How to use our Investment Forecast Tool
The larger the fees, the bigger the impact on your rate of return. The platform fees charged by different providers might not seem large, but over time they can have a big impact on your investments value. Our Investment Forecast Tool can help you to understand the compounding effects of these fees over time.
Platform fees
In our last blog post we looked at how to compare annual platform fees charged by different providers. For a £50,000 portfolio, you might expect to see a difference of a few hundred pounds per year in fees depending on which provider you choose. This may not seem too bad in a single year, but most people invest for the long term (e.g. retirement pots), and this is where the real impact can be seen.
How to use the Investment Forecast Tool
- Select your investment type (funds or shares)
- Input your lump sum investment
- Input your monthly investment
- Enter your expected growth rate
- Input the duration of investment
- Select the account type
Once you have entered these details, the tool will run a forecast to calculate two things:
- The value of your investment after the specified duration
- The total amount of platform fees paid
It will show you a breakdown for a range of providers, allowing you to understand the true impact of platform fees over the lifetime of your investment.
Note: the tool makes some assumptions in its calculations:
- Platform fees are deducted monthly
- Growth rate is fixed for the duration of your forecast
- Only the platform fees are accounted for (it does not factor in fund management fees or trading charges etc)
Lump sum example invested in shares
Take the example of investing £100,000 as a lump sum for 30 years. It's invested in shares in a Stocks and Shares ISA, with a 5% growth rate. The total platform fees you will pay vary depending on the provider:
| Platform | Investment Value | Annual Platform Fee |
|---|---|---|
| AJ Bell | £443,862 | £1,260 |
| HL | £443,653 | £1,350 |
| Fidelity | £440,532 | £2,700 |
| Interactive Investor | £436,796 | £4,316 |
| Vanguard | £428,736 | £8,809 |
As you can see, the lowest total platform fees paid are with AJ Bell at £1,260 and the highest are with Vanguard at £8,809. A difference of £7,549. But due to the compounding effect over the lifetime of the 30 year investment, it would lead to a difference in pot size of £15,126.
Regular investing example in funds
Next, let's look at an example where there is no lump sum but instead a monthly investment of £1,000 every month for 30 years. It's invested in funds in a Stocks and Shares ISA, with a 5% growth rate. The total platform fees paid will vary with different providers:
| Platform | Investment Value | Annual Platform Fee |
|---|---|---|
| Interactive Investor | £823,587 | £3,994 |
| Vanguard | £816,602 | £8,288 |
| AJ Bell | £802,955 | £16,433 |
| Fidelity | £795,653 | £20,752 |
| HL | £774,972 | £33,431 |
We saw in our last post that platform fees tend to be more expensive when investing in funds vs shares. In this example the total pot size is much larger, so we really start to see how big of an impact it can have. The lowest total platform fees are with Interactive Investor at £3,994, the highest are with HL at £33,431. A difference of £29,437. But again, due to the compounding effect over the course of the investment, it results in a difference in pot size of £48,615.
Summary
These two examples show us that small differences in annual platform fees can have a big impact over the long term. Head over to the Investment Forecast Tool and try it out for yourself.
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This does not constitute financial advice. Always do your own research.