Michael Trudeau punches through a wall of online investment platform complexity to reveal how much you really pay in broker charges.
How much you pay to invest via an online platform or broker is notoriously hard to determine. The number of different charges - hidden or explicit, percentage-based tiers or flat fee, initial or ongoing, or both - can be enough to make you lose the will to live, or at least the desire to invest anything at all.
To save your sanity, we decided to line up 24 major investment platforms and compare them in as clear a way as possible, both in terms of charges and with regard to the range of investments on offer - with the help of information provided by platform consultancy The Lang Cat.
Making sure you choose the correct platform is not all about analysing their charges. To find out what other factors you should take into account, read: What should you consider when choosing your fund platform?
The 24 platforms researched by The Lang Cat represent almost the entire market, but not quite all of it. Some small stockbrokers, for example, are not on the list.
However, The Lang Cat believes the list presents a picture of about 95 per cent of the platform market. Founder Mark Polson says: 'If you were looking to invest across funds and shares, these are the guys you would naturally turn to.'
HOW THEY STACK UP
In the two tables below (click to expand), we've listed the 22 platforms and the fees they charge for Isas and Sipps in both percentage and absolute terms. We have looked at how they stack up for several levels of invested wealth, to present a cross-section of typical levels of mainstream investment.
The prices each have a colour code indicating how they compare with their peers. It's a traffic light system, with red indicating the most expensive and green the cheapest.
The tables detail the ongoing fees each platform charges, plus the cost of 10 fund trades - in other words what a fairly typical investor could expect to pay each year. Set-up and exit fees or other one-off charges are not included.
One complication is that dealing charges - what you pay to buy or sell shares held on a platform - vary from one platform to another, and in some cases also between different types of investment. Although one broker may appear cheapest, the number of trades you make each year and your choice of investments could mean you end up paying more or less than you would elsewhere.
That's why each price in our traffic light map includes 10 fund trades a year - five buys and five sells. However, we've also broken out the portion of the charge attributable to dealing fees in a separate column to give you an idea of the underlying cost of investing.
For example, although Halifax looks pretty good value for a sizeable portfolio, bear in mind that 10 trades a year will cost you £125.
consider how often you trade
Generally speaking, those platforms with comparatively low ongoing charges for a given portfolio size tend to have higher dealing fees, while those without dealing fees tend to charge significantly higher ongoing charges.
You might want to think about how much you generally trade and take this into account when selecting your platform. Note that, although the prices quoted in the tables include 10 trades, many of the 'green' platforms have lower ongoing charges for that level of wealth, but comparatively high dealing costs.
The highest charges for 10 trades are made by Alliance Trust Savings and Halifax, each of which charge relatively modestly on portfolios of £100,000 or more, but levy £125 for 10 trades. Nutmeg, on the other hand, does not charge for fund transactions, but it will charge up to 1 per cent - £50 on a £5,000 portfolio - as a platform fee.
Mark Polson, founder of The Lang Cat, says: 'I'm a fan of relating charges to the work actually done. It seems to me unusual and desirable for no one except the platform that a £200,000 portfolio costs twice as much as a £100,000 portfolio. So shapes that recognise that are welcome, I think.
'You can go for "pure" fixed-fee propositions such as Alliance Trust Savings or Interactive Investor, or a hybrid such as AJ Bell YouInvest. All have strong points. Of course, percentage-based charges work well for smaller portfolios, and I like Charles Stanley and Cavendish here.
'If you want guidance, I think Fidelity Personal Investing and Axa Self Investor have a lot to offer.
'None of this has anything to do with service experience, mind you - and cost is only one dimension to consider. With Which? stamping only Hargreaves Lansdown as worthy of passing its tests, there are clearly lots of things to consider.'