Understanding investment fees and costs
Guide Summary
- Understanding different fees can help you understand the effects on your portfolio over time, and where you might be able to cut costs. This can stack up to big savings long-term.
- Some fees are less obvious and might not be readily apparent when signing up to a platform, so make sure you’re aware of these.
- Check on the fees you’re paying in your platform, in account summaries, or in the Key Investor Document (KID) if investing in funds.
Why investment fees matter
Investment fees can have a significant impact on your portfolio over time. Where you invest, how you invest, how frequently you invest – these can all impact the annual costs of your investments. If your portfolio earns a 7% average annual return, and your fees add up to 1%, your real returns are only 6%.
How investment fees affect your returns
It’s easy to shrug off small percentages, as they may not feel like much. This can really add up over a long-term investment horizon, and consider that compounding works in the opposite direction too. Lets say you invested £100,000 over a 30 year period, with a 7% average return (before fees):
- 0.25% fees – £761,000
- 1.5% fees – £574,000
By saving on fees, you’d end up with an extra £187,000!
Types of investment fees explained
If you’re using an investment platform such as Chip, the fees you’ll need to be aware of are platform fees, and fund management fees.
If you’re using a financial advisor, there will be a fee associated with this.
In some cases, there are direct fees associated with buying and selling assets. This is more common with trading stocks, mutual funds, and foreign investments; and are typically charged per transaction.
Platform or account fees
Platform fees, sometimes called account fees, are charged by your platform operator to cover certain operating costs.
These fees are usually expressed as a percentage of your portfolio value e.g. with Chip, it’s 0.25% on our free investing plan, or 0% with ChipX*. Some providers charge a flat monthly or annual fee e.g. £4.99 per month.
Historically, DIY investing was dominated by a few providers, who were able to charge higher maintenance fees. The development of investment platforms, like Chip, give investors an easily accessible experience at much lower costs.
*A monthly or annual ChipX membership fee is required and fund management charges apply.
Management fees (OCF)
A management fee, or Ongoing Charge Figure (OCF), represents the annual cost of running a particular investment. Typically these are applied to investments in ETFs and Mutual Funds. These fees are also expressed as a percentage of your portfolio e.g. 0.45%.
Management fees enable the professionals choosing and managing investments on your behalf, while also researching, trading, and monitoring your investments, to work towards getting you the strongest performance.
If you invest using a ready-made solution, sometimes the platform fee and management fee are layered into one, easy to understand fee.
For example, if you invested in a ready-made fund with an OCF of 0.45%, using a platform that charged a 0.25% platform fee, you may see this expressed as one fee of 0.7%.
Advisory fees
If you use a financial advisor, or advisory platform, there will be an associated fee, on top of your platform and management fees.
This may be expressed as a percentage of your portfolio, or as a flat fee annual, monthly or even hourly fee for services and consultations.
Robo-advisors are a relatively new form of advice, and generally come at a lower cost to traditional financial advisors. These can be a separate service, or in some cases are built into platforms themselves.
Trading or transaction fees
Trading or transaction fees are charged when you buy or sell investments. These are more common with individual stocks, mutual funds, or when investing in assets outside of the UK.
Some platforms offer commission-free trading, while others may charge a fixed fee per trade (e.g. £5–£10), especially for less frequently traded assets.
It’s worth checking whether your platform charges per transaction or offers commission-free investing. Over time, frequent trading can rack up costs and eat into your returns, particularly if you're making small trades or investing regularly.
Potentially hidden fees
Inactivity fees
Some platforms may charge a fee if your account is inactive for a certain period—meaning you haven't made a trade or deposit in a while. While this is becoming less common with modern platforms, it’s worth checking the small print to avoid any surprises.
Foreign Exchange (FX) fees
If you’re investing in international assets (like US stocks or global ETFs), your pounds need to be converted into a foreign currency. FX fees are usually charged as a percentage of the amount converted – often around 0.5% – 1.5%. This can apply both when you buy and sell, so it’s important to factor these costs into your decision to invest internationally.
Exit or withdrawal fees
Some providers may charge you for withdrawing or transferring your money out of a platform – particularly when closing an account or moving investments to another provider. These can be fixed fees (e.g. £25 per fund) or a percentage of your balance.
Checking exit terms ahead of time can save you from unnecessary costs later on.
Bid-ask spreads
This is the difference between the price a buyer is willing to pay (the bid) and the price a seller wants to receive (the ask). While this isn’t a “fee” in the traditional sense, it can represent a hidden cost – especially with less liquid investments like certain ETFs or niche funds.
The wider the spread, the more you might lose when entering or exiting a position.
How to check the fees you’re paying
Most UK investment platforms (like Chip) provide:
- A "fees" or "charges" section on the product/fund page
- A key facts document (KID or KIID) – this is required for each investment fund or ETF
- Your account summary or statements – often shows what fees you've paid
Understanding retirement and long term investing
Getting yourself on track to a healthy retirement will require some planning, and a long-term investment outlook. Saving simply isn’t enough once you factor in the effects of inflation on a cash sum.
The next guide will take you through why long-term investing matters, your investment options for retirement, and some planning considerations to keep you on track.
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than your original investment. Chip does not offer financial advice and this should not be considered as a personal recommendation.
