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How to work out which platform is cheapest for you

How to work out which platform is cheapest for you post image

Which is the best platform / broker for you? It’s a simple sounding question, but it twists the antennae of many Monevator readers.

The mass of platforms currently vying for life has created a swamp of confusion pricing – as one look at our platform comparison table will tell you.

Our new interactive comparison tool can give you a quick indication of which broker could be the cheapest option for you.

But some readers like to do their own sums. They want to fully understand the different pricing models.

And happily, there’s a fairly simple way to work out your cheapest option for yourself…

Step 1 – Preparation

First jot down the key factors that affect your calculation:

  • The size of your portfolio.
  • The account types you want – SIPP, ISA, or unsheltered investment account.
  • The products you want – Funds, ETFs, investment trusts, shares, and so on.
  • How often you will buy and sell – You won’t know for sure, so estimate this based on past patterns or future intentions.

Note that the number of products you own doesn’t matter. No platform will currently charge you more for owning 10 funds versus five, for example. (Keep in mind though that the higher the number of funds you have, the higher your likely switching fees will be if you decide to chuck your platform).

Next tot up all the charges you’d incur with the most competitive of the fixed fee platforms. (Hint: They’re the ones near the top of the table.)

Make sure you count any annual fees, platform fees, dealing charges, and other relevant costs listed on the Monevator table or the platform’s own price schedule. Remember to add the cost of multiple accounts if you hold them.

You now have a base cost for the investing services you require.

From here we can compare that cost against the best of the percentage fee platforms. The winner will be the cheapest deal for you.

Percentage fee platforms are generally best for people with small portfolios, whereas fixed fee platforms are tops for index tracker portfolios that are fatter than £25,000 in ISAs and around £70,000 in SIPPs.1

Note: The problem with percentage fee platforms is that many of them don’t cap their fees. So as your portfolio swells, the costs may keep rising, too. In an extreme case – say a £1 million portfolio that’s all invested in funds – this cost vampire could be sucking out more than £3,000 a year versus as little as £200 for the same portfolio held with a fixed fee platform.

Step 2 – The money shot

To compare fixed fee Platform A with percentage fee-based Platform B, make the following calculation:

Total annual costs of platform A2 divided by platform B percentage rate3
= breakeven point

If for example your fixed rate costs at Platform A = £80 and you’re comparing with a 0.25% rate at Platform B:

£80 / 0.0025 = £32,000

The breakeven point – £32,000 in this example – refers to your portfolio’s size. At this point, your costs will be the same with either platform.

In the example above, we’re better off with platform A if our portfolio is worth more than £32,000. Any less and we should bunk up with platform B.

A few things to remember:

  • Subtract any additional fixed rate costs charged by Platform B from Platform A’s fixed costs before making the calculation, so you’re comparing fairly.
  • Check if cheaper regular investment trades are available for the products you want.
  • Add in your portfolio’s Ongoing Charge Figure (OCF) to compare platform choices that don’t stock exactly the same products, or that offer discounts on certain fund manager’s charges.

Step 3 – What happens next?

Portfolio size is obviously a moveable feast, so you should consider how quickly your assets are growing or shrinking.

Are you piling cash into the pot? Or selling out faster than an old rocker being offered a knighthood?

If you’re likely to smash through the breakeven point within a year or two, it may be worth going with the platform that will suit you in the foreseeable future.

Also watch out for switching fever – the unbearable pressure to take action just because your platform is a smidge less than optimal.

In our example above, the difference in fees would only be £20 per year if the portfolio grew to £40,000 in size. Exit fees and switching hassle can make bolting for the door an exercise in self-harm every time your platform falls off the Best Buy spot.

Are these exit fees a reasonable administrative charge, or a blatant attempt to lock customers in? I think we know how this works by now.

Watch out for both entry and exit charges when you switch brokers – see our table. Some readers have reported success in demanding their platform waives its exit charges.

