Online share dealing has slashed the cost of buying and selling shares in recent years, with typical dealing costs falling to around £10 per trade.
But X-O.co.uk, a 'no-frills' online share dealing service launched by Jarvis Investment Management, appears to be cutting costs to the bone by charging just £5.95 per trade with no extra fees for an ISA wrapper. Is this a bargain or a false economy?
When trading online you need to be confident that a stockbroker’s dealing system is both reliable and competitive when quoting buying and selling prices for shares. X-O.co.uk should be ok on both counts. Its dealing system is also used by other companies, suggesting it should be robust, and there’s a ‘best execution’ policy in-line with other stockbrokers.
Dealing charges are fixed at £5.95 per deal (shares are held in a nominee account) and there are no extra charges to hold shares within an ISA. However, if you decide to transfer the ISA to another broker in future, or simply close it, you’ll be hit by a £50 charge. Plus transferring to another broker will also incur a £15 per stock charge. These penalties are pretty much the norm, but still annoying. It’s also annoying that telephone enquiries are charged at 9p per minute, although email enquiries are free.
The biggest downside for most is likely to be that X-O.co.uk only allows you to trade shares listed in the UK. While this includes the 350 or so US and European shares listed on the London Stock Exchange’s International Retail Service, avid overseas investors will likely find the choice rather restrictive. Also beware if you regularly hold significant cash balances, as you’ll receive no interest.
X-O.co.uk includes the plain vanilla features you’d expect including limit orders, tax vouchers and the ability to transfer in stocks from another broker, but don’t expect frills such as company research, regular savings schemes, discounts for reinvesting dividends or a self-invested personal pension (Sipp).
If you primarily trade UK shares then X-O.co.uk appears to offer an excellent deal, especially if you hold shares within ISAs. But, those who regularly trade overseas stocks and/or other more exotic investments should probably look elsewhere.