When it comes to investing online, getting to grips with the various fees is a priority. Here are the charges you might pay:
Platform fee: an annual fee some providers charge in exchange for holding your shares and funds on their platform. It’s usually charged as a percentage of your portfolio value, but may be a flat fee.
Some providers, including AJ Bell and Hargreaves Lansdown, charge one platform fee for the portion of your portfolio held as shares, and one for the portion held as funds.
Others operate a tiered platform fee, with a discount for larger portfolios.
This platform fee is sometimes called a ‘service charge,’ ‘custody charge’ or ‘platform management fee’.
Trading fee: Some online brokerages charge a flat ‘trading fee’ whenever you buy or sell an investment. These fees usually range from about £5 to £10 per trade, but may cost more for shares listed outside the UK.
Some providers charge a reduced rate if you make a certain number of trades in a given month.
These fees may only apply when you buy and sell shares, leaving you to trade funds free of charge. Just remember that investment funds charge their own management fees, which are taken directly from your returns.
Foreign exchange fee: If you buy and sell shares in a currency other than pounds sterling, most online brokerages charge a fee for switching your money back and forth into different currencies.
These foreign exchange fees are usually charged as a small percentage of the transaction value, in the range of 0.5% to 1.5%.
Inactivity fee: A handful of online brokerages charge inactivity fees if you don’t access your account for a certain stretch of time, often 12 months.
If your provider charges inactivity fees, you may want to set yourself reminders to regularly login and check on your investments.
Withdrawal fee: Some online brokerages charge a fee when you withdraw money from your trading account. It could be charged at a flat rate, or as a percentage of the amount withdrawn.
Choosing the right fee structure for you
There’s no one-size-fits all approach when it comes to choosing the most cost-effective investing platform. Fees can vary depending on factors such as the value of your portfolio, and how often you buy and sell.
Some providers also try to attract new customers with welcome offers, which may include free trades, reduced fees or cashback.
If you expect to buy and sell investments many times each month, for instance, it could make sense to choose a provider that doesn’t charge trading fees, such as Trading 212 or eToro.
These providers don’t charge a platform fee, either – but there are other charges to consider. With eToro, for instance, you’ll pay a flat withdrawal fee of $5 (£3.94), and inactivity fees of $10 (£7.89) per month if you don’t access the account for 12 consecutive months.
No investing platform is entirely free to the user, so it’s worth figuring out the fee structure before settling on a provider.
Fees are usually calculated automatically and deducted from your cash balance each month. If you don’t have enough to cover the cost, your platform may sell off some of your investments to settle the bill.
