“Zero commission”: what your portfolio really pays (TER, FX, spreads)

Commission is only one of three cost layers — often the smallest. TER, FX and spreads: where they hide, and what they compound to over twenty years.

“Zero commission” may be the most effective slogan in the history of online brokerage. It is also, taken literally, incomplete: commission is only one of three layers of cost in a portfolio — and often the smallest. The other two never show up on an invoice, which does not stop them from being paid, year after year, straight out of your returns.

This article walks through the three layers — ETF expense ratios, currency conversion, commissions and spreads — shows what they compound to over twenty years, and explains how to find them (or not) on your statements. No broker will be named: the mechanics are universal, and the only fee schedule that matters is your own broker's.

Layer 1 — ETF expense ratios (TER)

An ETF charges annual management fees: the TER (total expense ratio, shown as “ongoing charges” in the fund's key information document). Its defining trait: it never appears on your statement. It is deducted directly from the fund's net asset value, day after day — you do not pay it, it is subtracted from you. It is the most painless cost in existence, which makes it the easiest to forget.

The orders of magnitude, as published by the issuers in their fund documents: roughly 0.05% to 0.20% a year for the large world or S&P 500 index ETFs, and more like 0.3% to 0.7% a year for thematic or niche ETFs. These are published ranges, not your fund's figures: the exact TER lives in each ETF's key information document and factsheet — that is where it is authoritative, and nowhere else.

Layer 2 — currency conversion

Buying a US stock quoted in dollars from a euro account triggers a currency conversion — and most brokers charge a conversion fee on it, often somewhere between 0.25% and 1% of the amount converted. That is a generic range, a commonly observed order of magnitude: the exact rate is in your broker's fee schedule, and that schedule is what counts.

The part that stings: the fee applies on the buy and on the sell — a round trip pays it twice — and sometimes on dividends received in a foreign currency too. On a portfolio heavily invested outside the eurozone, the FX layer can weigh a great deal without ever looking like a fee line in the app.

A related subtlety: the currency an ETF trades in is not the currency you are exposed to. A world-index ETF quoted in euros still holds assets largely priced in dollars and other currencies — buying the euro-quoted line avoids the conversion fee, not the currency risk. The two questions are different, and only the first one belongs in a fee review.

Layer 3 — commissions and spreads

Brokerage commissions are the visible part — where they exist at all. Then there is the spread: the gap between the price you can buy at and the price you can sell at in the same instant. You pay it on every trade, inside the execution price itself — so it never shows up as a fee. It is tight on large, liquid ETFs during the underlying markets' trading hours, and widens on thinly traded products or outside those hours.

The compound effect: twenty years of fees in one table

An annual percentage always looks small; the horizon is what makes it big. Take a purely illustrative example — the assumptions are spelled out in the note under the table: €10,000 invested for twenty years at a hypothetical constant return of 5% a year before fees, with total annual costs (TER + FX + commissions and spreads, all in) of 0.2% a year in one case and 1.5% a year in the other.

A 1.3-point difference in annual fees, and the endpoints differ by €5,642 — more than half the initial stake. The mechanism is compounding: every euro taken this year is also a euro that will no longer work for the next nineteen. No market delivers a constant return, of course — freezing everything else is exactly how the example isolates the effect of fees alone.

There is an asymmetry worth sitting with: the return side of that equation is hypothetical, the fee side is not. Nobody can promise you 5% a year — markets will do what they do, and past performance is no guarantee of future results. The fees, on the other hand, are charged in good years and bad ones alike. Knowing exactly what you pay is the rare piece of the equation an investor can pin down with certainty; what you do with that knowledge, on your own portfolio, is a decision that belongs to you.

Why “zero commission” is not zero cost

A free broker is not a charity: its revenue comes from somewhere — conversion, spreads, paid services. Commission is the most visible of the three layers; that is precisely why it is the one marketing removes. The cost does not disappear, it migrates to the layers you cannot see. That is not a scandal — it is a business model. But comparing brokers means counting all three layers, not just the one displayed in large type on the landing page.

How to spot them on your statements

• Commissions — the easy ones: where they exist, they appear as an explicit line on the statement or trade confirmation.
• FX conversion — look for conversion lines, or compare the rate actually applied to your trades with the reference rate of the same day: the gap is the cost.
• TER — never on the statement. It lives in each ETF's key information document and factsheet, under “ongoing charges”.
• Spreads — invisible too: you would have to compare every execution price with the mid-price at the same instant, which is close to impossible by hand.

Doing this inventory once is eye-opening. Keeping it current by hand, statement after statement, is the kind of discipline that erodes within weeks — it is step 4 of our portfolio tracking method: track the real cash flows. Fees are what gets taken from you; dividends are what gets paid to you — two halves of the same ledger.

What OplynQ does

OplynQ builds a fee report per account, from your own imported statements: commissions, FX costs, ETF ongoing charges — measured on your actual trades, not estimated from market averages. And when a data point is missing — a statement that does not break out the conversion, a fund absent from our fee data — you see “—” and the reason, never a filler number.