EDIT: I’m very new to investing and thought maybe somebody here would know about this stuff. If this isn’t the right place for this kind of question please let me know!
In this post over on Personal Finance Stack Exchange, the top answer states the following:
By contrast: open a Vanguard account: free. Transfer £50/mo. into eTrade account: free.
The information about fees on Vanguard’s website seems to suggest that opening an account actually costs 0.15% annually, not exactly free…
Am I missing something here? Also, what’s an eTrade account?
Yeah I looked at a lot of those and their fees are so hard to figure out. Some charge to open an account, custody fees and exit fees. It’s hard to compare them. So no, Vanguard aren’t free but there’s plenty a lot worse
Have you had a look at https://freetrade.io
Not long launched so you’ll have to go on a waiting list but I use them and their fees are clear (or non existent in most cases)
With vanguard is free to open an account, the 0.15% is the account managemant fee, which is 0.15% of the amount you have invested annually.
Then what ever fund you buy into will have its own fee (OCF) which is usually taken out of the fund itself buy selling down units that you own to cover the fee.
For example, I invest with vanguard and my fees are 0.15% for the account management + 0.24% for the index fund that I buy.
@jensbr One thing to consider from a purely fees perspective is whether it makes more sense for you to use a platform which charges a fixed fee or a percentage fee. This will depend on the size of your portfolio. Using Vanguard v Freetrade as an example:
Although Freetrade does not charge a fee for a non-ISA account, it will charge a fixed £3/month fee for holding an ISA account from April onwards. You would need to have over £24k invested for the account management fee of a Freetrade ISA to be cheaper than Vanguard’s 0.15% management fee.
You can use both Vanguard and Freetrade wihout incurring dealing fees but comparisons involving other platforms will often be complicated by dealing fees on top of management fees. Their impact will depend on the frequency you wish to trade and the types of trades you make.
Of course, there are other things to consider on top of fees. Vanguard’s platform only gives you access to Vanguard’s own funds whilst Freetrade and many other platforms give you access to funds from many providers as well as well as shares.
The 0.15% stood out to me because I saw some funds with expense ratios lower than 0.05% so I couldn’t quite understand how the account management fee could be so much larger in comparison.
From reading your post, it seems the answer is that there simply isn’t a platform that is just overall the best in terms of fees, because it will depend entirely on what kind of trades you do and size of portfolio.
I will be putting our kids JISA into vanguard once the transfer from CTF to JISA is completed at foresters financial, if looking into JISA even though the website states £100 a month you can add a £10
eTrade is an old-school stockbroker in the US, it’s not available in the UK.
Yeah, there isn’t a cheapest platform for all, different platforms can better suit different users. I think Vangaurd and Freetrade are both good & the cheapest options around, but it depends what you are looking for as well as price.
- Vangaurd’s good if you want to invest via a website and are happy with the Vanguard range of funds. The percentage fees will be low for a small portfolio but will grow depending on how much you add to your portfolio and how much it portfolio increases overtime.
- Freetrade gives you wider choice of investments via an app: individual stocks and ETF’s (by Vangaurd, Blackrock & 7 others). The non-ISA account is free, ISA is fixed at £3pm, I also read the waitlist is less than 2 weeks now (but currently iPhone only).
So started the process to transfer JISA to Vanguard today fee is 0.15% but then have a 0.20% of interest to cover costs.
Then you set up a regular payment for a range of different funds with different risk level then each fund also has a % fee
Is this a stocks & shares ISA? If so, is there any point in using your ISA allowance on it if you’re making less than the capital gains tax threshold in a given year? If there are no recurring fees on the non-ISA account that seems almost too good to be true.
You need to consider how your portfolio may grow over a long period of time.
For example, If you invest £500 per month for 30 years you will have contributed £180k. Assume a relatively conservative growth rate of 5% per year, the account value would be £328k at that point. If you wanted to sell everything in one go and had not been using an ISA, you’d be liable to capital gains tax of about £27k assuming you are a higher rate tax payer in 30 years ( 0.2 x (328 - 180 - 12)) Compare this to Freetrade ISA fees of about £1k over 30 years. You’d also be earning significant dividends above the dividend tax threshold which would be taxable if not in an ISA.
The above is a very crude estimate because things like fees and thresholds will change in 30 years time, but it gives a rough idea of the value of using an ISA.