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There are different types of fees charged by trading platforms.
1. Stock trading fees
This is a flat fee charged by the platform each time you buy or sell a stock. Some platforms have no stock trading fees, while others can charge between £6 and £12 per trade. Fund trading fees can range from zero to the same fees as stock trading.
2. Platform fees
This is an annual fee charged for holding shares or funds on the platform. Some platforms charge no fees for this, some charge a flat fee, and others charge a percentage of the portfolio’s value between 0.25% and 0.45%.
These fees are usually deducted from the cash you have in your account, or you can also pay the fees directly with your debit card. However, if the fees remain unpaid, the platform may sell some of its shares as a last resort.
It’s also worth looking at the types of investments that incur platform fees, as some platforms charge for holding funds rather than shares. If your shareholdings are subject to platform fees, the annual maximum amount may be limited.
There are two types of percentage-based platform fees.
- tiered pricing: This is the most common type of platform fee, where you pay different fees for different “slices” of your portfolio. For example, if you have a portfolio worth £300,000, you might pay 0.45% on the first £250,000 and 0.25% on the next £50,000.
- non-tiered rates: A few providers charge non-tiered fees, so you pay the same fee across your portfolio. For example, if his portfolio is £300,000, he will pay 0.2% of the entire £300,000.
3. Foreign exchange fees
If you buy or sell shares in a currency other than pounds sterling, the platform charges a foreign exchange fee. This is also called a currency exchange fee and usually it varies between 0.5% and 1.5%. Some platforms charge higher trading fees for foreign stocks.
A few platforms allow you to hold foreign currency in your account, so you can exchange it once and use that money to buy stocks or keep the proceeds from selling stocks in your local currency.
Investments in currencies other than sterling are subject to exchange rate risk. Exchange rates are constantly changing and may affect the value of your investment in pounds sterling. Even if the stock price rises in your home currency, you could still lose money in pounds sterling. Shares listed on foreign exchanges may be subject to additional trading and exchange fees, may have other tax implications, and may not offer the same or any regulatory protection as in the UK .
4. Other charges
Some platforms charge other types of fees, such as inactivity fees, withdrawal fees (for accounts held in foreign currencies), and telephone transaction fees.
Although not strictly fees, the platform also makes money from the buy/sell spread on stocks. For example, let’s say you’re looking to buy a stock with a bid/ask spread of 98 to 100p. This means you pay 100p to buy a share and receive 98p to sell a share.
Some platforms may offer more competitive buy/sell spreads than others, and lightly traded stocks such as FTSE Small Cap companies typically have wider spreads than FTSE 100 companies.
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