What to consider when choosing an investment platform

What to consider when choosing an investment platform

By: Wendy Myers

Choosing an investment platform is an important and personal decision. It all depends on where you are in your investment journey, and consequently what is right for one investor won’t necessarily be right for another.

We recommend that investors trade through a JSE-registered stockbroking platform. These offer standard features, products and services, which include the ability to invest in local and international listed stocks, ETFs and unit trusts. Some can also offer you the options of investing in ETFs through a tax-free savings account and the ability to invest in cryptocurrencies.

A platform should enable you to externalise (out of South Africa) or repatriate (into South Africa) your funds to or from the offshore platform, taking into account the South African Revenue Services (Sars) and the South African Reserve Bank (Sarb) approval necessary if you wish to externalise more than R1 000 000 per annum. An additional useful offering of some platforms is the ability to make use of the investment platform’s asset swap facility, if you have excess funds to invest offshore but have fully utilised your annual single discretionary allowance.

For experienced investors, the ability to borrow money, use their equity portfolio as collateral, and invest this cash in the market is another attractive offering from a platform.

Investors should also consider what type of returns they can earn on cash that they might have on the platform. Offshore platforms tend to not offer interest on free cash, for example.

Other considerations to bear in mind when choosing an investment platform are the extent of research content provided, the functionality of the platform, whether it has a mobile application in addition to web access, and whether tax certificates are provided to assist you in completing your annual Sars reporting obligations. Bear in mind that you will earn income on the platform that will need to be included in your IT3b (e.g. interest and foreign dividends) and your IT3c (capital gains and losses).

If you are an investor with an existing share portfolio, and you have decided to switch to another platform, ensure you understand the costs and features of the new platform before transferring your portfolio.

We recommend using a demo account to get a feel for the new platform’s features, ease of trade, and access to research. It is also important to consider the costs associated with the new platform. Trading costs tend to be comparable, however, different platforms have other costs of service that you’ll need to understand to ensure you have no surprises post-transfer.

Remember that you do not need to sell your shares on the old platform to facilitate the transfer, as the platform you are transferring from will be able to transfer your holdings to the new platform (for both local and offshore positions) preventing you from having to sell your assets and triggering an unnecessary CGT event. It is important to note that derivatives cannot be transferred between platforms, and you will need to close out your open derivative contracts should you wish to move to another platform.

Once the above is understood by an investor, the type of account opened depends on their sophistication.

If you are relatively new to investing, you may want to have a non-discretionary or self-managed account, where you use the investment platform to execute trades in your name. If you need to make use of retirement and tax wrappers, ensure that you choose a platform that offers these products.

Alternatively, you may decide that, given the materiality of your investments, you require the services of a financial adviser to provide holistic advice in the context of your financial plan. In such an instance, you are looking for a discretionary account where your financial adviser has full investment discretion over your portfolio.

All of the above-mentioned can be complicated, and it is recommended that you choose a platform where you can access a financial adviser.

Your adviser can assist you with ensuring your overall portfolio is diversified and balanced across asset classes, sectors and geographies. They will also review all your assets, ensuring you consolidate across a single platform, thereby leveraging family pricing opportunities.

An adviser can provide invaluable guidance on the research available on a platform the different types of retirement wrappers, and how these products can be utilised to your advantage. Your financial adviser is also there to guide you with elective corporate action events and the tax implications of your choices.

Ultimately, it is reassuring to know that you can speak to somebody when you need guidance on your platform experience or when things become overwhelming.

* Myers is the head of securities at PSG Wealth.

PERSONAL FINANCE