Also beware that switching brokers can be a (too) lengthy process, and it may leave you out of the market for some time if you’re forced to cash out of your positions before switching.

Some canny Monevator readers time their switching to take advantage of temporary cash back offers. We wouldn’t suggest you let such antics risk derailing a once-a-decade push to sort out your finances. But if you’re on top of this stuff – the sort who checks the comments on the Monevator broker table before you open your email – then it could be a way to pick up some free loot en route!

Take it steady,

The Accumulator

  1. Or thereabouts: The more you trade, the higher those thresholds will be. []
  2. Subtract any fixed costs of platform B including dealing charges. []
  3. Note that multiple percentage rates may apply if your portfolio is very large and the platform’s charges are tiered, so you may need to work this out. []

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{ 36 comments… add one }
  • 1 vanguardfan February 18, 2014, 10:24 am

    still can’t subscribe to comments without making one 😉
    Useful article, am anticipating useful comments too!

  • 2 dlp6666 February 18, 2014, 10:46 am

    When I first clicked on this article I was hoping to see at least a link to the totally brilliant spreadsheet that I think it was ‘Snowman’ had posted in a comments section elsewhere.

    It enables us to enter the values etc. of our portfolio/anticipated trades etc. and automatically populates to update with the various platform’s costs making it a doddle to compare.

    With his/her full permission and collaboration, would it please be possible to adapt/incorporate that spreadsheet into this (or perhaps another) ‘official’ Monevator article?

    Many thanks!

  • 3 gadgetmind February 18, 2014, 10:59 am

    I wouldn’t move for £20 pa but I’ll be saving £400 pa for my ISA, £150 pa for my wife’s ISA, and £125 pa for my wife’s SIPP by moving from HL to BestInvest.

    Fortunately, my SIPP is already with BestInvest (I had the HL paperwork done but not sent when they introduced their £2pcm tracker fees!) as it woould cost me £1250+ pa more to hold this with HL.

    Note that BestInvest are only this cheap for us as they will leave us on the fixed custody fees (which are also having VAT removed!) as long as we move from trackers to ETFs.

  • 4 Aidan February 18, 2014, 12:55 pm

    I second snowman’s spreadsheet as a great tool, please link it somewhere. I think it is a mistake to think that you should select a single “best” platform for all your investment types, which is what the article suggests; especially with a SIPP in the mix. Each investment type should be tested individually against each platform.

  • 5 Jumper February 18, 2014, 3:23 pm

    @gadgetmind – Make sure you have factored the (known) trading costs, the (obscured) bid-offer spread and the (unknowable) possible loss from time out of the markets into your decision to move from funds to ETFs.

    I am in a similar position to you, but because of all of these, and in particular the last one, I decided I would rather move to a flat fee provider than uproot my entire portfolio just to satisfy a platform’s odd requirements. As a wise commenter once wrote, platforms are “entirely fungible middlemen”…

  • 6 dawn February 18, 2014, 3:57 pm

    many thanks again mr accumulator for your helpful, enlightening and simply put clear advice. we are lucky to have you.

  • 7 Paul February 18, 2014, 5:08 pm

    Thank you, TA. I only wonder if I am able to make TD waive their exit fees for me.

  • 8 Learner February 18, 2014, 5:18 pm

    From the Telegraph “campaign” article linked at the end:

    “In an early victory, one fund shop – TD Direct – will scrap all charges for Isa savers who leave for a competitor, The Telegraph can disclose.”

  • 9 premierfella February 18, 2014, 5:43 pm

    One of the things that gets in the way of me returning to TD Direct is that they seem to have a problem with plain English.

    In their new pricing, and if taking your ISA away to a competitor from them is indeed now subject to no charge (other than residual ISA administration fee if due) why on earth not just say that clearly in the new rates and charges. As they’ve written them, you could still be left thinking that switching your entire Plan away to a competitor would come under “Stock Withdrawal” (charge for plan transfer to another ISA provider applies) rather than “Account Closure” (free) given that I can’t be the only one who would read account closure as, well, closing the account rather than transferring the entire ISA out.

