Forward Diary

Stock & Shares - Comparison table

When looking for a suitable stockbroker the logical place to start is your investment objective. Whether you are saving for a holiday of a lifetime, the deposit for a house, education fees or retirement, will make a big difference to the sort of service you need.  It is hard to think of a more critical financial decision than how you will pay for your child’s education, or achieve a decent pension. In these complex areas there is a strong argument for some kind of advisory relationship. Otherwise it is a case of looking for a suitable execution-only facility. The next step is to decide on the most appropriate type of account. For most investors the obvious starting point is an Individual Savings Account (Isa), unless you are saving for a pension when a Self-Invested Personal Pension (Sipp) may be the better option. Those with more of a trading mentality might prefer a standard dealing account or possibly a spot foreign exchange (forex) account with a specialist currency broker.  It is then a case of thinking about where you will be investing your money. If you do not want to get too actively involved in the process you will probably want to concentrate on professionally managed funds, whereas those who enjoy the hands-on approach are likely to be more interested in company shares or possibly leveraged tools such as covered warrants.  In this special supplement we provide an in-depth look at each of these areas to help you decide which stockbroker offers the most appropriate service at the lowest possible price.   1. Selecting the right service for you   Advice  Those who want professional investment advice will need to choose a broker that offers discretionary and advisory portfolio management services.  These sorts of services start with a fact-finding session so the broker is clear about what you are trying to achieve and how much risk you are willing to take with your capital. It is then a case of deciding whether you would rather have  •  a discretionary arrangement, where you hand over all the day-to-day management of your portfolio, or •  an advisory service that provides recommendations but leaves it up to you whether to accept them.  Advisory and discretionary accounts are more expensive than an execution-only service, but the idea is enhanced performance more than makes up for the extra cost.   Execution-only services  If you prefer to make your own investment decisions you will need to find a suitable execution-only service. The starting point with these is the cost, but there are also lots of other features that may be relevant. These depend on the type of account and where you want to invest and are covered in the second and third sections of this guide.  Each time you buy or sell company shares, an investment trust or exchange-traded fund (ETF), you will have to pay commission on the transaction. Online deals tend to be cheaper with a typical flat rate charge in the region of £10 to £15. A few brokers apply tiered levels of commission according to the size of the trade, although this is more common for telephone deals.  Most brokers also charge a quarterly or annual administration fee. These are usually set at a fixed rate, but in some cases are calculated as a percentage of the value of your portfolio. Otherwise there may be an inactivity fee that applies if you do not trade for a stipulated period of time.  The only way you can work out how much the different services will cost is to estimate how many times you are likely to trade. In some cases there are discounts for frequent traders, although the criteria vary enormously between providers. If you plan to keep a lot of money in cash you should also find out whether it will earn any interest.       Multiple accounts  Having all your investments in one place makes it easier to monitor your overall portfolio, especially as many brokers provide a consolidated view across multiple accounts. It may also work out cheaper as some firms only charge a single admin fee.  The counter argument is that one particular broker is likely to be better in certain areas than others and if something was to go wrong you would be heavily over exposed. The main danger is your provider goes bust and is unable able to return its clients’ assets. In this worst case scenario you would be covered by the Financial Services Compensation Scheme up to a maximum of £50,000 for investments and £85,000 for deposits.  Even if you have more than this you should still be protected as most brokers hold their client assets in a nominee account. These operate a bit like a trust and a third-party custodian acts the legal owner on behalf of the beneficial interest of the investor.  If your broker was to become insolvent they would have no recourse to these assets and you should get them back, although it could take some time and you would not be able to trade. If the nominee accounts are pooled and there is a shortfall due to fraud you may incur part of the loss.  Anyone concerned about this remote possibility should speak to their broker to clarify the situation. If you are still worried then you should spread your assets between different providers. .    
Company Advisory Service ISA SIPP Charge Per Trade From (Online) Charge Per Trade From (Phone) Inactivity Charge Download / Web / Mobile FSA Registered Demo Account Sponsor's Message Account Minimum 24hr Trading


.Degiro
No No No £1.75 £7.50 No Web & Mobile Yes No Invest worldwide for extremely low fees N/A APPLY


AJ Bell Youinvest
No Yes Yes £4.95 £29.95 No Web & Mobile Yes No Yes APPLY


Share Centre
Yes Yes Yes £7.50 £7.50 No Web Yes Yes Simply easier No APPLY
Disclaimer: These comparison tables are provided for information purposes only, their accuracy is not guaranteed. Trading using some of these products carries a high level of risk to your capital and you can lose more than your initial deposit. These trading products may not be suitable for all investors so seek independent advice.