Saturday, 6 April 2013

Choosing Your Online Broker

When I first started investing in the late 1980s, there was no internet and the buying and selling of investments was done by post with either a traditional stockbroker or for trusts and funds via the provider.

Today, most diy investors will invest online with an execution-only discount broker. I first registered online with Interactive Investor - I recently moved over to Sippdeal when ii introduced its quarterly charges.

With online brokers, your investments are held in a nominee account which means you will not receive a share certificate so there is no ‘paperwork’ to attend to. The online execution-only broker is not legally permitted to offer advice to its customers.

Some Things to Consider

1. Does the broker offer the type of investment you wish to hold in your portfolio? Seems fairly obvious but some brokers currently do not offer, for example, Vanguard low cost trackers. Others will offer only a limited range of investment trusts etc.

2. Charges - is there an annual fee? Is there a fee for holding low cost trackers which pay no (or minimal) commission to the broker?

3. If you will hold mainly funds (OEICs), does the broker rebate some or all of the commission? Is there a dealing fee for buying and selling the funds?

4. What range of analysis tools are offered? It can be an advantage to view your portfolio online and also to maintain a ‘watchlist portfolio’ of investments you may wish to follow and analyse for the future. You may wish to filter shares for things like size, dividend yield, cover etc.

5. If you will be drip-feeding your money into the investments over a prolonged period, it will make sense to choose a broker who can offer a low cost regular investment option.

6. If you are likely to hold shares and/or investment trusts, check the situation regarding re-investing of dividends - is there a facility for this to be done automatically and if so, is there a charge?

7. Check if there are additional charges for telephone trades - with my former broker, interactive investor, the fee was £10 for both online and telephone trades. With my new broker Sippdeal, its an extra £20 for telephone trades.

8. Check the level of exit fees in the event you wish to move to another broker. Typical fees are usually based on whether you wish to transfer your portfolio over without having to sell and then repurchase with the new broker and will be around £20 - £30 per line of stock. Obviously, if you hold many different investments, it could be very expensive to transfer out.

9. Is it likely you will want to hold overseas listed investments? If so, make sure this option is available and check out any additional costs.

10. Finally, having narrowed down the list of candidates, you may want to give the broker a call to confirm everything is still in accordance with your research and also see how their customer services respond to your questions.

There is therefore no single best broker, the best one for any individual will be the one that ticks the most boxes according to that individuals specific situation and requirements.

A couple of comparison sites which may help are The International Investor   and  Monevator .

Of course, you are not limited to just one broker for all investments. You could use one for your sipp and a different one for your stocks & shares ISA or non-isa trading account. You could use one for low cost trackers and a different one for shares and investment trusts.

If using more than one broker, just be aware that with ISAs, you can only fund a single broker with your allowance for any one tax year - it cannot be split between two brokers in the same year.

Some Popular Brokers to Research

Sippdeal -

Hargreaves Lansdown -

Cavendish -

Halifax Sharedealing -

Alliance Trust -

TD Direct -

Charles Stanley -

Selftrade -

Iweb -


  1. Hi John

    A nice summary. For my own situation my preferred brokers today are:
    - Trading Account - Hargreaves Lansdown
    - ISA - TD Direct
    - Pension - Sippdeal

    They offer me the best compromise of your Considerations while importantly allow me to keep my asset allocations how I want them.


  2. Hello RIT,
    Just in relation to TD Direct, I am wondering whether you will be affected by the introduction of the 0.35% platform fees later this year?

    1. I don't hold any Unit Trusts or OEIC's in my ISA. Instead I hold ETF/C's and so won't be affected.