Would it be better to invest using more than one platform to reduce the risk of it?

10 February 2022

Question by Gareth

Good Morning ,
All my investments (stocks and shares) are managed by one platform . Would it be better to invest using more than one platform , bearing in mind the risk of that platform going under? Thanks

Answered by Ria Coles

There are often several benefits to investing via a single platform:

- Product and platform costs tend to decrease the higher the value of the holdings
- Having a consistent view across all of your holdings in one place can help you to monitor and review the performance more effectively
- You can apply consistent investment strategies across several different products such as ISA's, Pensions etc

With regards to the risk to your money, its important to consider which entity fails or becomes insolvent. If the platform itself failed resulting in a financial loss, you are covered for up to £85,000 per client under the Financial Services Compensation Scheme (FSCS). It is important to remember however that the insolvency of the platform provider itself won't necessarily lead to a financial loss as the holdings are actually placed with other institutions that could well be fully functioning, for example:

Uninvested cash held on platform is held with one, or a number of, specific banks. The failure of the platform does not necessarily mean the deposit with the bank in question is affected. If the underlying bank itself failed each client would be protected up to the value of £85,000 under the FSCS (please note, all deposits held by the client with that bank, whether on or off-platform, would count towards this limit).

A similar story with investment funds, the underlying fund managers that you would access via the platform (assuming they are UK-based) are also covered by the FSCS and insolvency of the fund manager is protected by the FSCS as per above.

Therefore, although the platform may, on the surface, feel as though you have aggregated several risks into one place, the levels of protection applicable are actually quite wide as the platform itself, underlying cash deposits and fund managers, may all benefit from their own degree of protection should the worst happen.

Answered by

Ria Coles

Financial Planning Director

I have worked in Financial Services now for over 18 years after deciding very early on in my career that the role of a Financial Adviser was, to me, the perfect combination of numbers and people.