Understanding Platform Fees: Worked Examples and Considerations
Investing can be a great way to grow your wealth, but it’s important to consider the fees associated with different platforms before diving in. The amount you’ll pay can vary significantly depending on factors such as the size of your portfolio, where you invest, how often you trade, and which provider you choose.
For example, let’s take a look at two popular platforms: AJ Bell and interactive investor (ii). AJ Bell charges a percentage-based platform fee, while ii charges a flat platform fee.
If you had a £5,000 portfolio with AJ Bell, consisting of 25% individual shares and 75% funds, you would pay an annual platform fee of £12.50. On the other hand, if you had the same portfolio with ii, you could end up paying significantly more due to their flat fee structure.
As your portfolio grows, the fees can also increase. For a £50,000 portfolio with AJ Bell, you would pay an annual platform fee of £125. However, with ii, you might end up paying less depending on the plan you choose.
For larger portfolios, such as £500,000, the fees can be even higher. With AJ Bell, you would pay an annual platform fee of £1,062.50. Again, choosing a platform with a flat fee structure like ii could result in significant savings.
It’s important to note that different providers have varying fee structures, so it’s essential to compare your options carefully. Some platforms may charge different fees for holding funds or individual shares, or for UK versus international shares.
If you’re looking for a commission-free trading platform, options like eToro and Trading 212 could be worth considering. While they don’t charge platform or dealing fees, there may be other costs to be aware of, such as currency conversion fees or inactivity fees.
Ultimately, understanding the fees associated with different investment platforms is crucial for making informed decisions about where to put your money. By comparing the costs and benefits of each option, you can ensure that you’re getting the best value for your investment.
