What impact does currency exchange mark-up have on broker fees?
Let's say I held £100,000 in Interactive Investor and wish to add £20,000 to my investment each year in monthly instalments. They charge £10/month for a standard account[1] that offers one free trade per month with no percentage based platform fee so on the surface it appears I pay £120 in fees a year.
Existing Investment: £100,000
Annual Platform Fees: 12 * 10 = £120
However there's also a mark-up on the exchange rate when investing in non GBP funds of 1.5%.[1]
I invest entirely in US based index funds so I would pay 1.5% on the £20,000 invested and then pay another 1.5% when it is eventually taken out. There's a big assumption the fee stays the same but I can't see any other way of calculating this.
Annual Investment: £20,000
Annual Exchange mark-up Fees: 20,000 * 0.015 * 2 = £600
Do mark-up exchange rates really have this much of an impact?
If I have calculated this correctly why do many reputable sites brokers omit their exchange fee margin from their fee schedule [2] while advertising their less relevant platform fee? Popular comparison sites also fail to mention this cost.[3]
If I have calculated incorrectly or based it on faulty information where have I gone wrong?
[1] media-prod.ii.co.uk/s3fs-public/pdfs/rates_and_charges_uk.pdf
[2] www.vanguardinvestor.co.uk/what-we-offer/fees-explained
[3] www.moneysavingexpert.com/savings/stocks-shares-isas/
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