarkets.
It analysed 11 businesses and ranked them according to seven criteria: ease of account opening, quality of content, ease of use, clarity and simplicity of charging structure, cost, customer service and communication.
Hargreaves Lansdown came out top for overall user experience and was singled out for having 'excellent' customer service.
Interactive Investor came second and polled well on overall cost and website content including guidance tools. Alliance Trust Savings came third.
This article was written for our sister website Money Observer
Like a self-select ISA but for pensions, self-invested personal pension is a registered pension plan that gives you a flexible and tax-efficient method of preparing for your retirement. It gives you all sorts of options on how you put money in, how you invest it and how it’s paid out and offers a greater number of investment opportunities than if the fund was managed by a pension company. SIPPs are very flexible and allow investments such as quoted and unquoted shares, investment funds, cash deposits, commercial property and intangible property (i.e. copyrights, royalties, patents or carbon offsets). Not permitted are loans to members or people or companies connected to the SIPP holder, tangible moveable property (with the exception of tradable gold) and residential property.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.