If you’ve got any money invested there’s a good chance it’s held on an investment platform. Most investors now buy, sell and hold funds and similar products through platforms, which over the past 15 years or so have given ordinary investors access to the tools and resources previously available only to the professionals.
The platform market is growing all the time. Some only offer funds, while others give you access to investment trusts, UK and overseas shares, Exchange Traded Funds (ETFs), corporate bonds and government securities. Some offer lots of tools, research and model portfolios to help you work out the best investments to meet your needs, while others are more basic.
But when it comes to comparing them, most investors will look first at the charges. And with a range of different charging structures used, it can be difficult to work out which will give you the best deal. You can run your own comparison using our free comparison tools, as the best platform for you will depend on your own preferences, objectives and circumstances.
Some of the main charges you may have to pay
Set-up charge
A one-off fee when you first open an account. This is quite rare these days, though it can be quite attractive in the long run as it can be cost effective over the longer term if it means recurring fees are kept lower.
Annual charge
Also referred to as a platform fee or an administration charge, this is a regular amount you pay – either monthly, quarterly or annually – for as long as you hold your account. Some charge a flat fee, while others take a percentage of the value of your holdings, typically around 0.15% to 0.45%. The percentage fee may reduce depending on the size of your investment, and some will be capped at a set monetary level (i.e. £45).
Dealing charge
When you buy and sell investments you may have to pay a dealing fee of between £3 and £15 for each deal. This is normally the case with investment trusts, shares, etc. However, some sites such as Interactive Investor allow you one free trade a month, while many do not charge anything for buying and selling funds. Recent years have seen the emergence of 0% brokers, which don’t charge commissions for the trades they execute on behalf of clients. Read about 0% brokers to find out more.
Fund management charges
These aren’t really platform fees as they’re charged by fund managers, but it’s worth including them here because they contribute to the amount you pay. The fund management fee or Ongoing Charges Figure (OCF) is expressed at a percentage of your portfolio and covers the annual costs of running the fund. The amount can vary between different types of funds, but it can range from 0.05% to 1% or more. Several of the bigger platforms have sufficient clout to negotiate discounts with fund managers.
Other charges
Depending on how you intend to use your platform account, there are other charges worth taking into account, such as for regular investment (some platforms have a lower dealing charge for regular savings); foreign exchange (if you’re investing in non-UK assets such as US shares); dividend reinvestment (some platforms charge less for dividend reinvestment, or do a sweep once your dividends reach a certain amount); and for setting up income drawdown.
Exit charges
While this is increasingly rare, some platforms still charge you a fee if you want to cash in or transfer your investments elsewhere. They may make a per holding charge if you want to transfer the funds or shares you hold instead of taking cash.
Costs and charges aren’t the only factor to consider when comparing platforms – we run through other features of a good platform to look out for. But for many investors it’s the first thing to look at, given that high charges will take a big chunk out of your investment growth over time.
We’re a comparison website, allowing you to input the type of investments and wrappers you hold or want and help you work out which might give you the best deal, depending on your requirements.
Run our free comparison tools to find out more!
Photo by Brandon Hoogenboom on Unsplash
