I've just put together a guide to online share dealing, including comprehensive comparison of 17 'low cost' online stockbrokers.
On the plus side, competition does appear to be driving down costs at the 'no frills' end of the market, with dealing fees below the £6 mark and no additional fees for ISAs or inactivity (i.e. lack of trading).
But there are still plenty who charge more and try to bolt on as many extra fess as they can. Costs can vary widely so it pays to shop around.
The wrong choice could cost you hundreds, even thousands of pounds.
Frequent traders using one of the more expensive brokers could find themselves paying thousands of pounds more in fees compared to cheaper brokers. For example, our comparison shows 480 trades a year on a £100,000 portfolio with Club Finance costs £590 whereas Barclays Stockbrokers would charge £3,336 and Alliance Trust £6,048.
Yet Club Finance is expensive at £356 if you make just 12 trades a year, with SVS Securities costing just £69 and x-o.co.uk close behind at £71.
Beware transfer fees
It's likely you'll want to transfer your investments from one stockbroker to another at some point in future. While fairly straightforward, you could be hit with a big bill if you want to transfer across your shares 'as is', i.e. an 'in-specie' transfer. All the stockbrokers we compared charge a per stock fee for such transfers, but it varies significantly. Club Finance and Saga both charge £10 per stock while Hargreaves Lansdown charges £30 and TD Waterhouse £35. Transfer 20 stocks and the difference could be up to £500.
Some stockbrokers will also hit you with an additional charge if you transfer your ISA elsewhere. The worst offenders, charging £50 & VAT include: x-o.co.uk, iWeb, Bestinvest, Halifax, Barclays, TD Waterhouse ad Alliance Trust Savings.
Mobile phone trading
If you like to trade but tend to be on the move, then trading via a mobile phone app could prove invaluable. Simply Stockbroking offers an iPhone app while Hargreaves Lansdown and TD Waterhouse offer an app for Android phones too.
Don't forget service and share pricing
The areas I can't realistically cover in a comparison are customer service and how competitive a particular broker's share pricing is. Both are important factors to consider.
Stockbrokers are under an obligation to attain the best price they practically can when buying and selling shares and usually get quotes from a range of market makers to do so. In practice there's likely to be little, if any, price difference between brokers when trading popular shares, but on less frequently traded shares there's a greater likelihood of a variance in prices - it may be that one stockbroker uses a certain market maker offering more favourable prices than the others.
If you have any experience of price differentials between stockbrokers or customer service please post below. Or, even better, write a review here.
Meanwhile hope you find the comparison helpful and happy to hear any suggestions for improving it.