Flat-Fee vs Percentage-Fee Investment Platforms: Which Costs Less in 2026?
A percentage fee looks small at first but scales with your pot; a flat fee looks bigger but stays fixed. The crossover point where one becomes cheaper than the other, worked through with real numbers.
The two fee models, side by side
| Model | How it charges | Cost behaviour as portfolio grows |
|---|---|---|
| Percentage fee | e.g. 0.25%-0.45% of assets per year | Pound cost rises with portfolio size |
| Flat fee | Fixed £ amount (or tiered flat amount) per year | Pound cost stays constant; % cost falls as portfolio grows |
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Consider a platform charging 0.25% a year on a percentage basis versus a flat fee of £150 a year:
| Portfolio size | Percentage fee (0.25%) | Flat fee (£150) | Cheaper option |
|---|---|---|---|
| £10,000 | £25 | £150 | Percentage |
| £30,000 | £75 | £150 | Percentage |
| £60,000 | £150 | £150 | Break-even |
| £100,000 | £250 | £150 | Flat |
| £250,000 | £625 | £150 | Flat |
At this illustrative fee level, the crossover sits around £60,000 — below that, a percentage fee is cheaper; above it, a flat fee wins by an increasing margin. The actual crossover for any specific pair of platforms depends entirely on their published fee schedules, which should always be checked directly rather than assumed from a general example.
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Open Compound Interest calculatorWhy some percentage platforms cap the fee
To stay competitive for larger portfolios, some percentage-fee platforms cap the annual fee once assets exceed a certain level — effectively becoming a flat fee above that point. This significantly changes the crossover calculation and can make a percentage-fee-with-cap platform competitive at almost any portfolio size, so the presence (or absence) of a cap is one of the first things worth checking.
The costs that sit outside the platform fee
Neither model captures the full cost of investing:
- Fund ongoing charges (OCF) — the fee the fund manager itself charges, which applies regardless of platform, and varies enormously between passive index trackers (often very low) and actively managed funds (often materially higher).
- Trading fees — some platforms charge per trade for buying/selling shares or ETFs, which matters more for active traders than long-term buy-and-hold investors.
- Exit or transfer fees — some platforms (especially older ones) charge to leave, which is worth checking before committing to a platform for the long term.
A practical way to decide
Rather than choosing a fee model in the abstract, it's more useful to estimate the portfolio's likely size in 3-5 years (accounting for contributions and expected growth) and compare the actual, total annual cost — platform fee plus fund OCF — across a shortlist of real platforms at that projected size, not just today's smaller balance.
Sources
- FCA: Investment platform fees and disclosure
- MoneyHelper: Choosing an investment platform
- gov.uk: Individual Savings Accounts (ISA)
Frequently asked questions
At what portfolio size does a flat fee become cheaper than a percentage fee?
It depends on the specific fees being compared, but as a rule of thumb, once a portfolio grows large enough that a percentage fee (say 0.25%-0.45% a year) exceeds a flat annual fee (say £100-£200 a year), the flat-fee platform becomes cheaper — this crossover typically happens somewhere in the tens of thousands of pounds, and should be checked against actual platform fee tables.
Do percentage-fee platforms usually cap the fee?
Some do, capping the percentage fee at a fixed maximum once the portfolio passes a certain size, which changes the crossover calculation — always check whether a cap exists before assuming the percentage keeps scaling indefinitely.
Is the platform fee the only cost that matters?
No — fund ongoing charges (OCF), trading fees, and exit/transfer fees all add to the total cost of investing, so the platform fee alone doesn't determine which option is genuinely cheapest for a given portfolio.
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