The Hidden Forex Cost of Investing: What Your Broker Isn't Telling You

When you buy a USD-denominated ETF with GBP, EUR, INR, or AUD, your broker converts the currency before executing the trade. The conversion rate used is almost never the true interbank (mid-market) rate — instead, the broker applies a markup, typically 0.5–2% above market. On a £10,000 investment: 1% markup = £100 in FX cost, on top of any visible commission. On a £100,000 portfolio with annual rebalancing, that's £2,000+ in currency drag per year.

• Interactive Brokers: 0.1% (≈ $10 per $10,000) — industry low
• Trading 212: 0.15% — competitive for retail
• Freetrade (UK): 0.45% on non-GBP transactions
• Hargreaves Lansdown: 1.0% up to £5,000, 0.75% above that
• eToro: 1.5% FX fee on all currency conversions
• Most high-street banks for international share dealing: 1–2%

Assume a £100,000 portfolio invested in global equities, rebalanced once per year. With IBKR (0.1% FX each way, 0.2% round trip per year): total FX drag over 20 years is approximately £4,000–8,000 depending on portfolio size changes. With Hargreaves Lansdown (1% each way, 2% round trip): total FX drag over 20 years is approximately £40,000–80,000 on the same portfolio. The difference compounds because each year's FX cost is applied to a larger portfolio.