10 Aug Investment Platforms vs Asset Managers explained
An investment platform (often also referred to as “an administrator”) is an online service which holds and administers investment funds on your behalf as an investor.
The platform provides the facility for you to invest in a variety of investment funds, does the statutory tax reporting for those fund investments, issues investment statements and facilitates investment switches, additions and withdrawals when instructed.
Is there a difference between an investment platform and an asset manager?
Yes, the investment platform and the asset manager are completely separate entities. The platform is the service that houses the investment vehicles while the asset manager is responsible for the underlying investments (unit trusts) and their performance.
Diversified investments vs consolidated platforms
At Netto we subscribe to the investment principle of reducing risk by ensuring your investments are well-diversified across asset classes and asset managers as well as geographically. How does this diversification principle fit in with using a single investment platform?
As mentioned above, an investment platform is not the same as an asset manager. An investment platform can host funds from numerous different asset managers. So while it is key for your investments to be effectively diversified across asset managers, we believe that there are benefits to consolidating investment platforms.
- Some of these benefits include:
- Viewing all your investments on a single statement / online account for easier monitoring
- Receiving a single set of tax certificates for simpler tax administration
- Reduced fees because platform fees are charged on a reducing sliding scale, thus more funds held on a particular platform translate into lower fees
- Platform independence — as the platform does not own your investments, your funds can be transferred to another platform should you so wish
In short, an investment platform adds value by providing a consolidated overview, easy access to your investments and ease of transacting which save you time on administering your affairs and frees you up to focus on the next step to achieving your financial goals.
What’s important when selecting an appropriate investment platform?
- When selecting an investment platform, you’re looking for
- high quality service, specifically efficient and accurate transaction processing, good communication and a minimal error rate
- market-related, transparent fee charges
- a wide range of underlying funds
- user-friendly online transaction portals for clients
- a variety of investment vehicles such as tax-free savings accounts, endowments, unit trusts.
At Netto we have terms of business with a number of platforms and refer business to those that meet the above requirements.
How do you beat the Paradox of Choice?
The opportunity cost of ignoring your investments for too long is high, yet research shows that when faced with too many options, overwhelm sets in and we default to procrastination. We end up choosing nothing at all — this is the paradox of choice.
Rather than risk overwhelm when faced with the wide array of unit trusts available on any South African investment platform, whittle down your investment options. Co-creating an investment strategy based on your individual lifestyle needs and long-term financial goals is the first step — make an appointment with your CERTIFIED FINANCIAL PLANNER® a