The downward pressure on online share dealing costs continues with the recent launch of jpjshare.com from an Isle of Man based broker (Rivington Street Stockbrokers) which undercuts low cost stalwart x-o.co.uk by 20p per trade.
Jpjshare.com offers no-frills online trades for just £5.75, falling to £4.75 if you place more than 15 trades in a given month. There's a free ISA wrapper and you can withdraw your cash/dividends for free via BACS. And you can also deal by phone for £7.50 (deals below £35,000), £15 (between £35,001 - £49,999) or 0.05% of deal size (for £50,000+).
With such competitive charges, are there any downsides?
Yes, but in general they're shared by other low cost stockbrokers: dealing is via a nominee account that's restricted to UK stock markets (London Stock Exchange, AiM and PLUS) , no interest on cash balances and a £20 per stock fee to move to another broker. However, unlike many rivals, there's no penalty for closing or transferring the ISA elsewhere (just the underlying stock penalties, if applicable) - a good thing.
Perhaps the biggest potential downside is that jpjshare.com is based and regulated in the Isle of Man, rather than the UK. This means they are regulated by the Isle of Man Financial Supervision Commission and not the FSA, affecting possible compensation payouts in the event that a bank used by the stockbroker for client accounts defaults or the stockbroker themselves does something untoward and goes bust (investor compensation doesn't cover losses from bad/unlucky investment selection).
Under the FSA Financial Services Compensation Scheme bank accounts are covered up to £85,000 per person per institution (including individuals within stockbroker 'pooled' accounts) while investments are covered to £50,000.
Under the Isle of Man Depositers' Compensation Scheme bank accounts are covered up to £50,000 per person per institution - but given it treats 'pooled accounts' (as used by jpjshare.com) as a single customer, meaning the £50,000 is split between all clients, potentially rather worthless. And the equivalent investment compensation scheme doesn't cover non-fund investments. So it seems you'll be eligible for little, if any, compensation in the unlikely event anything bad should happen.
On the bright side jpjshare directors include Tom Winnifrith, a well regarded journalist turned fund manager, and Brian Gould, who's held senior positions at Merrill Lynch and AXA - so it appears to be a serious business.
Being a 'no-frills' broker don't expect benefits such as discounts for reinvesting dividends, a regular savings scheme or SIPP. But you can place limit orders and will receive an annual consolidated tax voucher.
I haven't used jpjshare.com's services, but have little reason to suspect their service or stock prices will be any different from other online stockbrokers - they're all much of a likeness in this respect.
In summary, jpjshare.com offers a very good deal. My only concern is the lack of investor protection, due to them being Isle of Man based. While this is unlikely to be a problem, you can never say never. Personally I'd rather pay slightly more and use a FSA regulated UK broker for peace of mind.