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Archive: Weighing up the cost of platforms

Savvy DIY investors could boost their returns by choosing the right platform
Archive: Weighing up the cost of platforms

Platforms are a great way of holding all your investments in one place and often allow you to buy funds more cheaply than if you bought them directly from the asset manager that runs them. Most platforms also enable you to hold your funds within tax-efficient individual savings accounts (Isas).

But choosing which platform to use can be difficult, so we have looked at which ones are the best value if you want to hold funds in an Isa. If you primarily hold investment trusts, please refer back to our article on The cheapest DIY platforms to buy investment trusts or see the 20 October 2017 magazine.

When deciding which platform to choose for an Isa you need to weigh up several factors, including charges, customer service, the range of funds available and how easy the platform website is to use.

Costs have a direct impact on the returns of your investments so check these closely. But working out which Isa provider is the cheapest for you personally can be complicated as they do not all charge in the same way.

There are four main charges to look out for: administration, dealing, fund and transfer fees. If you plan to trade regularly, you should also check whether the platform offers a scheme that makes it cheaper to do this.


Platforms that charge less to hold funds

The majority of platforms charge administration fees. Occasionally this will be a product-specific fee for holding an Isa. For example, Equiniti Shareview charges 0.25 per cent plus value added tax (VAT) for its Isa, subject to a minimum £10 plus VAT and maximum £37.50 plus VAT. This is charged twice a year.

However, most platforms just charge an administration fee for using the platform, which is often called a custody, account management or platform fee. Platforms will either charge a percentage on the value of your fund holdings, on a monthly, quarterly or annual basis, or levy a flat fee irrespective of your portfolio's size.

If your portfolio is worth more than £100,000 you should look for a flat fee provider to cap the amount you will be charged. Flat fee providers include Halifax Share Dealing, which provides access to around 2,000 funds and charges an administration fee of £12.50 per year. The Share Centre offers around 6,000 funds and charges an annual fee of £57.60 inclusive of VAT. Interactive Investor offers around 4,000 funds and charges a flat fee of £90 a year. This is charged via quarterly payments of £22.50 and includes trades equivalent to this amount.

iWeb has around 2,000 funds to choose from and doesn't charge annual administration fees. It rather levies a £25 one-off fee for the first account you open on its platform, such as an Isa. Any other accounts you open on the site, for example a trading account or self-invested personal pension (Sipp), are free to open.

If your portfolio is worth less than £100,000 then platforms with percentage fees will typically be better value. The Barclays Smart Investor platform is not popular with some investors who hold shares, but for those who hold funds it charges a flat rate of 0.2 per cent a year on the value of your assets. This is charged monthly with a minimum of £4 and maximum of £125 a month. Barclays Smart Investor offers around 2,500 funds.

Charles Stanley Direct offers about 3,000 funds and charges 0.25 per cent for a fund portfolio worth up to £250,000. For fund portfolios between £250,000 and £500,000 it charges 0.2 per cent, between £500,000 and £1m 0.15 per cent, between £1m and £2m 0.05 per cent and above £2m there is no charge.

Selftrade provides more than 6,000 funds and charges 0.3 per cent a year on funds worth up to £50,000. For funds between £50,000 and £250,000 it charges 0.25 per cent, and for ones above £250,000 it charges 0.15 per cent. This fee is charged quarterly with a cap of £250 per quarter.

But while administration charges are important, you also need to think about service. Some of the most popular platforms charge higher fees, but remain well-liked by investors for reasons including good customer service and ease of use. Hargreaves Lansdown and Bestinvest, for example, both operate a tiered account management fee which is on the higher side.

Hargreaves Lansdown's stocks-and-shares Isa charges 0.45 per cent a year on the first £250,000 of funds; 0.25 per cent for funds between £250,000 and £1m; and 0.1 per cent on funds between £1m and £2m, after which there is no charge. It has about 2,500 funds on its platform.

Bestinvest provides access to around 2000 funds. Its stocks-and-shares Isa charges 0.4 per cent on assets worth up to £250,000. Between £250,000 and £1m there is a 0.2 per cent charge and above £1m there is no charge.


The best platforms for Isas invested in funds 

According to research company the lang cat, an investor with a £50,000 fund portfolio would be best buying an Isa from iWeb, which in the first year would charge £35. This would include the platform's one-off £25 account opening fee, plus two fund trades worth £5 each.

Hargreaves Lansdown would be the most expensive option for an investor with a £50,000 fund portfolio, charging an administration fee of £225 a year, although fund trades are free.

Alliance Trust Savings, iWeb, Interactive Investor and Halifax Share Dealing would be good options for investors with a £500,000 fund portfolio making two trades a year, with their fees working out at between 0.01 and 0.02 per cent of the value of the portfolio. Halifax Share Dealing would charge £38 a year, Interactive Investor £90 and Alliance Trust Savings £120.

Rplan and Hargreaves Lansdown are among the most expensive options for a £500,000 portfolio as they would both charge £1,750 a year.


