If you’ve begun to compare stockbrokers, investment platforms and robo advisers in the UK, you’ll discover a few things fairly early on:
- There’s a lot of choice – over 50 companies offering online services
- There’s a lot of variety – functionality is quite different between websites that appeared similar at first
- There’s not much in it – many of the main brokers have settled on pricing structures that approximate to something consistent as an overall charge to the investor
Each of these factors can make it difficult to compare and choose a stockbroker. So this article will cut through these challenges and provide tips on picking a well-suited stockbroker for your needs.
Cutting through the choices of stockbroker
First of all, if you begin with a list of 50 options, we need to have a sensible method for trimming that list down to a meaningful shortlist to allow for further investigation and research.
We cannot begin taking notes on 50 different providers or this would take 8 hours even if we only spent 10 minutes on each.
I would begin by highlighting the companies you have heard and the largest few providers in the UK. I would then scan down a stockbroker comparison service and make note of any providers with particularly eye-catching pricing or offers.
These may not be as appealing as they initially appear, but they’re certainly worthy of a further look. We owe it to ourselves to find the broker that will provide the most, and demand the least, after all.
Picking the right level of service
Next, you’ll want to label each provider with a category which helps you understand what their overall service offering consists of.
Are they a fund supermarket? I.e. a platform which only provides access to funds rather than shares?
Are they an online share dealing platform, i.e. an account allowing you to buy shares but not much else?
Are they an ‘all singing, all dancing’ full service brokerage account which allows you to buy pretty much anything you can conceive of (For example, preference shares, initial public offering, direct investment in foreign stock markets)
Does the account manage your money for you, and not allow you to pick and choose your investments? This could be what’s referred to as a robo adviser, although they may not use this phrase in their branding.
These labels are helpful, because you could probably decide on paper (without even specifically considering actual examples), which types of accounts would be inappropriate. This therefore gives a quick way to whittle down your shortlist even further.
Price comparison
The final step takes the most time, which is why I recommend you leave it until your shortlist is the shortest list before beginning. I’m talking about a detailed price comparison.
Stockbrokers unfortunately do not have a single price, they will have an entire PDF or webpage full of 20+ different charges for different actions, services or scenarios.
This will be a lot to take in, and will demand your patience, because often it’s a fee caught in the small print that could be the most important.
You will want to know what periodic account charges will be charged regardless of whether you trade or not. You’ll want to know how much you’ll pay for different types of trades (brokers often distinguish between domestic and international at least) and whether there are other admin charges as for deposits/withdrawals/currency exchange which you could rack up.
My tip is to create an illustrative year in account activity, and price this up using their fees page. Once you have a total annual illustrative fee, you can use this to compare against the other 3-4 key contenders.
It’s at this point that you may discover that the eye catchingly low fees advertised on a stockbroker comparison page did not actually lead to lower fees after all. These are the kinds of insights you can only glean from a detailed investigation. Good Luck!
