Cost is one of the biggest factors when it comes to picking an investment platform. Get it wrong and it could significantly dent your investment returns.
For most DIY investors, the option is to either go for a percentage based fee model, where you are charged a percentage based on how much you hold in your investment pot, or a fixed flat fee.
For most small investors with a nest egg of less than £50k, a percentage based fee provides better value, but for anyone making regular trades or with a higher amount, a flat fee could work out better.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
At MoneyWeek, we have always said keeping your costs down should be a priority when thinking about how to approach investing.
But, interactive investor claims its new offering, which comes with a flat fee of £4.99 a month, provides the best value for investors stashing away £30k or less. Available from tomorrow (1 February), we look at whether the offering really is the ‘gamechanger’ the platform claims it to be.
How does interactive investor’s £4.99 a month product work?
The product - Investor Essentials - means investors will only pay the fixed fee for the platform to manage their investments. It is aimed at those with small amounts of £30k a or less.
The new flat fee subscription service is in addition to its £9.99 fixed fee offering - but the £9.99 fee offers those with larger pots with better value. But now those with smaller pots can take advantage of the same investment options at half the price.
The subscription will allow investors access to a wide range of options, including the top funds to invest in, but also investment trusts with high yields and UK shares for £59.88, a year.
UK and US trades will cost the same at £5.99 a pop.
If investors go above the £30k threshold, they will be switched over to the £9.99 plan.
Research by interactive investor found that 67% of investors prefer a subscription flat fee due to simplicity and transparency.
How does interactive Investor’s offering compare to rivals?
Using the new offering, if an investor makes two ad-hoc fund trades in a year and two equity trades, as well as regular investing into one fund per month, and one share (or investment trust) per month the fee would be £83.84 a year.
Under the same criteria, if you hold £10,000 with Hargreaves Lansdown’s investment platform, the annual fee is £86.90 a year. But if you hold £50,000 that amount increases to £199.40 a year.
AJ Bell’s YouInvest would cost you £83.90 a year if you have an investment pot of £10,000 but £163.40 a year if you hold investments worth £50,000.
Fidelity personal investing’s platform fee is cheaper if you hold £10,000, costing you £68 a year. But the cost of investing £50,000 would lead to a charge of £208.
However, it is worth noting that there are other platforms targeting smaller investors and could be cheaper for lower fees.
AJ Bell’s Dodl, for example, costs 0.15% a year (based on your total fund value), though fund options are limited. Freetrade costs £4.99 for a stocks and shares ISA for up to £10k.
Ultimately, it comes down to knowing what you want to invest in and working out which option will work out better. If you have £15k or less, it may still be worth shopping around to nail to most cost-effective option.
What does the subscription include?
ii’s Investor Essentials includes:
- £4.99 flat fee, paid monthly by direct debit
- Free investing for funds, investment trusts and popular UK shares
- £5.99 charge for UK and US individual equities
- A stocks and shares Isa and trading account under the subscription
- Access to the widest range of investments and well-known brands
- Educational content
- An easy-to-use platform
- Quick start range for beginners
The service does not include:
- Free monthly trades
- Junior Isas or self-invested personal pensions
-
The outlook for stocks is improvingThis is the best of times for investors, says Max King. Global risks are receding, but few have noticed.
-
The building blocks for an income strategy: resilience, growth and diversificationAdvertisement Feature Iain Pyle, Investment Manager, Shires Income plc
-
The investment platforms that pay less than 2% interest on cash holdingsDo you know how much interest the cash balance in your investment portfolio, ISA or pension earns? We lift the lid on the best and worst interest-payers - and explain what you can do about it
-
FTSE 100 dividends: the top 10 yieldsTips We look at the 10 stocks with the best dividend yields in the FTSE 100 and discuss if you can depend on these blue-chips for income.
-
Can a woman deliver you better returns?Tips Women often make better stock pickers than men, delivering stronger returns for investors - but with fewer females managing funds, how can you make sure you take advantage of the feminist touch when picking funds? Kalpana Fitzpatrick on how to filter funds run by women and why it matters.
-
Flat fees vs percentage fees - are you paying too much for your investments?Analysis We investigate whether it’s better to choose an investment platform with flat fees, or whether percentage charges could work out cheaper.
-
Should you overpay your mortgage or invest?Advice As interest rates remain high, homeowners with spare cash may be wondering if they should overpay their mortgage. Or is investing a better option? We explain which one might be best for you
-
MoneyWeek: Personal View, December 2022Advice 3 growth and income shares from Stephen Anness of the Invesco Select Trust
