You’re in reasonably solid financial health. Perhaps you’re saving more than ever, thanks to a lucrative side hustle. But your money still buys you less today than it did a year ago. That’s not good news for your financial future.
It’s time your money started working harder. It’s time you gave it a chance to make more than the paltry interest paid on savings accounts.
You should be investing.
But here’s the problem you face. The world of investing has always been awash with intimidating jargon and high fee-charging stockbrokers. It’s like it was designed to work against people like you and me. Thankfully there’s a solution. One in which I have plenty of experience.
I’m talking about UK based online stockbrokers.
The digital world has brought the old-boys club of the stock market to your laptop, tablet, and mobile device. It’s demystified dealing in stocks and shares. Now you can profit from investing or day trading from the comfort of your own living room.
online stockbrokers Explained
A stockbroker is a middleman that sits between you and the stock market. It used to be that you’d need to phone your stockbroker, and they would buy or sell shares (or other securities) for you. They could give you advice, too, as well as manage your investment portfolio and send you statements.
An online stockbroker can do all of this at a fraction of the cost of traditional stockbrokers. Best of all, you get to manage your portfolio.
Okay, I know what you’re thinking: “I don’t understand investing in shares.”
Take it from me, your level of investment knowledge isn’t a barrier. Many online brokers offer investment education resources, as well as investment tips and advice, on their trading platforms.
How do you choose an online stockbroker?
Choosing the best online stockbroker is crucial to achieving your financial goals.
When I first started, the choice of trading platforms was much smaller than today. One thing I realised very quickly is that not all are equal. I went through a lot of trial and error before settling on the best for me at the time.
Here’s what I learned are the critical considerations:
Understand your investment needs
Are you new to investing, or are you an experienced trader? What are your investment goals? How often do you plan to trade? Do you need advanced charting and analytical tools? Do you want investment education? Are you investing for income or capital gain?
Answers to questions like these will help you determine what kind of trading platform you need.
What investment securities will you be trading?
Some online platforms offer access to many different types of investment securities, while others are more specialised. You’ll need to think about which you are most interested in trading.
For example, do you want to trade in UK (or international) shares, or bonds, or Exchange Traded Funds (ETFs), or options, or foreign exchange?
Think about the investment wrapper
When you’re investing, it’s important to consider how you will ‘hold’ your securities. For example, if you want tax efficiency (and who doesn’t?), you might want to hold your securities in an ISA (Individual Savings Account).
If you are investing to build a tax-efficient retirement fund, a SIPP (Self-Invested Personal Pension) might be the best choice for you.
Think of your investment like a boiled sweet. The foil wrapper protects it from being eaten by bugs. ISAs and SIPPs are two different types of investment wrapper, helping to protect your money against the taxman. And the less tax you pay, the more money you have in your pocket.
How much will it cost to trade?
Broker fees and commissions can quickly eat into your profits. This is less of a big deal if you plan to buy and hold securities for the long term. But if you expect to trade regularly, then commissions, account fees, and other dealing costs soon mount up and can have a big impact.
What level of customer service will you need?
Especially when starting out, you’ll need smooth and effective customer service. Personally, while chatbots can provide great customer service in many businesses, when it comes to trading, I prefer to speak to a real person. And I want fast response times.
When I first traded online, I found that online education resources were invaluable.
Never trade through an unregulated broker
Never sign up and trade through an unregulated broker. Your money is at risk, and you won’t be protected under the law. Always make sure that the broker is regulated by the Financial Conduct Authority (FCA). Read the small print to assess the measures the broker has in place to protect your investments and your personal data.
Finally, give the platform a test run
Last but not least, ‘play’ with the platform. Make sure that it is easy to use and reliable. Check that it publishes market prices and news in real time. Most online brokers provide demo modes. These allow you to experience the platform before committing. Before you ‘go live’, check that you are happy with how to place orders, and that you find it easy to navigate round the system.
Day trading v investing
The proliferation of low (or no) commission online trading platforms has led to a boom in the popularity of day trading. Whether you are day trading or investing, the objective is to make a profit. The difference between the two types of trading is timescale.
As a day trader, you’ll use your knowledge and experience to buy and sell securities rapidly. You might only hold a position for a few minutes or a couple of hours. You’ll trade many times each day, and work on small margins (called a ‘turn’ – the difference between the buying and selling price).
As an investor, you’ll buy and hold for a far longer period. This could be weeks, months, or years. You may have heard of Warren Buffet. One of his key mantras is, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
Yep, he’s an investor, and probably the most successful the world has ever known.
