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Know how much your broker's fees add up to

The fees levied by execution-only brokers can be baffling, making it difficult to work out which ones are most cost effective for you. And charges can change so it's important to stay on top of what's happening at your broker or platform.

Examples of this include Barclays which has recently launched a new online direct investing service which it anticipates will fully replace Barclays Stockbrokers by the end of next year. Existing customer accounts will be transferred to the new service during 2017.

The new service will see online trading fees for shares and exchange traded funds (ETFs) halved from £11.95 to £6 per trade. But funds, which were previously free to trade, will incur an online transaction fee of £3 per trade.

Investors will also pay a customer fee of 0.2 per cent on the value of their funds per year, down from 0.35 per cent. And there will be a new 0.1 per cent fee on the value of other investments such as shares and ETFs, with a minimum fee of £4 per month and a maximum of £125.

These percentage fees are different to Barclays Stockbrokers Investment Individual Savings Account (Isa) current flat fee of £15 + VAT, which is paid half yearly and waived if only funds are held.

The company says the new fees have been designed to be transparent, clear and competitive as all other extra fees, such as the hefty £30 per holding cost of transfering out of the broker, will be cut. Customers will also be able to see their bank accounts alongside their investments and manage them all with a single log-in through online banking.

But one Barclays Stockbrokers customer and Investors Chronicle reader told us the amount she pays in administration charges is going to shoot up.

She writes: "I trade very rarely, so stand to gain very little from the lower trading charge, but I will be massively affected by the new admin charges, which, as far as I can see, will pretty much be five times greater. My husband will be even more massively affected, as his portfolio is larger than mine. If other people want lots of frills, why can't they pay for those separately, and why should I subsidise them?"

A Barclays spokesperson says: "We're sorry to hear that [your reader] and her husband are unhappy with the changes being made. Our new direct investing service has a simple pricing structure that we believe offers great value for money. Independent research shows that for many it will be among the lowest-cost online investment services available and the majority of Barclays Stockbrokers' customers will pay less, or roughly the same, when they are moved over on to it.

"However, we realise some will see an increase in the amount they pay in fees, but hope that customers like [your reader] and her husband will see the value in the additional benefits and features available."

Barclays adds that if our reader is still dissatisfied she and her husband will be able to move without incurring a transfer fee.

However, when choosing an execution-only broker high transfer fees are just one feature you need to be aware of. Investors also need to take into account the following.

 

Administration fees

The majority of brokers charge administration fees when you open a general investment account, Isa or a self-invested personal pension (Sipp). Some call this a custody, account management or platform fee. Brokers will either charge a percentage on the value of your account holdings on a monthly, quarterly or annual basis, or levy a flat fee irrespective of your portfolio's size.

Generally, flat fees are better with larger pots and percentage-based fees with smaller ones. Holly Mackay, chief executive officer of personal finance website Boring Money, suggests that anyone with a portfolio worth more than £100,000 should opt for a broker with a flat fee charging structure. For Isas she suggests Alliance Trust Savings which charges £7.50 per month, Interactive Investor which charges a quarterly fee of £20 and The Share Centre which charges £4 + VAT per month.

iDealing, meanwhile, charges a quarterly £5 holding fee for its general investment account. And Computershare Sharedealing and SharePrice charge an annual account management fee on their Isas of £25 +VAT per year.

If your portfolio is under £100,000 Ms Mackay suggests percentage-charging providers, such as Hargreaves Lansdown and Tilney Bestinvest, both of which operate a tiered account management fee. Hargreaves Lansdown's Stocks and Shares Isa charges 0.45 per cent a year on the first £250,000 of funds; 0.25 per cent for funds between £250,000-£1m and 0.1 per cent on funds between £1m and £2m, after which there is no charge. Holding shares, investment trusts, ETFs, gilts and bonds costs 0.45 per cent of the value of your holding capped at £45 a year.

