Investment platform fees explained: how to avoid overpaying
- Robin Powell
- 3 hours ago
- 10 min read
Investment platform fees can cost you tens of thousands of pounds over a lifetime of investing. But comparing them is deliberately difficult. Here's how to work out what you're paying and whether you could do better elsewhere.
You've done the research. You know that low-cost index funds beat most active managers over time. You've picked a sensible global tracker, set up a monthly direct debit, and you're feeling pretty good about the whole thing.
Then you get an email from your platform announcing a "major fee reduction" and something doesn't add up. The headline says you'll pay less. The small print tells a different story.
That's what happened earlier this week when Hargreaves Lansdown what it called its biggest pricing overhaul in a decade. The marketing claimed 80% of customers would pay less. And maybe they will. But if you use low-cost ETFs rather than actively managed funds, if you hold investments across an ISA, SIPP and general account, you could be looking at nearly double the platform fees you paid before. The headline rate drops from 0.45% to 0.35%. But the cap on ETF charges in an ISA triples — from £45 to £150.
You're not imagining the confusion. The UK investment platform market now holds £547 billion across nearly 13 million accounts. That's a lot of money sloshing around, and platforms have every incentive to make their pricing hard to compare. They've borrowed a trick from budget airlines: quote an attractive headline price, then bury the extras in the terms and conditions.
So here's what we'll do. We'll break down how platform fees work, show you a method for calculating your true annual cost, and compare what the major platforms charge for a typical evidence-based portfolio. No jargon. No spin.
The four fees hiding in your platform costs
Platform pricing looks simple until you try to compare it. That's by design. Most providers break their charges into multiple components, making like-for-like comparison almost impossible.
The platform fee is the one they advertise. It's the cost of holding your investments with that provider. Some charge a percentage of your portfolio (Hargreaves Lansdown, Vanguard, Fidelity). Others charge a flat monthly amount (Interactive Investor). A few charge nothing at all (InvestEngine, Trading 212).
Percentage fees work in the platform's favour as your wealth grows. If you've got £50,000 invested, a 0.35% fee costs you £175 a year. Hit £200,000 and that same percentage takes £700. The platform isn't doing four times the work. But it's charging four times the price.
Flat fees flip this equation. Interactive Investor's new Core plan costs £71.88 a year whether you have £30,000 or £100,000 invested. Terrible value for small portfolios. Excellent value for larger ones.
"The platform isn't doing four times the work. But it's charging four times the price."
Trading fees are what you pay each time you buy or sell. They range from nothing (InvestEngine) to £11.95 per trade (Hargreaves Lansdown, until March). Most platforms offer free "regular investing" where you set up a monthly direct debit and they batch your orders together. If you're drip-feeding money into an index fund each month, you probably won't pay trading fees at all.
Make an ad-hoc purchase and the charges kick in. AJ Bell charges £5 for share and ETF trades. Fidelity charges £7.50. Interactive Investor charges £3.99 on its standard plans. These add up for active traders. For the buy-and-hold crowd, they're irrelevant.
Foreign exchange fees are the sneaky ones. Every time you buy an investment priced in dollars or euros, your platform converts your pounds. And takes a cut. Typically 0.5% to 1.5%, though some platforms bury this so deep in their documentation you'd need an archaeology degree to find it.
A global ETF listed on the London Stock Exchange in pounds (like Vanguard's VWRP) doesn't trigger FX fees when you buy it, even though the fund holds American, Japanese and European stocks. But buy the US-listed version of the same fund (VT) and you'll pay the conversion charge.
For most UK investors using LSE-listed ETFs, FX fees won't apply. If you're buying individual US shares or international funds, check the rates carefully.
Fund costs are the charges levied by whoever manages your investment. A Vanguard FTSE Global All Cap tracker costs 0.23% per year. An actively managed fund might charge 0.8% or more. These fees come out of your fund's value automatically. You don't see a line item on your statement. The money quietly disappears.
But fund costs are identical whichever platform you use. Vanguard charges 0.23% whether you hold it at Fidelity or AJ Bell or Hargreaves Lansdown. When comparing platforms, you can ignore fund costs entirely. They're a constant.
What matters is everything else. Platform fee plus trading fees plus FX charges equals your true cost of ownership.
Why investment platform fees compound against you
Small differences add up over time.
