What is a fund supermarket?
A fund supermarket is a company that provides
a facility for buying and selling a wide range of investment funds
from different fund management companies on the same platform,
often on favourable terms.
The fund supermarket facility usually records transactions,
provides consolidated reporting and on request, up to date
valuations of current holdings.
What are the advantages of trading through a fund
supermarket?
Funds are often available at a discount to
their standard charges and a very wide choice of funds is normally
available, from an extensive list of fund management groups. There
is typically be in excess of 700 funds to choose from.
There are often fund research and analytical
tools available as well to help in the construction of a
balanced portfolio.
Consolidated reporting and administration from
one source makes it easier to monitor and rebalance your
portfolio of funds. This can also help you when completing your tax
return. Online, up to date, valuations of your current portfolio
can usually be accessed at any time.
Can I buy funds for inclusion in my ISA or pension?
A traditional fund supermarket will enable you
to trade directly in funds, and simple investment-based products,
such as ISAs, and sometimes Sipps as well
The online facilities usually allow you to
view your underlying investments as one integrated statement,
regardless of the product the funds are invested in.
Most fund supermarkets are developing into
what is known as a ‘wrap.’ This is a service that has a fund
supermarket at its core, but allows investment in a much wider
range of products (pensions, and onshore and offshore, unit linked
bonds).
This service sometimes enables you
to invest in direct equities and individual fixed interest
securities as well.
It is advisable that you seek independent financial advice to
ensure that your investments dovetail with your financial needs and
aspirations. This becomes all the more important as you grow older
and invest in more diverse products.
What do I need to know when considering a fund
supermarket?
Do you require financial advice? If so, it is
probably advisable to go through an independent financial adviser
(IFA) as IFAs are required to advise across the entire investment
market.
If you have particular preferences for
individual funds or fund management companies, check that these are
available on the supermarket platform you are considering.
If you already hold investments, you may wish
to transfer these onto the fund supermarket platform, in which case
you need to check that this is possible and if any costs are
involved.
In order to appear on a fund supermarket, fund
managers have to cut their charges, so you need to check that these
savings are passed on to you, the client, or if they are used to
subsidise the running costs of the fund supermarket.
Buying and selling funds on a fund supermarket
should result in lower initial and annual charges than if
you bought the same funds directly from a fund management house.
You can check this by looking on the fund managers’ own
websites.
It is also worth checking the cost of transferring all your
investments to another fund supermarket platform, in the event that
you are dissatisfied with the service you receive.
There have been complaints about clients not being able to
switch easily to other fund supermarketst.
How do I access a fund supermarket?
Many IFAs use fund supermarkets to trade on
behalf of their clients. Some run their own supermarkets and allow
direct access by their clients. This is a route that should be
considered seriously, as this makes it easier to obtain financial
advice as and when required.
Some of the mainstream fund supermarkets/wraps
are: