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UK Investors Overpaying Platform Fees by Hundreds of Pounds
By: Maisie Grice, Investment Reporter
UK investors are significantly overpaying on investment platform fees, with many failing to shop around and consequently missing out on substantial compound gains. New research highlights that this financial oversight is costing hundreds of pounds annually across both active and passive investment strategies.
Widespread Overpayment Among Investors
According to the latest findings from IG, over 50 per cent of UK investors are utilising the market’s 12 most expensive providers. This trend affects a broad spectrum of investors, leading to unnecessary financial drain that could otherwise be invested for better returns.
Active investors, who engage in frequent buying and selling to outperform the market, face particularly steep costs. Those using expensive platforms incur cumulative fees that are £515 higher than their counterparts on low-cost alternatives. On average, investors on the four most expensive platforms overpay by £711 annually.
Over a 40-year investment horizon, this overpayment amounts to a staggering £28,440 in costs, based on current fee structures and without considering the lost compounding effects that could amplify these losses further.
Passive Investors Also Impacted
Passive investors are not immune to these hiked fees. They overpay an annual average of £263, with those using platforms at the upper end of the market facing an overpayment of £344. Additionally, investors making an average of three trades per month fork out £357 annually, while those on the top four platforms pay £459.
Michael Healy, managing director for UK and Ireland at IG Group, commented on the situation, stating, “Most retail investors in the UK are being ripped off, paying hundreds of pounds a year in fees for a service they could access for far less by switching platforms.”
He added, “While investing was once expensive, it’s no longer the case, and there’s no reason for customers to miss out on compounded gains by paying through the roof in annual charges.”
Lack of Awareness and Engagement
The research also sheds light on why many investors remain overcharged. A significant 47 per cent of Brits have never calculated their total investment fees, indicating a widespread lack of awareness. Complicated investment fee jargon, such as FX spreads and tiered changes, further contributes to this disengagement.
Despite this, 55 per cent of investors express confidence that they are paying the lowest possible fees, highlighting a concerning gap in understanding regarding investment platform costs.
For those aware of high fees, the hassle of changing platforms often deters action. Nearly half of investors cite the ‘life admin’ involved as a barrier, preferring to stay with their current providers despite the financial drawbacks.
This combination of ignorance and inertia underscores the need for greater financial education and transparency in the investment sector to help UK investors maximise their returns and avoid unnecessary fees.
