The cost of trading is an important factor for many traders and investors when they decide to choose a broker. Just as paying £3.00 for a Starbucks every morning adds up, so does paying anywhere between £4.95 and £12.50 for each trade. Furthermore, you may also need to pay a monthly, quarterly or annual management fee, depending on the type and size of your holding.
Just like the coffee junkies who will not settle for anything less than a cup of Starbucks, traders and investors looking for a quality broker will have to pay for that quality. So ultimately, the price you pay depends on your requirements and your tastes. This scenario is also true for online trading.
The best broker for you will depend on whether you are a frequent trader or casual investor, and whether you have a small or large portfolio.
The best broker for you will depend on whether you are a frequent trader or casual investor, and whether you have a small or large portfolio. Some brokers offer discounted rates for more frequent trading, whilst others charge flat fees. Similarly, some charge holding fees that depend on the size of the account, whilst others have a flat overall fee structure. In our assessment, we considered all possible scenarios.
The top pick in the category of Commissions & Fees is IG. Unlike most brokers, there are no management/administration/ custodial charges for their share-dealing account (or on their ISA). Furthermore, the standard commission rate of £8.00 per trade on UK shares is the lowest dealing charge in our review. For more frequent traders, this falls to just £5.00 per trade when 10 or more trades are placed in the prior calendar month. This superb value is beaten only by AJ Bell, which charges £4.95 for 10 or more monthly trades.
Halifax finished second. The trading fee of £12.50 per trade is at the high end charged by brokers in our UK review and may put off traders/investors who trade frequently. But again, as with IG, there is no administration charge for holding assets in the share-dealing account (and only a £12.50 per annum admin charge for the Stocks and Shares ISA).
Finally, in third place was Interactive Investor. Although Interactive Investor does levy a £20 quarterly charge, this covers the client’s first two trades in each quarter (or the value of £20 worth of trades) and can be used across Trading, ISA and SIPP accounts. The fee per trade is £10, which falls to £5 after the first 10 trades.
When considering any broker on fees and commissions alone, first identify what type of trader or investor you are. Is your portfolio large enough for management charges to be an important consideration? On average, how many trades do you place each month? Do you invest primarily in stocks, funds or other asset classes?
Next, calculate the overall trading cost to you; crunch the numbers. To help, read our detailed commission notes for each broker. You can also compare brokers side by side using the comparison tool. Overall, there may be a tradeoff between price and quality of service that you are willing to make, or maybe not. That’s for you to decide.