Free Dealing, Paid For By Your Cash: The Platform Fee Hiding in Plain Sight

Free dealing has a nice ring to it. It sounds like a gift from your broker, or at least a fair trade: no commission, no ticket charge, no nagging cost every time you buy or sell. But a platform is a business, not a charity. Somewhere, somehow, the meter is still running. In 2026, one of the most reliable meters is the cash you leave sitting in your account.

This is not a scandal. It is a business model. But it is a business model that rarely appears in the headline fee table, and that makes it worth understanding. If you hold an ISA or SIPP, your broker may be earning a spread on your uninvested cash while paying you little or nothing for the privilege. The gap between the two rates is the fee you did not know you were paying.

The business model in one sentence

Your broker’s cash sweep is a spread business. Client cash is pooled and placed with banks, or sometimes into money-market vehicles. The platform earns a wholesale rate on that cash and pays you a retail rate. The difference is revenue. It helps fund the app, the call centre, the regulation and, yes, the free dealing.

None of that is automatically bad. The problem is that the spread is easy to miss, especially when the marketing is all about zero commission. A platform can be cheap on trades and expensive on cash. Or cheap on cash and expensive on trades. The only way to know is to compare the whole package, not just the bit in the advert.

Why ‘free’ can be the costliest line

Suppose, purely for illustration, you keep £20,000 in platform cash for a year. The platform pays 1.25% on that cash. A sterling money-market fund yields 4.10%, and a one-year gilt yields something similar after costs. The gap is 2.85 percentage points. On £20,000, that is £570 a year.

Now compare that with dealing charges. If you make twelve trades at £5 each, you pay £60. The free-dealing promise has saved you £60. The cash spread has cost you £570. That is not a rounding error. It is the main event.

Scale it up and the maths gets louder. A SIPP with £50,000 sitting in cash after a transfer, or an ISA with sale proceeds waiting for the right moment, can bleed four figures in opportunity cost over a year. The cash feels safe because it does not wobble. But safety and cost are different things. Cash can be the right place for money you need soon. It is rarely the right place for money you have no plan to use.

The three rates you need to find

A proper audit starts with three numbers, not one.

1. The client cash rate. Find out what your platform actually pays on uninvested cash. Check the terms, the rates page and your statement. Look for tiers, minimum balances, exclusions and whether the rate applies to ISA cash, SIPP cash or both. Some platforms pay nothing on small balances. Some pay interest only above a threshold. Some pay a different rate depending on how the cash is held.

2. The reference rate. Compare like with like. A useful benchmark is the yield on a sterling money-market fund, which tracks short-term interest rates, or the yield on a short-dated gilt held to maturity. In 2026, these are not exotic instruments. They are plain, boring benchmarks for what cash-like money can earn. Use the platform’s own factsheet, the Bank of England’s data or a reputable fund screener. Do not compare a gross money-market yield with a net platform rate without adjusting for charges.

3. The all-in platform cost. Add up the account fee, dealing charges, foreign-exchange spread, exit fees and any cash-transfer charges. Then add the cash spread. That is the real cost of doing business with the platform. It is the number that should sit next to the logo in your head.

How to audit the spread in half an hour

Start with your last twelve months of statements. Work out your average idle cash balance, not the peak or the month-end figure. Include dividends, sale proceeds and contributions that sat around before being invested. Most people overestimate how quickly they put cash to work.

Next, find the rate your platform paid on that cash. Then find a sensible benchmark: a sterling money-market fund yield, or a short-dated gilt yield if you are comfortable with the maths. Multiply your average cash balance by the gap between the two rates. That is your annual cash drag in pounds.

Now ask a simple question: would I pay this as an explicit fee? If the answer is no, you have found something worth fixing. It might mean moving spare cash into a money-market fund, buying short-dated gilts, transferring cash to a linked bank account or simply asking the platform for a better rate. It might also mean changing platform. A broker that charges £9.99 a trade but pays a decent cash rate can be cheaper than a free-dealing app that pays almost nothing.

A few warnings. Money-market funds are not bank deposits and are not covered by the Financial Services Compensation Scheme. Short-dated gilts carry capital risk if you sell before maturity, and dealing costs can eat the advantage on small amounts. Platform cash may be held in trust or as a bank deposit, with different protections. Check the small print before you move anything. The point is not to chase yield into something you do not understand. The point is to stop treating cash as a free parking space.

Keep a buffer, but price the rest

There is a sensible role for platform cash. Keep enough to cover pending trades, dividends, fees and a short buffer so you are not forced to sell something at the wrong moment. That is operational cash. It has a job.

The rest is different. If it is waiting for an investment idea that may never arrive, or sitting there because you have not got round to it, it should be priced like any other holding. In a world where short-term sterling yields are still meaningful, a zero or near-zero cash rate is not a neutral default. It is an active decision to accept a poor return.

The contrarian point is simple. Everyone compares platform fees and dealing charges because those are visible. The bigger cost is often invisible, buried in the gap between what your cash earns and what it could earn. In 2026, that gap is wide enough to matter. Check it before your broker’s next set of results does it for you.