Low Cost Broker

stphnstevey

I have been looking into costs, particularly % fee brokers vs fixed fee brokers

I am looking for multiple purposes:

- S&S ISA
- Non ISA Trading account
- SIPP
- Pension Administrator/Trading Account (eg for a SSAS)
- Company

I have looked on LemonFool and here monevator.com/compare-the-brokers/

I have a H&L account and back when they restructured their fees, I made a complaint (prompted by the success of many on the MSE board) and they agreed to reduce the annual fee to 0.25% on upto 1M. This then seems to match the lowest % fee brokers I can find

It seems iWeb might have the lowest fixed fee at £25 one off setup and £5 per trade

With a fixed fee broker I am not sure how many trades I should estimate making? For 2 trades (assuming a buy and sell) is 2x£5=£10 with iWeb (ignoring setup) which is what I would pay on a portfolio of £4000 at H&L (£4000x0.25%=£10)
Iweb for me seems to generally the cheapest at £25 to open and then £5 a trade

I have also looked at some other slightly less mainstream options:

- Degiro - around £2 trading costs for shares

- Trading 212 - similar costs to Degiro, but 10x free trades per month of up to £10k each trade (which would be enough for me)

- Plus 500 - no trading fees, seems to some how make money from the spread and deposit/withdrawal fees

How do any of these sound or have you used any?
Are there others I should consider? Where do you do yours?

ValiantSon

I'm not exactly sure what it is you are asking.

If you have managed to get HL to reduce your annual fee to 0.25% then that's pretty good.

Fixed fee brokers are normally better for larger portfolios. iWeb are one of the cheapest available, as long as they have the funds you want to trade in, and you won't trade a lot.

stphnstevey

I have looked at REGULAR INVESTMENT options due to the low cost. I realize selling incurs the normal trading cost, so have bared that in mind. I hope to hold for a long period with little selling and when I do sell, sell in large amounts to limit the trading cost

Some Regular investment sites restrict what you can invest in to, particularly I discounted H&L RI due to this.

I also looked for accounts with NO ANNUAL FEE. As I plan to hold for a long period, I just want to pay for trading costs and not an additional annual fee. I realize some annual fees incorporate trading costs, but generally I found those who just charged for trading with no ongoing costs were cheaper for me.

I assumed a trading cost of 10 trades per £50k invested. Obviously other assumptions would produce different results. Where there was a different cost to trade funds vs shares, I evaluated both options. I haven't as yet decided if I want to hold funds or shares (likely ETFs)


Looking at TRADING accounts, iii seemed good with £1 regular investing but had a £90/yr fee. Halifax had £2 RI and no annual fee. Halifax is obviously a major bank and I am more happy to hold investments with them.

For an ISA, again iii has £1 RI but £90/yr fee. Halifax £2 RI and £12.50/yr fee. x-o.co.uk had no RI and therefore a higher trading cost at £5.95/trade but then I was not reliant on RI and selling costs were the same as purchase costs. x-o.co.uk had no annual fee.

For a SIPP, iii annual fee appeared to be (£120+£90) £220, Halifax £180 (for £50k+) and x-o.co.uk refunds any annual fee (with trading account). RI could be used for both iii and Halifax to reduce trading cost, but x-o.co.uk effectively has no annual fee.

For a LISA, as I wanted to invest in the stock market, it was a choice of H&L or AJ Bell for me. Other stock market options seemed too high cost. I was looking at investing the full £4k/yr and just one trade/yr. AJB RI is £1.50 trading and 0.25%/yr with a £30 cap on share costs, which as the balance increase, makes shares much cheaper than even funds. H&L RI is also £1.50 but has a very restrictive list. H&L % cost will also be higher for most.


What protection is there for S&S accounts? It appears securities are protected at a lower amount than a bank account?

I am wary of having large amounts on x-o.co.uk and would prefer Halifax, but for the ISA and SIPP x-o.co.uk seems a good deal

Alexland

On the LISA - yes AJ Bell are likely to be your best option for lump sum trades of £4k and £1k bonuses. After a few years when the balance is high enough it makes sense to move across from funds to Shares, ETFs or ITs for capped fees. I avoid AJ Bell on the LISA as they also have a role in administering my Halifax SD SIPP.

On the Halifax SD SIPP as the £180 is entirely deducted from the account it's only £144 per year. So I just add £12 per month via DD. With II only the £120 is deducted from within the account costing £100 and you have to pay the full £90. It depends what you want to invest in as Jarvis X-O don't offer funds.

On the ISA and GIA you have lots of options again it very much depends on what you want to invest in? My preference is to invest directly with the fund manager which can sometimes be cheaper.

On the FSCS protection - the limit on uninsured investment products is £50k per financial institution. Obviously this doesn't cover normal investment losses. I go over this limit with some reputable institutions however we do spread our money around as much as practically possible even if it costs a bit more in fees.

Alex

ValiantSon

I think you need to make some clearer decisions about what you actually want to invest in. Once you know where your investments will be (which funds, if any; shares; ETFs; ITs) then you can make more informed decisions about the platform to hold them with.

Of your various options so far, the LISA is the only one where we can give helpful comments. In your particular situation, where you would have two trades per year (£4,000 investment and £1,000 bonus), AJ Bell would almost certainly be the cheaper option, although some funds on HL are significantly cheaper than on AJ Bell, so again you should still make a decision on the type of investment before committing to the platform.

Alexland

ElenePikkarainen wrote: »

Actually, fixed loans are somewhere reliable because you can plan that how you can manage while returning it. % particularly loans, you are not sure that how much you will have to pay next month and that will make trouble for you.

Did you mean to post this message on another thread?

