Commission-free does not mean cost-free. The regulator’s disclosures show where the money goes, and an hour with your statements shows what it is costing you.
Almost every UK share-dealing app now advertises zero commission. The marketing is accurate as far as it goes. It is also almost beside the point, because commission was never the main cost of trading for most retail investors, and the parts that remain are the ones people rarely add up.
Two sets of figures published under FCA rules make the picture unusually clear. The first is the risk warning every regulated CFD provider must display, stating the percentage of its retail clients who lose money. Across the major UK providers those figures sit between roughly 70 and 80 per cent. The second is the firms’ own audited accounts: taken together, analysis of FCA filings and annual reports puts average revenue at around £4,685 per active UK client per year. That revenue has held broadly steady while headline commissions have fallen to nothing. It did not disappear. It moved.
Four lines carry most of it. The spread, the gap between the buy and sell price, is the largest and the least visible, because it is quoted as a ‘from’ figure that reflects calm markets and popular instruments. Foreign exchange conversion is the second: charges on international share dealing range from a few tenths of a per cent to around 1.5 per cent per conversion, and an investor buying US shares monthly pays it every single time. Custody or platform fees are the third, calculated on different bases by different providers so that identical portfolios can be charged very differently. Overnight financing on leveraged positions is the fourth, and for anyone holding CFDs for more than a few days it is often the biggest of all.
None of this is hidden in any regulatory sense. All of it is easy not to notice, because each item is small and none of them appears as a single line marked ‘cost of trading’.
You do not need a spreadsheet model to find out what you are paying. You need last year’s statements and an hour.
Start with the itemised fees: platform charges, custody, inactivity, withdrawal. They are the easy part. Then estimate the spread cost by taking a handful of your trades and comparing the price you got against the mid-market price at the time, which most platforms show in the order history. Multiply the typical gap by your number of trades. Next, add up every currency conversion, using the rate the platform applied rather than the rate you saw on the news. Finally, if you hold leveraged positions, total the financing charges, which are usually listed separately in the account history.
Add the four together. For an occasional investor in UK shares the total is often modest, and the exercise simply confirms that. For anyone dealing regularly in overseas shares, or holding leveraged positions, it is common to find that the real annual cost is several multiples of the advertised one, without a single word of the marketing having been untrue.
Not necessarily switch. Transfer friction is real, and for small portfolios the differences between platforms are small in pounds. The value of the audit is that it turns platform choice from a habit into a decision made with your own figures. Independent testing that opens funded accounts and records what real trades actually cost, of the kind published by The Investors Centre, exists precisely because the published fee tables only describe what a platform chooses to itemise. Your own statements describe what it actually took.
The cheapest platform is not automatically the right one, and cost should not be the only factor in choosing where to invest. But of all the inputs to your long-term return, the cost of the platform is one of the very few you fully control, and it takes an hour to measure.
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