    (I’m assuming that the charges from 14FEB14 are the ones the Telegraph is referencing and that the free transfer isn’t a subsequent change to the new charges, and that the Telegraph aren’t mistaken).

  • 10 Under The Money Tree February 18, 2014, 6:14 pm

    Very timely post….I began to build a xls this morning to review the best place for my SIPP!

  • 11 Paul February 18, 2014, 6:53 pm

    @Learner
    Thank you, this is great news. Apart from their percentage based fees which soon will be too much for me I quite like them after all.

  • 12 Jonny February 19, 2014, 7:54 pm

    Useful article, am anticipating useful comments too!

    ^^ 🙂

  • 13 Bob February 19, 2014, 9:37 pm

    Thanks for continuing to beat the drum on this….you are prompting me to act.

    As a 34 year old with 100k in an ISA, 150k in a SIPP + regular contributions to both, I can’t stomach the forthcoming uncapped percentage fees with HL. I’m somewhat of a reluctant leaver given their good website and service – in fact, if they had retained their capped fee even £50-100 p.a. above some of their fixed fee competitors, I would probably stay put – particularly given the heartache associated with the in specie transfer to them in the first place. Nonetheless as you say…..the compounded savings are eye-watering.

    Whilst they claim to be competitive for those with ‘average’ portfolios (apparently around £50K) I can’t help but think that those with larger pots will now be leaving in hoards…….

    I’m tempted to stick around to see how their new low-cost trackers look but with them still subject to the uncapped 0.45% annual management fee (up to £250k) they can’t be considered ‘low cost’ in my opinion.

    Now all I need to do is decide on which fixed fee provider to go to…and place a tight-stopped short on HL 🙂

  • 14 The Rhino February 20, 2014, 11:16 am
  • 15 Kean February 20, 2014, 1:29 pm

    Agree with Aidan – I have made a decision in principle to split up my portfolio amongst at least two platform providers; may be 3 even.

    During the last 6 years I have made concerted effort to centralise all my investments including Money Purchase Occupational Pension into HL AND look where its got me.

    My rational …….. I believe it’ll take time (anticipating 18mth) for the dust to settle wrt Platform fee structures. Many providers will watch competitors to see what disgruntled investors will tolerate albeit begrudgingly! Then they will start inching toward the most successful model while making it their life ambition to make like-for-like comparisons pretty much impossible. Just like the banking & energy sectors while regulators just stand by & watch!

  • 16 The Rhino February 20, 2014, 5:26 pm

    seen this: http://www.thisismoney.co.uk/money/diyinvesting/article-2555801/Direct-investors-casualties-price-war.html

    i don’t think i agree – for sure the broker needs to be economically viable, you don’t want the mess of them going bust, but i’m not sure they need to provide tools/advice etc.

    in fact quite the opposite – they should not be providing advice due to clear conflict of interest. In fact isn’t it against the rules for them to do so?

    far better to contact an independent 3rd party (like finmetrica) if you want to figure out how you should be investing?

    so don’t see how lack of or poor advice is in any way an issue relating to cost-cutting between brokers..

  • 17 The Accumulator February 20, 2014, 10:15 pm

    Talking of Finametrica, they’ll give you a free go on their industry-standard, risk tolerance questionnaire in exchange for an email address:

    https://www.riskprofiling.com/your_risk_tolerance

  • 18 AnAdmirer February 20, 2014, 11:04 pm

    FWIW I pinged H-L with a secure message the other week telling them I was leaving due to their fee hikes and they phoned me up – first offering 0.25% and then down to 0.20% – I have an £80k SIPP with them but it still wasn’t worth it. Although I appreciated them trying to accommodate me, they wouldn’t go down to a fixed fee and that’s the deal breaker for me. So, anyway – point is, they will negotiate.