Tilney Bestinvest's Stocks and Shares Isa charges 0.4 per cent of the value of the assets held in the account for those between £0 and £250,000. Between £25,000 and £1m there is a 0.2 per cent charge, and above £1m there is no charge.

Some brokers don't charge account management or platform fees, including Beaufort Securities, Degiro, IG Markets and Saga Share Direct.

Some brokers only charge fees on their tax wrapper accounts but not on their general investment accounts. For example, Equiniti Shareview charges a half-yearly Isa fee of 0.25 per cent, with a minimum of £10 + VAT and maximum £37.50 + VAT, but doesn't charge an account management fee on its general investment account.

Halifax Share Dealing charges £12.50 per year on its Isa account and has no charge on its share dealing account. But it charges a quarterly administration fee of £22.50 on Sipps with a value of less than £50,000, and £45 on ones with a greater value.

Ms Mackay says investors planning to drawdown an income from a Sipp need to be particularly aware of the pick-and-mix nature of many Sipp platform fees.

"With Hargreaves' Sipp account you pay 0.45 per cent on funds and up to £200 on shares, but pretty much everything is included [such as income drawdown payments]," she explains. "Then at the other end of the spectrum groups such as AJ Bell have more of a menu approach to charging, so the headline fees will look cheaper but depending on what you're going to do, there's a list of ancillary fees that can add up."

Mark Polsen, founder of platform research company the lang cat,says the different charges on different accounts on the same platform mean investors need to think carefully about the amount they plan to hold in different wrappers. For Sipps he believes it is better to choose a broker or platform that administers the pension in-house rather than via a third party. He particularly likes AJ Bell, Alliance Trust Savings and Hargreaves Lansdown.

 

Transfer fees

Generally, you can expect to pay £15 to £25 per holding to move your assets out of a broker, with some companies charging much more. For example, Alliance Trust Savings charges £60 + VAT to transfer to another provider from its general investment account and £100 + VAT if you transfer out of its Isa. Farley and Thompson charges £100 plus £20 per holding.

Some companies charge you to transfer your holdings into them. ADM Investor Services International, for example, charges £15 per holding to transfer in and out, and Cave & Sons charges £10 per holding and Degiro €10 per holding to move your money to and from them.

A few providers do not charge exit fees, such as IG Markets and TD Direct Investing.

 

Account opening and closure

Check whether a broker has an account opening or closure fee, although these are less common than transfer fees. IWeb, for example, has a one-off £200 including VAT account opening charge. Hargreaves Lansdown charges an account closure fee of £25 + VAT, in addition to £25 per holding to transfer stock out to another provider. X-O.co.uk doesn't have account management fees but charges £50 to close accounts.

 

Funds and share dealing costs

The price of trading can add up even if you don't trade a lot, with brokers typically charging £10 or more per trade. But Dutch execution-only stockbroker Degiro charges £1.75 + 0.004 per cent per trade on UK stocks, capped at £5. The broker also allows you to trade a limited number of ETFs for free. Each month you can place one commission free trade per ISIN, from a choice of about 700 ETFs, and increase your holding in a given ETF for free provided that the order is a minimum of E/$1,000. But as Degiro relies on the European Union (EU) passporting system to operate in the UK, it could be affected by the UK's forthcoming departure from the EU.

Other platforms with very low dealing costs include: Clubfinance, which from January 2017 will charge £4.95 to trade both stocks and funds; IWeb which charges £5 per trade on stocks and funds; and X-O.co.uk which charges £5.95 per trade for UK equities.