Take an ETF investor paying £150 a year in platform fees versus one paying nothing. Over 30 years, that gap costs roughly £10,000 once you account for lost compounding.
For fund investors without fee caps, the damage is far worse. A 0.3% annual difference on a £100,000 portfolio can compound to nearly £50,000 over the same period, because the fee grows alongside your wealth.
But let's keep perspective. The difference between a £42 platform and a £150 platform matters less than the difference between investing and not investing at all. If comparing fees is stopping you from getting started, pick any reasonable low-cost platform and move on with your life. You can switch later.
The real danger isn't paying £100 more than you theoretically could. It's paying 1% or 2% in total charges without realising it, because the fees were scattered across four different line items and you never added them up.
Why comparing platforms feels impossible
The complexity is intentional. If fee comparison were straightforward, customers would migrate to whoever's cheapest.
Look at how differently the major providers present their charges. Hargreaves Lansdown quotes a percentage with caps that vary by investment type and account. Interactive Investor quotes a flat monthly fee that changes based on your portfolio size. AJ Bell has percentage fees on some investments, capped fees on others, and different rates depending on how you place trades. Vanguard recently introduced a minimum monthly charge that flips its entire value proposition for smaller investors.
None of them are lying, exactly. But good luck putting these side by side.
It helps to understand what each platform optimises for. Hargreaves Lansdown built its business on investors who hold actively managed funds and value hand-holding. Its new fee structure cuts costs for that traditional customer base while raising prices for ETF investors. Holly Mackay, founder of the consumer research firm Boring Money, put it bluntly: the "fare dodgers" who'd figured out how to use HL's capped ETF fees as a loophole have had "the party ended".
Then there's the ownership question. Hargreaves Lansdown was taken private in 2024 by a consortium including CVC Capital Partners and Nordic Capital in a deal worth £5.4 billion. Private equity firms don't buy businesses to leave them alone. They buy them to extract returns. Cutting headline fees while quietly raising caps elsewhere is a classic playbook move: look generous in the press release, protect margin in the detail.
And once you're on a platform, you tend to stay. Transfers take weeks, sometimes months. Paperwork multiplies. There's always the nagging worry that you'll be out of the market at exactly the wrong moment. Platforms know this. They're betting that even if you notice fees creeping up, you won't bother to leave.
The industry calls this "inertia pricing." It works because switching costs feel higher than they are.
"Private equity firms don't buy businesses to leave them alone. They buy them to extract returns."
How to calculate what you're paying
You need one number: your total annual platform cost. Not the headline fee. Not the percentage before caps. The pounds leaving your account each year.
Step one: work out your platform fee. If your provider charges a percentage, multiply that by your portfolio value. But check for caps. A platform charging 0.35% with a £90 annual cap on ETFs will cost you £90 on a £100,000 ETF portfolio, not £350. If it's a flat fee, multiply the monthly charge by 12.
Step two: add your trading costs. Count how many trades you made last year outside of any free regular investing scheme. Multiply by the per-trade charge. If you're a buy-and-hold investor using monthly direct debits, this is probably zero.
Step three: add FX fees if they apply. Only relevant if you're buying investments priced in foreign currencies. Most UK investors using London-listed ETFs can skip this.
Step four: ignore fund costs. They're the same everywhere.
That's it. Platform fee plus trading costs plus FX fees.
Let's run the numbers for a typical evidence-based investor. Say you've got £100,000 in a global equity ETF, held in an ISA. You contribute monthly through a regular investing scheme. No other trades. No foreign currency purchases.
Here's what each major platform would charge you per year:
The gap between cheapest and most expensive is £150 a year. Over a decade, that's £1,500 in fees alone, before you account for the returns you'd have earned on that money.
Some caveats. InvestEngine only offers ETFs, so if you want funds or individual shares, it's not an option. Vanguard only offers its own products. Interactive Investor's £5.99 Core plan has a £100,000 portfolio limit; go above that and you move to the £14.99 Plus plan.
But the table makes one thing obvious: for a straightforward ETF portfolio, the traditional big-name platforms are now among the most expensive options. Hargreaves Lansdown's "price cut" puts it joint-last.
Which platform suits you
The cheapest option depends on how you invest. There's no universally best platform. Only the one that costs least for your situation.