    Much like Bob, I would be prepared to pay around £200 a year or so for my portfolio (which I think is reasonable) but much more than that is not worth it and I am piling in too quickly to make 0.20 p.a. worth it for more than 6 months or so.

  • 19 The Rhino February 21, 2014, 11:05 am

    I wonder what it was about your 80k SIPP that prompted HL to break out the under-the-counter deals. It seems that folk with larger portfolios than that have not received such offers when their transfer forms have landed on the desk. Maybe you’ve got a bunch of dirty funds in there that will still be paying commission til 2016? Or maybe it is something to do with the rate at which you are depositing cash with them? Its a bit unclear what properties HL is looking for in clients it is trying a bit harder to retain..

  • 20 BLife February 21, 2014, 12:26 pm

    I only started investing last year, and have found this website hugely helpful. Along with Tim Hale’s must read book.

    At the time I started, H&L were my best option as I simply wanted to invest in one fund. The Vanguard Lifestrategy 60% Acc fund. For various personal reasons, I use the Fund and Share account rather than the ISA or SIPP.

    I’ve got about 25K in there now and putting in approx 2.5K per month. So it would seem that my best option will now be one of the fixed fee platforms. Shame as I find H&L website easy to use and their customer service good. But fees must.

    For someone like me, investing in one fund, 12x a year, I think Sharecentre of ii look best. But I’d appreciate being told otherwise if anyone thinks I’ve messed up my calculations.

    The old compare chart had a little entry showing which provider best for Vanguard Lifestrategy investors. Would be great if that could be put back into the new one.

    Thanks again to Monevator and its contributors. This is a priceless resource.

  • 21 dawn February 22, 2014, 4:25 pm

    hello mr accumulator or friends who would know.
    been reading about how vanguards life strategys are doing.
    on the citywire site its saying VLS 60% grew at 5.8%
    and VLS 80% grew at 7.58%
    have I read it correctly?

  • 22 avfc1982 February 26, 2014, 5:47 pm

    From the Telegraph “campaign” article linked at the end:

    “In an early victory, one fund shop – TD Direct – will scrap all charges for Isa savers who leave for a competitor, The Telegraph can disclose.”

    That’s not the answer I received from them when I questioned them, this is there response:

    “I can confirm that from the 14th February we do not charge an ISA closure fee; we do however still charge £25 per holding for stock withdrawal to paper form, and £50 + the relevent ISA administration Fee for transfer to another ISA provider”

    Another ISA provider would be a competitor so that’s not scraping all charges is it?!

  • 23 Trevor C December 15, 2017, 1:22 pm

    I’m not sure this tool works if you only use the low cost ‘regular investment’ facility with fixed trade dates

  • 24 Ancienti December 15, 2017, 8:07 pm

    So is it worth sticking with HL for the time being ? I’ve just requested my cash isa to be transferred to them with 50k inside

    I also have 50k invested with them already

  • 25 Jaygti December 15, 2017, 8:39 pm

    @ancienti if your buying funds then HL are expensive once your past about £50k, as there is no cap.

    If your planning to buy ETF’s or IT’s they have a cap of £45 a year , so are competitive.
    Good customer service and website also, if that matters to you.

  • 26 Jaygti December 15, 2017, 9:08 pm

    Just to add to the above, you have to take into account dealing fees on ETFs and ITs with HL. Whereas fund dealing is free.

  • 27 Jaygti December 15, 2017, 9:11 pm

    Err, sorry about the apostrophes in the earlier answer.

  • 28 ChrisB December 16, 2017, 11:48 am

    I have £850k in a SIPP with Hargreaves Lansdown, only investments trusts and ETFs. I pay the £200 pa cap which is equals 0.0002% admin charge – fantastic value!!!

  • 29 malc1111 December 17, 2017, 1:48 pm

    Chris, I thought with HL you had to pay a % fee regardless. I have recently gone with ii for this reason as I will have a large sum to invest and did not want to pay 0.25% or more for just purchasing IT’s or ETF’s. Choosing platforms seems to be a minefield. Wish I had known this earlier.