Several platforms do not charge for fund dealing. These include:

AXA Self Investor

■ Tilney Bestinvest

Fidelity Personal Investing

Charles Stanley Direct

■ Hargreaves Lansdown

■ TD Direct Investing

 

Regular investment savings

With a regular investment plan you can purchase shares at a reduced dealing commission of between £1-£2 per trade, and invest as little as £20 a month. For example, AJ Bell, Alliance Trust Savings, Computershare Sharedealing, Hargreaves Lansdown, Interactive Investor, Saga Share Direct, Selftrade and Willis Owen offer regular investing from £1.50 per trade. The Share Centre allows you to invest between £10 and £200 per month for a £1 dealing commission, but above this amount it will cost 0.5 per cent to invest regularly. As many of these schemes only apply to buying investments, if you want to sell you will be charged the usual trading fee.

Frequent trader discounts

Several platforms offer discounts if you trade many times a month. For example, AJ Bell halves its standard online trading fee on UK shares from £9.95 to £4.95 if you've traded more than 10 times in the previous month. Interactive Investor halves its rate to £5 per trade on funds and shares if you buy or sell more than 10 times in a month. And Hargreaves Lansdown cuts its dealing cost from £11.95 to £8.95, if you trade between 10 and 19 times in a month, and to £5.95 if you trade over 20 times.

Some platforms offer reductions in account management charges as sweeteners. Charles Stanley Direct, for example, waives platform fees for clients who make one or more chargeable trade within a calendar month.

Inactivity fees

Some brokers charge if you don't trade a minimum number of times. For example, Selftrade does not have account management charges but will hit customers with an inactivity fee of £10.00 + VAT per quarter if no trades are made within the previous quarter. From January, Clubfinance will charge £15 per quarter if you make less than three trades in a quarter.Redmayne Bentley charges £40 on its Crest account if no trades are made for a full year. This fee is extended to its stocks and shares Isa after three years of non-trading.

 

Dividend reinvestment

Many platforms do not facilitate dividend reinvestment. Of those that do, Alliance Trust Savings charges £5 per trade, and a number charge between 1 and 2 per cent of the dividend value. However, Cave and Sons does not charge for dividend reinvestment, and Tilney Bestinvest doesn't charge for this with funds. Pilling & Co Stockbrokers and The Share Centre charge 0.5 per cent per trade to reinvest dividends.