Portfolio size is the main factor. Percentage-based fees favour smaller investors. Flat fees favour larger ones. The crossover point varies, but somewhere around £30,000 to £50,000, flat-fee providers usually start winning.
If you've got £15,000, paying Vanguard's 0.15% costs you £22.50 a year. Interactive Investor's flat £72 would be more than three times as much. At £200,000, Vanguard charges £300 while Interactive Investor still charges £72.
First question: how much are you investing?
Second question: what do you want to invest in?
InvestEngine's zero fees look unbeatable on paper. But you can only buy ETFs there. No individual shares. No investment trusts. No actively managed funds. For a straightforward global tracker strategy, that's fine. For anything more complex, it's a dealbreaker.
Vanguard has the same constraint in reverse. Great range of low-cost funds and ETFs, but only its own products. If you want a Fundsmith fund alongside your index trackers, you'll need to look elsewhere.
The bigger platforms offer more choice. Fidelity has over 3,000 funds. AJ Bell and Hargreaves Lansdown have thousands more. Whether you need that choice is another matter. Most evidence-based investors do perfectly well with a single global equity fund and maybe a bond allocation.
What about service? Hargreaves Lansdown consistently scores well in customer satisfaction surveys. Their phone support is genuinely helpful. Their app works. Their research is decent. You're paying extra for that, and some people find it worth the premium. I don't, personally. But I can see why others might.
One thing you shouldn't worry about: safety. All major UK platforms are covered by the Financial Services Compensation Scheme up to £85,000 per person. Your investments are held separately from the platform's own assets. If a platform goes bust, your shares and funds don't vanish with it.
Full disclosure: I use InvestEngine for my own ISA. For my needs, zero fees on a simple ETF portfolio made the decision easy. Your needs might be different.
How to switch without the headache
"The fee savings compound forever. The hassle of transferring happens once."
Transferring is easier than it feels. The friction is mostly psychological.
You apply to open an account with your new platform and tell them you want to transfer existing investments. They contact your old provider and handle the paperwork. You don't need to phone anyone or fill out forms in triplicate.
You've got two options for moving your money. A cash transfer means your old platform sells everything, sends the cash across, and your new platform buys it back. An in-specie transfer moves your actual holdings without selling them. The shares or fund units themselves get relocated.
In-specie is almost always better. You stay invested throughout. You avoid triggering capital gains tax on profits, which matters for holdings outside an ISA. And you don't pay dealing fees to sell and re-buy.
The catch is timing. Cash transfers typically complete in two to four weeks. In-specie can take six to eight weeks, sometimes longer if your old provider drags their feet. That delay puts some people off. But being out of the market for a month isn't the disaster it might seem. Markets move randomly in the short term. You're as likely to miss a dip as a rally.
Exit fees vary. Some platforms charge nothing to leave. Others charge per holding transferred. Hargreaves Lansdown doesn't charge exit fees for ISAs. Check before you start.
Several platforms will reimburse your exit fees if you're transferring a decent-sized portfolio. AJ Bell and Interactive Investor both offer this, typically covering up to £500 for transfers above £20,000. Worth asking about.
You don't have to move everything at once. If the idea of transferring your entire portfolio feels overwhelming, start with new contributions. Open your ISA with the cheaper platform for this tax year. Leave your existing holdings where they are. Transfer them later when you've got more confidence in the new setup.
The fee savings compound forever. The hassle of transferring happens once.
Making your money work harder
Platform fees are one of the few things in investing you can control. Markets do what they do. Fund managers disappoint more often than they deliver. But the cost of holding your investments is a decision you get to make.
Next time a platform announces a "fee cut", treat it like a Ryanair sale. Check the total cost for your actual journey, not the headline fare. Add up the platform fee, the trading charges, the caps and tiers and exceptions. Get to a single annual number. Then compare.
You know how to do that calculation now. You know why percentage fees hurt more as your portfolio grows. You know that the big-name platforms aren't always the cheapest, and that zero-fee alternatives exist for investors with simple needs.
If you're happy with your current platform and the fees feel reasonable for the service you get, there's no obligation to move. Cheapest isn't always best. Some people genuinely value helpful customer service or the reassurance of a familiar name.
But if you've never added up what you're paying, now's the time. The numbers might surprise you.
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