Many investors do not research which trading platforms (a.k.a. on-line stockbrokers) are the cheapest before they sign up with them. Neither do all platforms offer the same facilities – for example all the different types of ISAs and allow investment in both funds and investment companies or direct shares. Retail investors tend to depend on which name they remember from advertising, from friends’ recommendations and other sources. But now the Association of Investment Companies (AIC) has provided a useful comparison tool.
The AIC represents investment companies and has issued the following press release about the launch of their new platform comparison tool: https://www.theaic.co.uk/aic/news/press-releases/aic-launches-platform-comparison-tool-on-its-website
This is an exceedingly useful tool and shows that the platform charge on several platforms can be as high as over £3,000 p.a. or as low as less than £100 p.a. for a portfolio valued at £1 million invested solely in open-ended funds. In other words, an enormous range!
They also have separate tables for investments in investment trusts so you can compare those charges against open-ended fund portfolios, or a mix. Funds are often more expensive. You might notice they don’t give the cost of directly investing in shares, but these would be the same as investment trusts as they are simply listed company shares.
They don’t include transaction costs on trading which is worth bearing in mind though. The volume of trading as well as the size of portfolio affects the overall costs.
Surely you don’t need reminding that minimising what you pay to platforms is one of the key ways to maximise long-term investment performance as they can seriously erode your returns. If you are looking for a new stockbroker, it would be worth reviewing this comparison tool first because although service quality is important there is little correlation between cost and service. Some of the lowest cost brokers provide very good service in my experience so one wonders why there is such a price difference in this market. One reason might be the difficulty investors have in switching brokers that reduces competition in this market.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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