1. Are you happy to deal online?
If you have access to a computer and are comfortable using the Internet there's little reason not to carry out your share dealing online. It's generally cheaper and more convenient than telephoning a stockbroker. Plus it makes keeping track of your portfolio much simpler - you can view your portfolio (including current prices) whenever you wish. Some brokers also offer dealing via iPhone and Android phone apps.
If you wish to deal by telephone it's still possible, but most stockbrokers charge a lot more for this service than online dealing.
2. How frequently will you trade?
The stockbroker that's best value for you will largely depend on how often you'll trade shares. If you only trade a few times a year then avoiding account fees and 'inactivity charges' (a fee some brokers levy if you don't trade) will be more important than seeking out the lowest dealing charge.
By contrast, if you're a heavy trader then dealing fees will have a far greater impact on overall cost.
If you prefer to save monthly then standard dealing fees may prove uneconomic, especially on smaller amounts. Look for a broker that offers a low cost regular investing option, which typically slashes purchase dealing fees to around £1.50.
3. Hold shares in an ISA?
If you want to hold shares within an Individual Savings Account (ISA) then check whether the stockbroker will charge you. Some levy quarterly or annual fees that could even outweigh the potential tax benefits in some instances.
It's worth noting that basic rate taxpayers don't save income tax on dividends within ISAs. If you're not paying extra for an ISA then using one is still usually a good idea (you might save capital gains tax, become a higher rate taxpayer and/or decide to hold interest paying investments in future - where the income is tax-free). Read more details on our ISAs page.
4. Will you re-invest dividends?
Unless you rely on dividends to provide an income, re-investing them to buy more shares can be a worthwhile strategy to boost long term growth. However, standard dealing charges might prove steep for small dividends, so look out for brokers offering reduced dealing fees for re-investing dividends.
5. Beware charges to move elsewhere
If you decide to move your portfolio to another stockbroker in future you'll have two options: either sell your shares, transfer the cash and buy them back, or move the shares across 'as is' - a process called 'in-specie' transfer. The latter is usually preferable as it avoids realising gains (which might be taxable), your money being out of the market and dealing fees.
However, brokers usually charge fees for transferring each share - some a lot more than others. And some will also hit you with an extra penalty for transferring your ISA account. Always check these before using a new broker to avoid unexpected charges in future.
6. Do you need guidance and research?
Most low cost stockbrokers offer a 'no-frills' service, but some provide research and guidance which you may find helpful...or not. In any case, there's plenty of research available on the Internet these days.
7. Invest in overseas shares?
Some brokers allow you to trade shares on overseas stock markets online. The majority use Crest Depositary Interests (or 'CDIs') which, in simple terms, are electronic versions of overseas shares which can be traded on usual UK systems in pounds. This makes trading straightforward and costs are usually the same as dealing UK shares. Crest CDIs provide access to US, Canadian and European stock markets, although not all shares are included.
A handful of brokers allow you trade on actual overseas markets, potentially providing greater choice, although the costs of doing so are normally higher than dealing UK shares.
8. Other costs of investing
When purchasing UK shares expect to pay 0.5% Stamp Duty Reserve Tax (SDRT) and an extra £1 PTM levy on transactions above £10,000 (this funds the Panel of Takeovers & Mergers). Exchange Traded Funds (ETFs) are exempt from stamp duty.
9. Stop loss and limit orders
Stop loss and limit orders allow you to set a price at which the stockbroker will automatically sell your shares. If you don't constantly monitor your shares they can help limit the damage should prices plunge. For more details on how they work take a look here. These are standard features for online dealing accounts and offered by all the brokers in our comparison.
Online share dealing comparison
How we carried out the comparison
We calculated the total annual cost, including any applicable account fees, based on various numbers of deals being placed. Where portfolio size affects costs we ran calculations for £10,000 and £100,000 portfolios. Examples exclude dividends, growth, stamp duty, PTM levy and any ISA fees. The brokers are loosely ranked on overall value, but bear in mind this will vary depending on your needs. Please carry out your own research and due diligence before choosing a particular broker.
Last updated: 30 September 2015.
|Total Annual Cost: £10,000/£100,000 portfolio by number of deals|
|Notes: Div reinvest: no, Close ISA account: nil, Xfer out: £15 per stock, Overseas: no.|
Candid Verdict: Low cost plain vanilla service with simple pricing. Sensible choice for infrequent to moderate traders.
||Online Share dealing
|Notes: Div reinvest: no, Close ISA account: £50 & VAT, Xfer out: £15 & VAT per stock, Overseas: no.|
Candid Verdict: Another very competitive no-frills service, ideal for occasional traders. Website could be a lot more user friendly.
|AJ Bell Youinvest
||£9.95 0-19 deals previous month
£4.95 20+ deals
|Notes: Div reinvest: no, Close ISA account: nil, Xfer out: £25 per stock, Overseas: US/Europe.|
Candid Verdict: Competitive for higher volume traders else very average.
