How to Choose a UK Investing Platform Without Overpaying

The investing platform you pick can cost more over time than the investments you choose. Here is what to check first.

Opening an investment account in the UK has never been easier. Most platforms let you sign up in minutes, fund the account by bank transfer and start buying shares or funds the same day. The hard part is choosing between them, because the headline differences are small and the real differences are buried in the fee pages.

Start with what you will actually do

A platform that is cheap for one investor can be expensive for another. Someone putting £100 a month into a single fund has very different needs from someone buying individual shares a few times a week. Before comparing anything, decide roughly how much you will hold, how often you will buy and sell, and whether you want funds, shares, or both.

The four costs that matter

The first is the platform or account fee. Some platforms charge a percentage of your balance each year, others a flat monthly or annual fee. Percentage fees tend to suit smaller pots, and flat fees usually work out cheaper as the balance grows.

The second is dealing charges, the cost of each buy or sell. Some platforms investment account advertise commission-free share dealing, but check whether that applies to UK and international shares alike, and whether there is a charge for regular investing.

The third is the foreign exchange fee on overseas shares. If you buy US shares, the platform converts your pounds into dollars and usually takes a percentage for doing so. On an active account this can quietly become the largest cost of all.

The fourth is fund charges, which are set by the fund manager rather than the platform, and are paid on top of everything else. A low-cost tracker fund and an actively managed fund can differ by close to one percent a year.

Check the protections

Make sure the platform is authorised by the FCA, which you can check on the Financial Services Register. Eligible investments held with an authorised firm are covered by the Financial Services Compensation Scheme up to £85,000 per person per firm if the firm fails, although this does not protect you against investments falling in value.

Use the tax wrappers

For most people, the account should be an ISA before it is anything else. Up to £20,000 a year can go into ISAs, and any income or gains inside them are free of tax. Pensions, including a self-invested personal pension, offer tax relief on the way in. A general investment account is usually only needed once those allowances are used.

Compare like with like

Because platforms present their charges so differently, the easiest way to compare them is to work out what a year would cost for your own pattern of investing. Independent reviews of the best trading platforms that test funded accounts and record what is actually charged can save a lot of time here.

Do not overthink the switch

If you already have an account and find it is expensive, moving is usually simpler than people expect. Most platforms accept transfers of ISAs and pensions, and some will cover exit fees charged by your old provider. The small effort involved can pay for itself many times over across a lifetime of investing.

The value of investments can fall as well as rise, and you may get back less than you invest. This article is general information, not financial advice.

Photo by Rafael Minguet Delgado: https://www.pexels.com/photo/stock-market-chart-with-candlestick-patterns-39195833/