Why you need an investment platform

So you are ready to invest. Now you need to decide which investment platform to use.

If you are just buying one or two shares or ETFs, are going to hold them long term and choose not to participate in the dividend reinvestment plan, your broker platform (for example Commsec or Self Wealth), a sound filing system, and a spreadsheet might be all you need.

You’ll need to track your trades and file your contract notes. You’ll also need to record your dividends or distributions and the tax components of them. If you sell some of your holding (for example to rebalance your allocation), you’ll need to work out your capital gain or loss.

And then, of course, there are corporate actions – companies merge or restructure, issue bonus shares or buy back their shares. All of which have tax implications.

Soon your spreadsheet will prove too tricky or unwieldy, and you might need a tool like Sharesight. They have free options, but to track your unrealised capital gains (essential for planning sales), you’ll need a paid plan ($31/month)

And if you need to use a mix of listed (shares, LICs or ETFs) and unlisted funds, things start to get a little more complicated.

When you get serious about investing, you will need to include some unlisted funds because asset allocation matters most and not all indexes or asset classes are available in listed form.

This is where a true investment platform comes in.

What is an Investment Platform?

An investment platform is a service which allows you to buy, hold and sell a range of investments (including those held in superannuation) and provides administration, reporting, and tax planning in one place.

It’s more than just a piece of software, it’s a portal to a whole world of investment and it gives you and your adviser visibility over your assets.

Traditionally, these have been expensive, but competition and technology has brought them within reach of most investors.

What does an investment platform do for me?

As well as the administrative benefits described above, most platforms provide a range of benefits which will usually more than cover the cost of the platform.

Access to wholesale funds

Many unlisted funds have minimum investment levels which you can avoid using a platform. Others have higher fees for retail investors. You can access wholesale pricing by investing through a platform.

Regular Investment Plans

Unlike direct shares, most platforms allow you to set up regular investment schedules using BPay or direct debit. Automation removes the potential for emotions to get in the way of your regular investments and helps make dollar-cost averaging or other periodic investment plans foolproof.

Rebalancing

Most platforms provide for automated rebalancing. The platform monitors the changing balance between the components of your portfolio, and when they get out of line, it automatically buys or sells to compensate.

Reduced brokerage

You can save on brokerage by investing in unlisted funds, and the platform can reduce brokerage costs further because they pool transactions (netting off buyers and sellers).

Simplified accounting and admin – don’t miss any tax deductions

Your investment platform will seamlessly track your transactions and tax liability. Most platforms will allow you to choose which parcel you sell to best manage your CGT liability.

Convenient online access

Most platforms provide online access to review your investments, get latest prices and process transactions. Most also have an app for convenient access on the go.

Visibility for your adviser and accountant

You can provide access to your portfolio reports to your accountant and advisor, saving time and money when it comes to lodging your tax return.

Your adviser also has visibility on the tax implications of each proposed transaction allowing for tax-aware portfolio mamangement, saving thousands in tax.

Back Office Cost Savings

Your adviser doesn’t have to audit, correct or recreate your portfolio spreadsheet, which saves time and scope for error in their back office. This benefit should flow to you through reduced advice fees.

In most cases these savings and benefits wil more than offset the cost of the investment platform.

Platform Costs

Just as cost matters for your investments, it also matters for you choice of platform. Comparing platforms is complex. At Life Sherpa, we’ve run the numbers and identified a shortlist of investment platforms that cost-effectively meet the needs of our members.

As part of any investment recommendation, your adviser will recommend an appropriate platform.

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