Guide to Fund Supermarkets
Investors are increasingly being encouraged to use fund supermarkets to buy and sell mutual funds as this can provide cost savings and greater of ease of administration. But it is important that you are aware of what investing on a fund supermarket, so this guide deals with some of the most frequently asked questions.
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 at 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 terms and a very wide choice of funds is normally available, from an extensive list of different fund management companies. There would typically be in excess of 700 funds to choose from.
There are often fund research and analytical tools available to help in the construction of a balanced portfolio of funds. Consolidated reporting and administration from one source makes it easier to monitor and manage 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?
Most savings products such as pensions, ISAs and unit-linked bonds rely on underlying investments (usually mutual funds) for their capital growth and, where applicable, regular income.
A traditional fund supermarket facilitates trading directly in funds, and simple investment-based products, such as ISAs. The online facilities usually allow a view of your underlying investments, regardless of the product they are invested in.
Most fund supermarkets are developing in to 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 facilitates investment in other types of investments, such as direct equities and individual fixed interest securities.
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 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, it 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 clients, or if they are used to fund the running of the fund supermarket.
Buying and selling funds on a fund supermarket should certainly offer lower initial and annual charges than if you bought the same funds directly from a fund management house. You can usually 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 case you are not satisfied with the service you receive.
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.
Two of the mainstream fund supermarkets websites are:
Last edited August 2007
Nothing in this guide is, or shall be deemed to constitute, financial or other advice or a recommendation to purchase any product or service.