One of the amazing things about investing in, or raising money for, early-stage companies is that fee comparison tends to be ignored.
Perhaps one reason is that unlike investing in main market stocks, where you are dividend hunting. Or, forex trading, where you are trying to take short-term profits sometimes within a matter of minutes. The fees are not generally considered a large cost in terms of the percentage return or risk.
If you are investing in dividend stocks wanting to make 5% a year, commissions and custody fees can take a large bite of your profits. As with forex trading, if you are trying to make 5 pips on the trade and your brokers spread is 2 pips instead of 1. As a percentage that is a big deal.
Comparing equity crowdfunding fees and costs
But if you investing through an equity crowdfunding site you are probably aiming to make at minimum 10x your money back. So if you get charged a little fee on the way in or a percentage of your profits it’s not that bigger deal really (in percentage terms of course).
Same if you are raising money. If you’ve founded a start-up you’ll want to know where you have the best chance of doing so rather than do a cost comparison of equity crowdfunding platform fees before choosing a provider. After all, if you don’t raise any money because you’ve gone with the wrong platform then a larger percentage of nothing, is still nothing.
I can’t tell you how many meetings I’ve had with banks, brokers and various financial service provides where the phrase “let’s no discuss costs at this stage, let’s just see if we can work together” (obviously in various guises) has been uttered.
But cost comparison is still important. Especially, when the costs are after the fact. You’ll have to consider what the end goal is going to be. Plus, just because someone says something costs something, that doesn’t really mean anything. A rate card in financial services is probably the most inaccurate piece of information ever. All prices are subject to negotiation.
But anyway, if you want to compare the fees associated with the various platforms in the UK we’ve put together a handy little equity crowdfunding cost and fee comparison table for you.
So far we’ve added the majors like:
With more to follow…
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.