All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
As with everything, investing comes with a price – you just need to figure out what it is, and whether it’s worth paying for. Nobody likes paying fees, but fees you don’t understand or even know about are worse. Many fees are unavoidable, but some can be reduced or completely eradicated with some planning. Find out how to navigate the choppy waters of investment fees to help you make your money go further and compare the fees involved with each provider.
What are the different types of investment fee?
There are several different fees involved when you invest — it’s worth making sure you know what each one is for. Each broker might have slightly different names for its fees, but in general, these are the ones you’ll come across. t>:
- Custody fee. This is paid to the provider for holding and investing your money. This is sometimes called a “platform fee” or “annual charge”.
- CommissionThis is a transaction fee, it’s the cost of buying stocks and shares.
- Trustee fee. Usually this is only found with SIPPs. It covers the cost of the legal infrastructure of the investment platform you’ve chosen.
- Management fee. This is paid to the fund’s advisor for their advisory and management services. Depending on the company, this fee may also cover administrative services related to the fund.
- Advice fee. This is if you have a financial adviser, so not every platform charges this.
- ISA fee. Some providers charge a fee for investing in an individual savings account (ISA).
What is each fee for?
These fees can have different names across various platforms. Likewise they can come bundled together or be charged separately to add a bit more confusion. Let’s go into a bit more detail about what each one means.
|Name of fee||Also known as…||What’s it for?|
|Custody fee||Platform fee||Similar to the management fee and in some instances may be bundled with it. This covers the people responsible for holding and investing your money as well as the people managing the associated legal structure of your investments.|
|Transaction fee||Brokerage fee, commission, entry and exit costs, front-end load or back-end load (mutual funds only)||This fee can be charged every time you make a transaction, whether it be a buy or a sell. These fees can be either a set amount per trade or a percentage of the transaction amount. If you are buying and selling lots of small shares, these fees can add up quickly.|
|Management fee||Ongoing charges, fund management fee, total expense ratio (TER), internal expenses, total annual charge (TAC), annual account fee.||This fee is generally paid as a percentage of the managed fund and is paid to the fund’s advisor for their advisory and management services. Depending on the company, this fee may also cover administrative services related to the fund as well.|
|Trustee fee||N/A||This fee usually only applies to SIPPs|
|Advice fee||Ongoing advice fee, fee for advice, financial advisor fee||This is the fee you will pay if you choose to seek the advice of a financial advisor to assist you with your investments and the related decision making.|
|ISA fee||N/A||This is the charge for investing in an individual savings account (ISA), which lets you pay less in capital gains tax.|
Know your fees
As we’ve seen, fees vary hugely between brokers. They can also vary between types of investing. SIPPs for example will often have the management and custodian fees bundled as they will probably be offered by the same provider.
What kind of investing will you be doing?
This is an important question to ask when working out what fees you will pay. Will you buy and sell individual shares or invest in funds or ready made portfolios? Will you be dealing in lots of small shares or fewer big ones? Will you seek the assistance of a financial advisor or go it alone? These are all questions that will affect the type and amount of investment fees you will pay.
How much will I pay in fees?
This depends on how much you’re planning to invest. Obviously, if you’re investing bigger amounts, you will pay more in fees. However you will also (hopefully) be making more profit to hopefully make the fees worthwhile. If you are “hobby investing”, a term to mean dealing in only small amounts of money, you should be especially careful of fees as they may end up adding up quickly and your return may not be enough to make the fees worthwhile. Some total investment fees can be up to 2% per year or even higher of your total investment value, this will really add up over the years.
How much does each provider charge?
Here’s some of the fees charged by a number of platforms we’ve reviewed on our site.
In some cases, you can get cheaper trades by making a certain number of trades in the previous month, or by investing a certain amount. The same goes for platform charges. We’ve listed the highest and lowest of each of these fees, but there will generally be a condition attached to the better fee — make sure you look into what this is and compare the fees for the amount you plan to invest and the number of trades you plan to make.
|Provider||Costs rating||ISA fee||Minimum deposit||Platform charge||Trading fee||Frequent-trader fee||Foreign-exchange fee|
|Degiro||★★★★★||N/A||£0||£0||UK: UK: £1.75 + £1|
US: €1 + €1
EU: €3.90 + €1
|Freetrade||★★★★★||£3 per month||£0||£0||£0||N/A||0.59%|
|interactive investor||★★★★★||Included in platform fee||£0||£4.99-£19.99||£3.99 (free regular investing)||£0||1.5%|
|Saxo||★★★★★||£0||£0||0.12% per year||£8||N/A||1%|
EU: 0.1% (min €10)
EU: 0.1% (min €10)
Are there any hidden fees?
There might be additional fees that aren’t apparent from the get-go – most of the time these fees can be found somewhere on the website, but they’re often pretty hidden. In our reviews, we’ve detailed everything we know about provider fees, so you can visit our review of the provider you’re interested in if you’re worried about hidden fees.
You could also read customer reviews of each broker if you can, as they’ll detail any issues they’ve had with hidden fees — our customer satisfaction survey could be helpful here, too.
How important are fees?
Depending on your situation, potentially very. Even a small difference in fees over a long amount of time will add up to a significant amount of money.
However, it’s also important to remember that the amount of fees you pay is not necessarily the most important thing, you also need to consider what you are getting in return for your money. If you find a broker who charges 0.5% annually but does very little to help you grow your investment and you find a broker who charges 2% but spends a great deal of time working to improve your financial position, then you may actually be better off for paying that 2%.
How can I find out how much I’m paying?
If you’re already investing then ask your broker directly for a breakdown of the fees they charge. Make sure they include all the admin fees and how much you pay in transaction fees per trade.
If you are thinking about trading, do your homework and some comparisons between brokers. Remember not only to focus on how much each provider is charging, but also what exactly you get for your money.
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