Execution only broker fees compared

Broker/ PlatformStandard online dealing costs for UK shares (per trade)Standard online dealing costs for funds (per trade)Reduced dealing charge for frequent tradesDealing account management chargesInactivity feesDividend reinvestment plan costsRegular investor schemeTransfer out fee
AJ Bell Youinvest£9.95£1.5010+ share deals in previous month: £4.95Shares (including investment trusts, ETFs, gilts and bonds):  0.25% (maximum £7.50 per quarter), funds: first £0 - 250,000: 0.25%, Next £250,000 - £1m: 0.10%, Next £1m - £2m: 0.05%, over £2m: no chargeNonena£1.50 per deal£25 per holding
Alliance Trust Savings £12.50£12.50na£7.50 per monthNone£5 per trade£1.50 per deal£60 plus VAT
Barclays Stockbrokers £11.95Free10-19 deals per month: £8.95, 20+ deals per month: £5.95 Quarterly administration charge £12 + VAT (waived if you trade within the quarter);  Fund administration fee: 0.35% per year, minimum of £35 per year per account.None1% (minimum £1, maximum £7.50)For funds only, if you join regular investor scheme the £35 per year fund administration fee is waived and you will only pay the 0.35% rate£30 per holding
Barclays new online direct service£6£3na0.2 per cent on value of funds per year, 0.1 per cent fee on the value of other investments like shares and ETFs per year; minimum of £4 and maximum of £125 per monthNoneFree£1 per dealNone
Beaufort Securities £8nanaNoneNonenana£16 per line of stock
Charles Stanley & Company Limited£11.50FreeIf you place 1+ share trade each month, the 0.25% platform charge will be waived that month on stocks and shares holdingsStocks and shares: 0.25% (minimum of £24, maximum of £240 per year); funds: £0 - 250,000: 0.25%, £250,000 - £500,000:20%, £500,000- £1m: 0.15%, £1m- £2m: 0.05%, over £2m: no chargeNonenana£10 per holding
Clubfinance*£4.95£4.95naNoneLow activity fee: £15 per quarter if you make less than 3 trades during a quarter.nana£15 per holding
Computershare Sharedealing£20FreenaAnnual funds platform fee: Up to £250,000 0.30% Over £250,000 0.20% (maximum £1,500)None£1.50 (all reinvestments must be over £10)£1.50 per deal£25 per holding
Degiro£1.75 + 0.004%Not OEICS or Ucits; Partial commission free trading on ETFs with clients able to have one transaction (a purchase or sell) per ISIN commission free each calendar month. naNoneNonenana€10 per position to transfer in and out
Equiniti Shareview £12.50FreenaNoneNone£1.75 per stock£1.75 per stock£35 per holding 
Halifax Share Dealing £12.50 FreenaNoneNone 2%, max £12.50£2 per stock£25 per individual stock (max £125)
Hargreaves Lansdown Stockbrokers £11.95Free10 - 19 deals per month: £8.95, 20+ deals: £5.95No charge to hold shares, investment trusts, ETFs, gilts and bonds. Funds: up to £250,000: 0.45%, £250,000 to £1m: 0.25%, £1m to £2m: 0.10%, £2m+: no charge None1% (£1 minimum, £10 maximum)£1.50 per stock£25 per holding
IDealing Ltd£9.90 (Euronext securities are commission free to trade)iDealing runs its own funds network, with no charge for dealing funds.Discounts from 10 - 30%. Starting discount of 10% requires £180 of commission in a year.£5 holding fee, paid quarterlyNonenana£60 on account closure or transfer out and £17.50 per line transferred
IG Markets Limited£8na10+ trades in previous month: £5None£12 per month, charged if you have no activity across any IG account for 24 consecutive months. (Dividend payments count as activity.)nanaNone
Interactive Investor£10 £10 10+ trades in a month: £5£20 quarterly feeNone1% of the value of the dividend paid (capped at £10)£1.50 per trade£15 per line of stock (when an account has been open for more than a year)
IWeb Share Dealing£5£5naNo ongoing admin fee, but there is a one-off £200 account opening charge for the first account you open.None2% of the dividend payment, maximum £5na£25 per stock, maximum £125
Saga Share Direct£11.95Free to buy, £11.95 to sell10+ trades in a quarter: £9.75Fund administration fee of 0.35% per year, with a minimum charge of £35 per account.None1% (minimum £1, maximum £7.50)£1.50 per trade£10 per stock, maximum charge £100
Selftrade£11.75Free to buy, £11.75 to sell20+ trades in a month: £6 Annual funds platform fee: £0 - £50,000: 0.30% per annum, £50,000- £250,000: 0.25%, over £250,000: 0.15%, Maximum: £250 per quarter£10.00 + VAT per quarter if you do not trade in the previous quarter£1.50£1.50 per stock£15 per line of stock
SharePrice£10nanaNoneNonenana£15 per stock
TD Direct Investing £12.50FreeAverage 10-19 trades per month across the last 3 consecutive months: £8.95, Average 20+ trades across 3 months: £5.95 Annual platform fee on funds up to £250,000: 0.30%, over £250,000: 0.20%, maximum: £750 per charge, per account (£1500 maximum per year, per account)None£1.50 (all reinvestments must be over £10)£1.50 per stockNone
The Share Centre 1% per deal (min £7.50) 1% per deal (min £7.50)Pay additional dealing option fee of £20 + VAT per quarter and receive a fixed rate of £7.50 per trade£1.50 + VAT per monthNone0.50%0.5% (min £1.00) £25 per holding
X-O.co.uk£5.95nanaNoneNonenana£15 per line of stock

*Effective from January 2017

Sources: Broker/platform websites and Investors Chronicle

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By Emma Agyemang,
15 December 2016

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