  • 30 AAJ December 18, 2017, 12:28 pm

    [malc1111] “Choosing platforms seems to be a minefield”

    Too right it is. With TD Direct and ii merging, just when you thought you’d picked the correct platform for you everything changes.

    Has anyone else been affected by the merger of ii and TD? There appears to be a massive limitation on the ii monthly drip feed in that you can only buy funds up the value of your monthly investment. This is very annoying if you have spare cash in your account as you can’t use the drip feed facility to invest it *grrrr*

  • 31 vanguardfan December 18, 2017, 12:50 pm

    I think we just have to accept that things change. Strategically, the most important regulatory change would be banning exit fees, so I think its well worth continuing to make complaints about platforms changing fees and locking you in with exorbitant exit fees.
    But I think you have to accept that you will likely need to switch platforms every few years, and also that there is little point trying to optimise to the nth degree or future proof your choices too much.
    Regarding inflexible regular investment schemes – ii aren’t the only ones to do this, Alliance Trust also have a similar approach. I started with them and later opened accounts with Youinvest, and couldn’t quite believe the flexibility that was allowed! Its one of those things that you’re unlikely to twig the significance of before you are actually signed up to a platform (another reason why exit fees are so insidious – you have no idea whether a platform is really going to suit before you actually use it in anger).

  • 32 AAJ December 18, 2017, 1:00 pm

    [vanguardfan] “you have no idea whether a platform is really going to suit before you actually use it in anger”

    This is very true. I tried 3, then chose ii. Now I have SIPP, ISA & Trading accounts with ii. It’ll be a royal pain to move.

    The new ii system (inherited from TD) appears to be more restrictive in several ways. Presently, I can’t even remove a regular investment until I set up a new DD, even though that investment is no longer available following the new TD/ii merger.
    The previous DD payment has gone through so I have this month’s money to invest but no way to select what I wish to invest in, or not.
    There are too many restrictions where once there were none.

  • 33 Jonny December 18, 2017, 1:27 pm

    When II first introduced charges that affected funds (2012 I think) I switched to HL. Then HL first introduced £2 fund dealing fees, then % based-fees (at which point I switched back to II to take advantage of family savings).

    Recently II failed me (for the second time), at which point I made the decision to switch to Vanguard. Being percentage based, they’re not necessarily the cheapest (I think Halifax and iWeb worked out cheaper on paper), but I feel I trust Vanguard more (as they have a tendency to reduce costs over time, not increase them), with the hope this decision will increase the time between me needing to make my next S&S ISA transfer someone else!

    I also agree with raising complaints about exit fees. When II first announced the recent changes, I requested a free transfer out. They declined my request. I raised a complaint (along with probably hundreds/thousands of others) and a few days later they contacted me to let me know they’d made a ‘mistake’, and offered to let me exit for free. At the very least raising a complaint will cause some hassle for them at their end too!

  • 34 kean December 18, 2017, 1:27 pm

    Generally, the regulators really need to clamp down on exorbitant exit charges and provide standard guidelines for the investment transfer process much like they have simplified current account transfers and handover. Personally, I’d like to see transfer fees after the first year to be reduced zero or at least on a sliding scale whereby exit fee go down to zero once an investor has been with a broker/platform for say 3 years.

    The level of complexity and opaqueness now in this area is becoming unmanageable.

  • 35 Nick January 15, 2018, 10:36 pm

    Do people advise that you spread your investments across several providers? Despite the cost increase it’s less risky in terms of something catastrophic?

  • 36 The Accumulator January 17, 2018, 9:16 pm

    Hi Nick, yes at some point that’s a good idea. This piece gives you the gist on the UK compensation scheme: http://monevator.com/investor-compensation-scheme/

    I’m not neurotic about it. I don’t hire a new platform every time I get over the compensation limit. There’s a balance to be struck between prudent diversification and an unwieldy admin burden.

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