Choosing a broker

There are two types of stock broker – advisory brokers and execution-only brokers. If you are happy to make your own investment decisions and wish to minimise costs, you should use an execution-only broker.

The range and cost of services offered by different brokers frequently change. The most important costs to bear in mind when selecting a broker will be dealing charges and annual or management fees. Dealing charges invariably depend on the value, frequency and method of placing individual trades. Annual or management fees may or may not depend on the overall portfolio value. As with any account with any financial institution these days, there are likely to be a whole host of other charges which may apply under certain circumstances such as inactivity fees and charges for stock transfers and withdrawals, and it is recommended that you read and understand all terms and conditions.

The range of services offered also varies. We’ve already discussed the benefits of regular investment so it would be good to use a broker that offers this facility across a broader range of investments such as the more commonly traded stocks that make up the FTSE100 or FTSE350 indices, as well as some ETFs, within an ISA and/or SIPP account.

Working out which will be the best broker in terms of cost and convenience is not easy. In addition, it may well change over time as brokers change their terms, new providers enter the market or your portfolio value and/or frequency of trading change. It will then be a case of calculating whether you are better off transferring your portfolio to the new provider or running your portfolio across multiple providers.

If you are looking to open an account with an online broker, the Monevator website has a useful comparison table (https://monevator.com/compare-uk-cheapest-online-brokers/).

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