Top 10 Online Stock Brokers
Now we’ve discussed a few basics, let’s dive into what I consider to be 10 of the best, FCA-regulated online brokers in the UK today – in alphabetical order.
AJ Bell Youinvest
The Youinvest platform from AJ Bell makes it easy to open an account – you could be up and running in less than 10 minutes. Trading fees are higher than many other platforms, though there are discounts if you trade more regularly.
Another fee to watch for is the custodial fee, which is charged at 0.25% of the value of your holdings per annum (though deducted monthly). Like trading fees, the custodial fee is reduced for higher-value portfolios. Customer service is among the best.
The platform offers basic charting and analytics, so it’s probably not the best choice for sophisticated investors. There is a platform tutorial, but no demo mode.
If you want to trade stocks, CFDs (contracts for difference), Forex, and Crypto currencies, then eToro may be the best choice for you. Its mobile app is particularly robust, and it offers ‘copy trading’ – where you track trades of other users. You can trade for free in stocks and ETFs, but you’ll be penalised for inactivity. There’s a demo account for you to cut your teeth on, too, as well as some good analytical tools.
Too good to be true? Well, here are the negatives:
Though it’s a user-friendly platform, there is no customisation available. And you’ll pay a fee to withdraw. Oh, and accounts are held in US Dollars, so you might get stung by high conversion fees. The quality of its educational tools is barely better than average.
Overall, with its social trading features and zero-commission trading, eToro could be a good choice for day trading but less so for those wishing to buy and hold.
FinecoBank offers some of the lowest trading fees across all online brokers. It’s not free to trade, but costs less than £3 for UK shares and ETFs, less than $4 for U.S. stocks and ETFs, and less than €4 for European stocks and ETFs.
Good news on the costs front, whether you are an active trader or occasional investor. Other securities tradeable on the platform include bonds, funds, Forex, and CFDs, and you can package applicable investments into an ISA, though it doesn’t offer a SIPP wrapper.
Delayed data is free, but you’ll need to pay for real-time streaming data, pushing the costs up for day traders, and while FinecoBank provides a range of screeners, the research that accompanies the platform is limited.
Its web-based trading platform isn’t up to the standards set by IG or Interactive Brokers, but it does provide news and market updates, as well as basic charting with 24 technical indicators. OK for the casual trader, but insufficient if you are following more sophisticated trading strategies. If this is the case, you’ll need to download FinecoBank’s PowerDesk. This lets you build charts with up to 30 years’ historical data and 90 technical indicators, and it gives you the ability to trade from the chart.
Overall, good if you are seeking a platform with solid usability and low fees.
Commission-free stock and ETF trading is the name of the game at Freetrade. It’s easy to open an account, and you’ll find the mobile trading platform is extremely user friendly. There’s no charge for low or no activity, either, making this a good choice for longer-term investors. There are no withdrawal fees, but there is also no demo account. You can search for securities by name, asset class, industry, and country.
Customer service is offered via live chat on its app, but there is no phone support available. It has some good educational tools and its own blog, but no analyst recommendations and only limited research tools.
Hargreaves Lansdown was founded as a traditional stockbroker more than 40 years ago. You’ll love the deep research offered by in-house analysts. With the capacity to deal in shares, bonds, funds, and investment trusts across more than 20 international exchanges, it’s easy to create a balanced portfolio.
Hargreaves Lansdown also offers ISA and SIPP wrappers, with advisory services and ready-made portfolios.
The trading application is robust and functional, and easy to use. You can access all the research from the system, too, which is great if your investing style relies on fundamental research. For day traders, the charting function is reasonable, but only includes 20 technical indicators. For longer-term investors, a cool feature on the charts is the ability to display broker forecasts, financial announcements, and dividends.
You’ll be able to access some good quality educational resources, but not as deep as you might expect for the charges to use the platform. If you trade fewer than 10 times a month, you’ll pay £11.95 per trade. Even if trading more than 20 times each month, the cost of dealing only falls to £5.95 per month. If trading government bonds, you’ll pay a minimum of £20 or 1% of the value of the trade.
In short, an easy-to-use trading platform, with incredible research, but higher-than-average commissions and fees.
One of the most user-friendly of all online trading platforms, IG is easy to use. You can filter by a range of criteria, get real-time news, and set price alerts. Its charting and analytical tools are exceptional – and you can trade from the chart. You can also customise the trading layout.
You’ll have access to technical analysis and fundamental data. Another feature I like about this platform is that you can see what stocks other users own, and how bullish or bearish IG clients are on any stock. There’s a very active community, too, with plenty of trading and investing ideas being discussed continuously. Plus, there’s IGTV – screening three market bulletins a day.