Ilona

ElenePikkarainen wrote: »

Actually, fixed loans are somewhere reliable because you can plan that how you can manage while returning it. % particularly loans, you are not sure that how much you will have to pay next month and that will make trouble for you.

EP has posted five times in quick succession, and none of them make much sense. Not sure why they have posted, they are in the USA.

Ilona

stphnstevey

ValiantSon wrote: »

I think you need to make some clearer decisions about what you actually want to invest in. Once you know where your investments will be (which funds, if any; shares; ETFs; ITs) then you can make more informed decisions about the platform to hold them with.

Of your various options so far, the LISA is the only one where we can give helpful comments. In your particular situation, where you would have two trades per year (£4,000 investment and £1,000 bonus), AJ Bell would almost certainly be the cheaper option, although some funds on HL are significantly cheaper than on AJ Bell, so again you should still make a decision on the type of investment before committing to the platform.

Yes, I think your right and maybe doing AAF

Looking at funds and ETFs now

stphnstevey

I was looking purchasing ETFs

I see there currency transaction costs with each broker.

I presume it is best to buy the sterling version? Is there always a sterling version?

If the assets the ETF buys are in another currency, does the ETF make a hidden charge to exchange that back to sterling when buying and selling the sterling version? If so, does that translate into lower performance?

Thanks

coastline

stphnstevey wrote: »

I was looking purchasing ETFs

I see there currency transaction costs with each broker.

I presume it is best to buy the sterling version? Is there always a sterling version?

If the assets the ETF buys are in another currency, does the ETF make a hidden charge to exchange that back to sterling when buying and selling the sterling version? If so, does that translate into lower performance?

Thanks

I'm not sure but I normally buy the sterling version..a useful link below..

https://www.justetf.com/uk/

Looking at the best broker it depends how often you are dealing in a year. Just because a deal is around £5 doesn't always mean they are obtaining the best price as they might only use a few market makers. ? The links below show they try to obtain a decent quote by using 20-30 market makers..


https://www.halifax.co.uk/sharedealing/getting-started/how-to-buy-shares/price-polling/

http://www.hl.co.uk/news/investment-times/2014/11/the-right-tools-for-the-job

https://www.smartinvestor.barclays.co.uk/invest/investments/barclays-price-improver.html

Look at post 12 on here. No idea if this is accurate but you'll need a price improver if you are dealing on a regular basis.
If your chosen platform can't give you decent information on this subject then it looks like its worth making an enquiry.

http://moneyforums.citywire.co.uk/yaf_postst3868_Stockbrokers.aspx

bowlhead99

stphnstevey wrote: »

I was looking purchasing ETFs

I see there currency transaction costs with each broker.

I presume it is best to buy the sterling version?

Generally yes. The ETF manager is looking after millions of pounds/dollars so can exchange the currency to buy whatever underlying assets he wants, at relatively low cost. Your broker is just dealing there and then with your trade size of £1000 or whatever and while you'll get better than tourist rates it will generally be no where near as competitive as what the fund could get for themselves if you just gave them the sterling.

there always a sterling version?

Unfortunately no. Depends if there's enough demand for alternative currencies for the ETF manager to bother creating one to be able to sell to more customers. Generally the more niche the fund, the fewer currencies and listing venues it'll be available in, because people that really really want it will just take what they're offered

If the assets the ETF buys are in another currency, does the ETF make a hidden charge to exchange that back to sterling when buying and selling the sterling version?

It would be unlikely in this day and age for the fund manager to syphon off money for himself as a hidden charge and blame it on currency.

But when the fund manager goes to buy assets in the market (e.g. Tesco and Samsung and Microsoft and Nestle in a world index) he will face the same thing that you do when you go to your own broker and ask about buying into a dollar ETF; i.e. the fund's stockbroker/custodian will want Pounds and Won and Dollars and Francs to settle all the trades, or will charge a commission for getting them himself. If the fund manager doesn't have those currencies, or the right proportion of currencies (eg he has a lot of Swiss Francs and euro and dollars and pounds from recently issuing new shares, but no Korean Won), he will have to buy some at market rates including commission.

When he buys an underlying share in (eg) Samsung in Won but he does his accounting in dollars, he will record the price he paid in dollars, which will include all the costs of acquiring the share, including currency commissions. By the end of the year the share might be valued at $100,000 having only been acquired for $90,000 (inc FX conversion and broker costs to buy). So, a $10,000 gain. Of course, it would have been a $10002 gain if he had been able to avoid paying the currency exchange commission on buying $90,000 worth of Won because he had some in the bank from a previous sale of Korean shares. Then he could have bought them for $89998 equivalent instead of spending $90,000. But he didn't so you only see the $10,000 reported profit, because that was the profit. The fx charge is "hidden".

If so, does that translate into lower performance?

Lower performance than if he could somehow have been able to buy all the different currencies he needs, for free. But generally the FX trades done by the fund to buy dollars and other currencies with the GBP you give them on a GBP share class, are lower priced overall than the total cost if you had bought dollars yourself via your broker at a high cost and then given them the dollars and they still had to buy all the euro and francs and won and rmb that they want anyway.

You can of course compare the performances between funds and ETFs and between those funds and ETFs and a benchmark index, to see what if anything is "hidden". Any deviation from the index it should be tracking is a combination of either "tracking error" or genuine costs. The costs might be either explicit (management fee, admin cost forecast) or implicit (trading costs such as broker and FX commissions etc) and if they are implicit you'll only find guesstimates. If you look at the bottom line you'll see the actual results, even if the costs aren't broken or very well. With something like an index tracker it is much easier to work out the implicit internal charges because you can see from the published index direct from FTSE or MSCI etc, what you'd have got off the index if there had been no charges at all.