||0.24% annual fee (£120 min)
|assume £100,000 portfolio
|Notes: Div reinvest: no, Close ISA account: nil, Xfer out: £10 per stock, Overseas: US/Europe/Australia.|
Candid Verdict: Excellent deal if you trade very frequently with a modest sized portfolio, else potentially expensive.
||£10 first 10 deals per month then
||£20 per quarter, includes 2 deals
||included in account fee
|Notes: Div reinvest: 1% (£10 max), Close ISA account: nil, Xfer out: £15 per stock, Overseas: US/Europe.|
Candid Verdict: Account fee high if you don't use included deals. Indifferent overall although v good deal when buying funds and lots of share information available.
||11.95 0-9 deals previous month
£8.95 10-19 deals
£5.95 20+ deals
||0.5% (£45 max)
|Notes: Div reinvest: 1% (£10-£50), Close ISA account: nil, Xfer out: £25 & VAT per stock, Overseas: US/Europe.|
Candid Verdict: Middle of the road deal with unwelcome ISA charge. However, iphone/Android dealing and good website with lots of research and share information.
||£7.50 with £80 & VAT p.a. fee
||£1.50 & VAT per month
||£48 & VAT
|Notes: Div reinvest: 0.5% (min £1), Close ISA account: £20, Xfer out: £25 per stock, Overseas: US/Europe.|
Candid Verdict: Guidance and research available plus a good reputation for customer service. However, costs could end up on the high side.
||£200 to open account
|Notes: Div reinvest: 2% (£10 max), Close ISA account: £50 & VAT, Xfer out: £25 per stock, Overseas: US/Europe.|
Candid Verdict: One of the original low cost online brokers. £200 account opening charge prohibitive for smaller portfolios, else good value. Awful website though.
||£11.95 first 9 deals per quarter
£9.75 10+ deals
|Notes: Div reinvest: 1% (£1-£7.50), Close ISA account: £15 & VAT, Xfer out: £10 per stock, Overseas: no.|
Candid Verdict: Nothing particularly good or bad to say. Offers a reasonable deal if you don't trade often.
||Share Dealing Account
|Notes: Div reinvest: 2% (£11.95 max), Close ISA account: £50 & VAT, Xfer out: £25 per stock, Overseas: US/Europe.|
Candid Verdict: A bit on the expensive side, hard to find a reason to use over cheaper rivals.
||12.95 1-14 deals previous month
£9.95 15-24 deals
£6.95 25+ deals
||£12 & VAT per quarter if no trade
||£30-£50 & VAT
|Notes: Div reinvest: 1% (£1-£7.50), Close ISA account: £50 & VAT, Xfer out: £15 per stock, Overseas: US/Europe.|
Candid Verdict: Expensive unless you trade very frequently. High inactivity and ISA fees.
||£12.50 first 100 deals per quarter then
||£8.75 & VAT per quarter if no deals
|Notes: Div reinvest: £1.50, Close ISA account: nil, Xfer out: £15 per stock, Overseas: US/Europe.|
Candid Verdict: High inactivity charge and dealing costs make this account quite unappealing for most investors.
|TD Direct Investing
||£12.50 0-9 deals previous month
£8.95 10+ deals
£5.95 10+ deals
||£30 & VAT if under £5,100
|Notes: Div reinvest: £1.50, Close ISA account: £50 & VAT, Xfer out: £35 per stock, Overseas: US/Europe/Asia.|
Candid Verdict: Dealing costs a bit off the pace and very expensive to transfer out. However, good website and iphone/Android trading.
How safe are stockbrokers and nominee accounts?
The safest way to own shares is via a paper share certificate. However this doesn't lend itself to online share trading and can be expensive to administer, so brokers normally use a nominee account - which means they own the shares via a separate company for your benefit.
If a broker goes bust the nominee company should be unaffected unless the broker illegally withdrew money or shares. Should the latter occur and you lose money, you'll normally be covered by the Financial Services Compensation Scheme (FSCS) up to £50,000 per stockbroker. You can read more details in our article here.
It is possible to be the registered owner of the shares (i.e. like to owning a certificate) and trade online using Crest Personal Accounts. However, most stockbrokers have yet to offer these and those that do charge extra.
Will I benefit from shareholder perks via a nominee account?
No, because the stockbroker will be the registered holder of the shares, the same holds true of the right to vote and attend AGMs. However, some brokers do offer the option of passing on perks and voting/AGM rights to shareholders, although extra charges may apply.
Do all brokers offer the same share price?
Stockbrokers are under an obligation to attain the best price they practically can when buying and selling shares. Because brokers use market makers (basically middle men) who match up buyers and sellers of shares and effectively set prices, the price you're quoted could vary between brokers if they use different market makers. In practice brokers obtain quotes from a range of market makers and give you the most competitive price, which means there's likely to be little, if any, price difference between brokers when trading popular shares.
However, when it comes to less frequently traded shares it can be harder to find buyers and sellers, potentially giving rise to a variance in prices - it may be that one stockbroker uses a certain market maker offering more favourable prices than the others.