The best platforms for Isa fund portfolios (cost as % of portfolio)

AJ Bell Youinvest0.31%0.27%0.26%0.25%0.25%0.25%0.18%0.14%
Alliance Trust Savings2.40%0.80%0.24%0.16%0.12%0.05%0.02%0.01%
Aviva Consumer Platform0.40%0.40%0.40%0.38%0.38%0.36%0.31%0.15%
Cavendish Online0.25%0.25%0.25%0.25%0.25%0.20%0.20%0.20%
Charles Stanley Direct0.25%0.25%0.25%0.25%0.25%0.25%0.22%0.19%
Close Brothers A.M. Self Directed Service0.25%0.25%0.25%0.25%0.25%0.25%0.25%0.25%
Fidelity Personal Investing0.90%0.35%0.35%0.35%0.35%0.20%0.20%0.20%
Halifax Share Dealing0.75%0.25%0.08%0.05%0.04%0.02%0.01%0.00%
Hargreaves Lansdown0.45%0.45%0.45%0.45%0.45%0.45%0.35%0.30%
Interactive Investor1.80%0.60%0.18%0.12%0.09%0.04%0.02%0.01%
Saga Investment Services0.40%0.40%0.40%0.40%0.40%0.40%0.30%0.25%
The Share Centre1.45%0.48%0.15%0.10%0.17%0.07%0.03%0.02%
Trustnet Direct0.80%0.38%0.29%0.28%0.22%0.09%0.04%0.02%
Willis Owen0.40%0.40%0.40%0.37%0.35%0.26%0.21%0.18%

Source: the lang cat;  table shows the cost of holding an Isa invested in funds for one year with two fund trades. *Currently closed to investors


The best platforms for Isa fund portfolios (cost as £ per year)

AJ Bell Youinvest£16£41£128£191£253£628£878£1,378
Alliance Trust Savings£120£120£120£120£120£120£120£120
Aviva Consumer Platform£20£60£200£288£375£900£1,525£1,525
Barclays £54£54£106£156£206£506£1,006£1,506
Cavendish Online£13£38£125£188£250£500£1,000£2,000
Charles Stanley Direct£13£38£125£188£250£625£1,125£1,875
Close Brothers A.M. Self Directed Service£13£38£125£188£250£625£1,250£2,500
Fidelity Personal Investing£45£53£175£263£350£500£1,000£2,000
Halifax Share Dealing£38£38£38£38£38£38£38£38
Hargreaves Lansdown£23£68£225£338£450£1,125£1,750£3,000
Interactive Investor£90£90£90£90£90£90£90£90
Saga Investment Services£20£60£200£300£400£1,000£1,500£2,500
The Share Centre£73£73£73£73£169£169£169£169
Trustnet Direct£40£58£145£208£220£220£220£220
Willis Owen£20£60£200£275£350£650£1,025£1,775

Source: the lang cat;  table shows the cost of holding an Isa invested in funds for one year with two fund trades. *Currently closed to investors


The cheapest platforms on which to trade funds

You also need to consider how much a platform will charge when you buy and sell funds. Generally, a fund is a long-term investment and you should not trade it frequently. However, when you do want to buy or sell funds the amount you pay can quickly add up as some platforms charge £10 or more per transaction.  

However, other platforms don't charge anything to buy or sell funds, including Bestinvest, Fidelity Personal InvestingCharles Stanley Direct and Hargreaves Lansdown.

Selftrade doesn't charge you to buy funds, but selling a fund on this platform costs £11.75 per trade.

And some platforms levy a low dealing fee to buy and sell funds, including AJ Bell Youinvest, which offers around 4,000 funds and charges £1.50 per trade.

Some platforms offer regular investment plans which enable you to invest as little as £20 a month and purchase funds at a reduced dealing price, typically between £1 and £2 per trade. And regular investing is a useful way to grow your Isa because market fluctuations will allow you to benefit from pound cost averaging. This is because when markets go up and are more expensive your set amount of money buys fewer fund units, and when markets fall and are cheaper your money buys more units.

A few platforms allow you to invest regular amounts in funds at no extra charge. For example, with Hargreaves Lansdown you can set up a direct debit from £25 a month and there is no dealing charge on funds. Bestinvest allows you to invest regular amounts by setting up a direct debit of £50 or more per month. And Barclays Smart Investor and Interactive Investor allow regular investing into funds at £1 per trade, lower than Barclays' standard trading fee of £3 and Interactive Investor's of £10. 

Generally regular investment schemes only apply to buying funds, so when you want to sell them you will be charged the usual trading fee.


Fund fees

When you hold funds in your Isa you also incur the fees of the asset manager that runs the fund, on top of the platform charges. Typically, a fund's ongoing charge will be between 0.1 and 1.5 per cent.

Some platforms offer fund share classes with lower charges than the share classes offered by other platforms. So if you want to hold a particular fund in your Isa it is a good idea to check the charges on different platforms to see if any are noticeably cheaper.