And I haven’t even mentioned the IG Academy, with several trading/investment courses available and live sessions most days. There are also dozens of articles covering all things trading.
On the IG platform, you can trade shares, CFDs, ETFs, bonds, and investment trusts. You can hold them in and ISA or SIPP. Commissions are competitive, from £8 per trade down to £3 per trade depending on volume of trading. There is a custody charge of £96 per year, charged quarterly.
IG is not the cheapest online stockbroker, but has an incredible history dating back to the early 1970s and an incredible trading platform.
Not to be confused with Interactive Investor, Interactive Brokers offers low commissions, great research, and a range of intuitive trading tools.
If you want real-time data, you can opt into the paid real-time streaming data (between £1 and £10 per month per exchange). There are plenty of educational resources on the system, though they are mostly focused on the United States – and aimed at intermediate and advanced traders rather than the beginner.
You can trade in securities that include shares, warrants, Forex, bonds, futures, ETFs, investment trusts, and CFDs from more than 30 countries. Commissions range from a £3 minimum for Western stocks (with a 0.05% commission of trade value). They do offer fund dealing with no commission and no custody fees.
Trading tools available to users include funds scanners, options strategy lab, risk navigator, market scanner, and portfolio builder. There are around 100 different order types! Its charting tools include more than 130 technical indicators, and it is integrating AI into stock trading.
If you’re an advanced trader or experienced investor, Interactive Brokers could be a great choice of online broker. The platform gives you the feel of being in a city trading room. If you’re a beginner, then you may be better to select one of the other online brokers I’ve reviewed in this article.
With a well-designed, user-friendly platform, Interactive Investor is a good choice for the novice. Customer service is fast and efficient, as is making deposits or withdrawals. Trading fees are average, and you’ll have a facility to make up to 25 regular investments each month without commission.
There are no fees for inactivity, though you will incur a monthly account fee according to the type of account and investment wrapper you have. Interactive Investor offers a demo trading platform, too – though there are no advanced analytical or charting tools.
If you wish to focus on the UK stock market, with the option to trade in ETFs, funds, and bonds as well as UK shares, then this could be a good choice for you. ISA and SIPP wrappers are available.
Saxo’s trading platform is on a par with IG. It’s easy to use and incorporates watchlists and price alerts. Click on a stock on your watchlist, and you get stock fundamentals, charts, and trading signals. It’s fast and easy to trade, too.
Its research offering is very good, with analysis provided by its own analysts as well as third-party providers. You can trade stocks, ETFs, bonds, investment trusts, and CFDs from around 40 markets around the world. And you can open ISAs and SIPPs, too.
To help you get started in trading, Saxo’s platform includes several educational videos and quizzes, as well as webinars.
All this comes at a price, though. Trading commissions are 0.1% of trade value, with a minimum of £8. Custody is charged at 0.12% per year, with a minimum of €120 (or sterling equivalent). To open a SIPP account requires a minimum deposit of £10,000.
A great platform, with many plus points – but you’ll need to decide if the costs are worth it for you.
If you are seeking a cheap way to trade stock, ETFs and CFDs, Trading 212 is worth considering. There are no inactivity, custody, or account fees. There are no commissions for trading shares and ETFs, either. Withdrawals are free. It also offers an ISA wrapper.
Customer service is via live chat and email. There is a demo account to try out the platform. The system also provides fundamental data on stocks. If you wish to trade Forex, be aware that Forex fees are high on Trading 212.
If you want to get started in stock trading online, Trading 212 could be a good choice. But, as you become more sophisticated and wish to diversify your portfolio, its limited securities offering could be restrictive.
The bottom line
The internet has unwrapped a previously inaccessible world of investing. You can now participate in the world’s stock markets from anywhere.
And that’s a great thing.
You’ll pay lower costs, and probably do a better job than the professionals.
Yes, you did read that last sentence correctly.
Data consistently shows that around 80% of active fund managers underperform their benchmark. Taking control of your investments will not only give you a sense of empowerment, but it could also make you better off.
I think you’ll agree that not all online brokers are equal. Each of the trading platforms I’ve discussed in this article has unique merits. Which is best for you depends on many factors. These include:
- The type of securities you plan to trade
- The investment wrappers you prefer
- Your budget for trading fees
- Your level of investment experience
- Your requirement for customer service
Online brokers and trading platforms range from those most suitable for novices, like Interactive Investor, to those built for advanced traders, like Interactive Brokers.
One thing is certain. Whether you are a novice investor or an experienced trader, trading through an online broker puts your financial future in your hands. With the right information, preparation, and broker, your money could start working harder for you.