Investment platform fees compared: are you over-paying?

Your choice of investment platform could cost you hundreds of pounds per year - whether or not your investments perform well.

We've analysed the cost of investing across 18 do-it-yourself investment platforms , including platform and trading fees.

If you understand the level of risk you want to take on, and have the time to research investments, do-it-yourself investment platforms should be a cheaper way to invest than using a financial adviser.

Yet at a time when fund managers are competing to slash fees, significant cost gaps remain between the most and least expensive DIY platforms.

Investors with less to invest are disproportionately affected, with fixed fees on some platforms putting them at a huge disadvantage.

Here we reveal our findings, why reducing fees can improve your returns, and how to do so.

How much could you save?

Switching investment platform can be as simple as filling in a form with a new provider, and the savings can be considerable:

Cost gaps (and thus savings) can add up over time.

If you invested £5,000 in a fund that grew 4% in a year, the most expensive platform at this level would wipe out more than half of your returns, while the cheapest would take less than 5%.

For a traditional funds investment portfolio worth £5,000, you would have to pay an extra £104 a year in fees to the most expensive platform compared with the cheapest. 

If you reinvest that money and stay in the market for five years, you could end up with an extra £574 in your pocket - assuming 5% growth.

If you want to invest directly in shares , the difference would be even greater and you could save £138 per year - growing to £762 in the same five year scenario.

• Find out more: our full comparison of investment platform fees

Are beginner investors paying over-the-odds?

Investors with smaller amounts in their portfolios are disproportionately disadvantaged if they stick with a pricey platform.

For a £5,000 portfolio, the money saved would be 2% of the amount invested, while portfolios from £25,000 to £500,000 vary from 0.37% to 0.46%.

While app-based investment platforms including Plum and Moneybox target newer investors, and received great customer scores in our survey, their charges for smaller investors are relatively higher.

Investors with larger portfolios shouldn't ignore cost however, as they can save the most.

If you have more than £250,000 invested, you could save £1,049 in a single year investing in funds or £1,077 investing in shares. Again assuming 5% growth over five years, these savings could leave you with a whopping extra £5,796 or £5,951 for funds and shares, respectively.

Exchange-traded funds (ETFs) investors with large portfolios see the biggest difference in fees, with a £2,262 difference for a £500,000 portfolio in a single year.

A more expensive platform doesn't necessarily mean better quality - we surveyed more than 6,000 investors to find out how platforms like Hargreaves Lansdown, Interactive Investor and Fidelity compared on value for money, customer service and more.

• Find out more: Best investment platforms

Which investment platform is best for you?

Percentage vs flat fee

To keep platform charges from eating into your returns, you'll need to work out whether a percentage or a flat fee would suit you better.

If you have less than £50,000 invested, you'll generally be better off with a percentage fee provider like Vanguard or AJ Bell rather than a flat fee provider. The flat fees work out as higher percentages on smaller amounts and are usually the most expensive options for portfolios of these sizes.

For investors with portfolios of more than £50,000, the opposite will be true and you'll get the best value out of a flat fee, like Freetrade. 

Back to basics vs bells and whistles

Some platforms, like AJ Bell, offer features like customer service helplines and newsletters and podcasts discussing investments news - ideal for the more involved and interested investor.

For beginners, platforms like Plum and Moneybox offer a simple approach to investing with round ups on your spending to add into your investment, but both have high fees.

Others, like Vanguard, have pared back the number of investments on offer in return for a lower cost for investing with them.

Ethical investing

For many investors, the bottom line isn’t the only thing that matters - but also how your money is used along the way.

The Big Exchange, majority-owned by The Big Issue, only lists funds assessed by their independent panel to have a positive impact on the world. These funds receive gold, silver or bronze medals to denote the scale of these impacts. 

If you aren’t comfortable investing with a platform that encourages investors towards ‘sin sectors’ like fossil fuels and weapons, The Big Exchange could be a good fit.

• Find out more: ethical investing explained 

'Free' platforms

Some platforms like InvestEngine and Freetrade are sold as free to use, which is true - but only up to a point.

Freetrade charge a monthly fee to users who want additional features. For example, a stocks and shares Isa is part of their Standard plan at £60 a year or £5.99 per month.

InvestEngine is currently free with full access to all of its features, with the exception of its managed portfolios which charge a fee of 0.25% of the value of your portfolio.

Which? Money Podcast

Join us on our weekly audio show for the latest money news and personal finance hacks to help make you better off.

Listen now

Should you invest?

While investments can be a valuable way to save towards a goal, now might not be the time to start for everyone.

You'll need an emergency savings pot in place - between three and six months worth of living expenses saved in an account you can easily access - and no high interest debt, like credit card, before you start investing. 

To give your investments a decent chance of riding out market dips, you'll want to leave your money untouched for at least five years. If you're likely to use it before then, it's better to keep it in savings accounts.

• Find out more: are you ready to invest?

How to pick a stocks and shares Isa

• Think about what you want to invest in. Not every platform offers every type of asset, so if you know you want to invest directly in shares, for example, you wouldn’t be a good fit for platforms like Aviva, The Big Exchange, and Vanguard who only offer funds
• Consider the added charges. Some platforms also charge for buying and selling shares and funds - we include these costs in our summary of platform charges
• Check our customer scores. The most helpful thoughts come from those who use the platform, so we collected opinions from over 6,000 investors to compile our comprehensive investment platform reviews