For example, when Neil Woodford launched LF Woodford Income Focus (GB00BD9X7109) last year, Hargreaves Lansdown secured the lowest ongoing charge for investing in it at 0.6 per cent.


Watch out for transfer fees

Moving your Isa between platforms can be expensive and laborious because many platforms charge chunky transfer fees when you close your account and move assets away from them. The transfer fees are often charged per fund, so the more funds you have in your Isa, the more it will cost you to leave.

You can expect to pay between £15 and £25 per holding to switch to a different provider. However, these transfer fees tend to apply only if you are transferring funds rather than cash. For example, AJ Bell Youinvest charges £25 per holding to move your Isa to a different provider, but makes no charge if you are transferring cash. However, you should remember that in order to transfer a portfolio as cash you would first need to sell out of your funds, potentially incurring dealing costs.

But some providers enable you to transfer your Isa more cheaply. For example, The Share Centre charges £25 per account to transfer out, and a few providers do not charge any transfer exit fees to move funds. These include Barclays Smart Investor, Bestinvest and Fidelity Personal Investing.


Cost of investing an Isa in funds

Broker/platformNumber of funds available Standard online dealing cost per fund tradeReduced dealing charge for frequent tradesIsa annual admin charge for a funds only portfolioInactivity feeDividend reinvestment plan costsRegular investor scheme Closure/transfer out fees
AJ Bell Youinvestaround 4,000£1.50naFirst £0 - 250k: 0.25%, Next £250k - £1m: 0.10%, Next £1m - £2m: 0.05%, over £2m: no chargenoOnly for shares£1.50 per tradeCash transfer: no charge; transfer out underlying assets: £25 per holding
Alliance Trust Savings around 2,500£9.99 na£120 (includes 4 free trades a year)no£5 per trade£1.50 per tradeTransfer in from maturing employee share scheme: £15 per investment; Transfer out to another provider: £100 plus VAT 
Barclays Smart Investoraround 2,500£3na0.2% a year (charged monthly with a min. of £4 and max. of £125 a month)noOnly for shares; no charge£1 per tradeNo charges
Bestinvestaround 2,000No chargenaFirst £250k: 0.4%, £250k-£1m: 0.2%, over £1m no charge. noyes, no chargeyes, no chargeNo charge unless transferring out as a share certificate, which is: £20 per asset
Charles Stanley Direct3,000No chargena£0-£250k: 0.25%, £250k-500k: 0.2%, £500k-£1m: 0.15%, £1m-£2m: 0.05%, over £2m:  no charge.noyes, no chargenaTransferring underlying assets:  £10 per line of stock
Fidelity Personal Investing 2,000No chargenaUp to £7.5k: £45, £7.5k - £250k: 0.35%, £250k - £1m: 0.2%, Over £1m: no chargenoyes, no chargeFor portfolios up to £7.5k: 0.35% rather than £45No charges
Halifax Share Dealing2,000£12.50 na£12.50 no2% of dividend (max £12.50)£2 per tradeNo closure charge, however, the current annual administration fee (pro-rated) is payable. Transfer out of underlying assets to another provider: £25 per stock, max £125
Hargreaves Lansdown around 2,500No chargenaup to £250k: 0.45%, £250k to £1m: 0.25%, £1m - £2m: 0.1%, Over £2m: no charge no1% £1 min. £10 max.)yes, no chargeAccount closure: £25 plus VAT, Cash transfer out: £25, underlying assets transfer: £25 per line of stock
Interactive Investor3,881£10 for deal value up to £100k, £40: £100k - £500k, £70: Over £500k£6 per trade if you've traded 10 or more times a month on average in the preceding 3 months.£90 a year (charged quarterly at £22.50 – which gives an equivalent £22.50 of trading credits a quarter)no£1, with min. dividend value for reinvestment of £10.£1 per tradeTransfer stock to another provider: £10 per line of stock, min. of £30 and max. of £250, customers of less than one year can transfer at no charge.
IWeb2,000£5naOne-off £25 opening charge for your first account (other accounts will be free to open)no2% of the dividend payment, max. £5naTransfer out underlying assets to another provider: £25 per stock, max. £125
Selftrade6,083 No charge to buy; £11.75 to sell£6 per trade when you trade more than 20 times per month.£0 - £50k: 0.30%, £50k - £250k: 0.25%, over £250,000: 0.15%, Max: £250 per quarterNo. (An inactivity fee of £10 + VAT per quarter  applies if you do not trade while holding shares but you do not incur this for holding funds.) £1.50 per trade£1.50 per tradeTransfer out: £15 per line of stock
The Share Centrearound 6,000£7.50 for deals less than £750, 1% for deals above £750 £7.50 per trade (for those who deal more than £750 frequently or have a lump sum to invest)£57.60 (incl. VAT)no0.5% per trade (min £1.00) 0.5% per trade (min £1.00) Transfer to another provider: £25 per account 
Source: platforms and Investors Chronicle


For a comparison of the costs of different broker platforms see our Broker Comparison tool