Hidden Fees - Are you aware of what you're paying for your investments?

OpenMoney Team

December 19, 2019

When it comes to investing, it makes sense to shop around for the most competitive rates so that you can keep more of your potential returns, but it can be tricky to do so when not all providers are upfront with the costs involved in the management of your portfolio. A recent study by The Lang Cat[1] states that only 54% of investors are aware of what they are being charged for their Stocks and Shares ISA.

According to The Telegraph[2], investors could be paying fees up to six times higher than advertised rates, so are you aware of what are you paying for?

Exit Fees

We’re seeing an increase in investment platforms abolishing their exit fees which is shaking up the way the industry has operated for many years. As things stand, when looking to transfer your investment to another platform, your current provider can charge an (often sizeable) exit fee. This can often deter from a switch regardless of how competitive rates are and ultimately causes investors to miss out on the best rates available. As we offer financial advice here at OpenMoney, we have found ourselves in situations where we have advised customers against transferring to our products purely because the exit fees charged by their current provider would make transferring a more costly option, which is the last thing we want!

The OCF

The standard charge that comes with investing is the Ongoing Charge Figure(OCF) - here at OpenMoney we combine the OCF and Transaction Fees to give you our ‘Overall Portfolio Charge’. You should be made aware of from the offset. The OCF is made up of the fund manager’s fees for running your portfolio as well as admin and marketing costs. This fee will usually be presented in percentage format to represent how much of your investment is taken by running costs. It’s worth noting that although this fee is transparent as standard, it does not include others that could really ramp up the cost of your portfolio.

Transaction Costs

No two funds are the same and so you can expect that some providers will charge more in what’s called ‘transaction costs’ since they are buying and selling stocks more frequently than others, in order to make the most of the market in all states. It’s not necessarily a bad thing as long as you know what you’re paying for and why, and as long as you’re happy with the level of risk being taken with your investment.

Trading fees, commissions & stamp duty

You will need to pay Stamp Duty Reserve Tax (SDRT) on any electronic, paperless share transactions. The amount of SDRT you pay is worked out at a flat rate of 0.5%[3]based on what you give for the shares, rather than what the shares are worth.

So, if it’s a cash transaction, the amount of SDRT is based on the amount of cash you pay. For example, if you buy shares for £1000, you’ll pay £5 SDRT whatever the value of the shares themselves. If you give something else of value, the SDRT is based on the value of what you give.


[1] The Lang Cat – Can’t get there from here

[2] The Telegraph

[3] Gov.co.uk

Join our mailing list

Thanks for joining our mailing list.

We've sent you a verification email.

Oops! Something went wrong while submitting the form.
Thank you! Your submission has been received!