CSD alternatives & transaction charges

Plenty of discussion about other platforms in the main CSD fee hike thread here:
https://forums.moneysavingexpert.com/showthread.php?t=5880383

traineepensioner wrote: »

I've been looking at Iweb fees and they mention a "Transaction charge" of 0.5% in addition to their £5 dealing costs. Do all platforms have this charge? There's no mention of this in II's charges.... Or is this just another hidden charge that investors don't see?

I use II and iWeb and iWeb does not have a 0.5% charge in addition to the £5 dealing costs (perhaps you're referring to stamp duty on shares and investment trusts, which is applicable to all platforms).

traineepensioner wrote: »

Thanks again, it must be a hidden charge within the fund.

I was looking at the fund buying example (Farouk) at https://www.iweb-sharedealing.co.uk/PDFs/CostsAndCharges.pdf

Stamp duty is not a hidden charge, it's a Government tax. It doesn't apply to ETFs or open ended funds.

In the case of Farouk, iWeb is using a regulatory figure of 0.5% to represent the average cost across the industry. It is a bit of a nonsense figure because it is not charged to the investor, but it is part of the cost of running the fund and is included in the overall fund performance. It is therefore diluted between all holders of the fund and the actual percentage could be more or less than 0.5% depending on how actively traded the fund is.

They don't mention the big hidden cost in actively managed funds and that's the cost of portfolio turnover - when underlying investments are bought and sold by the fund manager. All in all, the hidden costs can add up to as much as 5% per year, but as these costs are deducted from fund performance they will tend to cause the fund to underperform over the long term if they are higher.