Percentage vs Flat Platform Fees: Which is Cheaper?
Investment platform fees are typically charged in one of two ways: as a percentage of your investments or as a flat fee.
Which option works out cheaper will depend on factors such as how much you have invested and how your portfolio grows over time. Below, we explain how each fee structure works and when one may be cheaper than the other.
What is a percentage-based platform fee?
Percentage-based platform fees are calculated as a proportion of the total amount you have invested.
Some providers charge a single percentage on the full value of your portfolio, while others use a tiered structure, where different percentages apply to different portions of the investment value.
For example, if a platform charges 0.5% of the total amount invested, a portfolio worth £100,000 would incur an annual platform fee of £500.
What is a flat-fee investment platform?
Flat-fee platforms charge a fixed amount, regardless of how much you have invested.
For example, if a platform charges £120 per year, a portfolio worth £1,000 would incur an annual platform fee of £120. A portfolio worth £1,000,000 would also incur an annual platform fee of £120.
When percentage-based platform fees are cheaper
As a general rule, platforms that charge percentage-based fees tend to be cheaper for investors with smaller portfolios.
As portfolio values increase, flat-fee platforms often become more cost-effective. However, this will depend on the specific fee levels charged by each provider.
Break-even points explained
A break-even point is the portfolio value at which the cost of a percentage-based platform fee and a flat platform fee are the same.
For example, if a percentage-based provider charges 0.5% per year, a portfolio worth £24,000 would incur annual platform fees of £120.
If a flat-fee provider charges £120 per year regardless of how much is invested, £24,000 would be the break-even point.
Once the portfolio value exceeds this level, the flat-fee platform would become cheaper. For example, at a portfolio value of £240,000, a 0.5% fee would result in annual platform fees of £1,200, while the flat-fee platform would still charge £120 per year.
Compare fee structures using our calculator
The examples above are illustrative only and do not reflect the actual platform fees charged by specific investment providers.
You can use our Platform Fees Calculator to compare annual platform fees across a range of investment providers available in the UK.
This does not constitute financial advice. Always do your own research.