Platform comparison: Service matters as much as fees
Thank you to everyone who provided valuable insight on last week’s Freetrade article. I echo the thoughts of matt365:
I enjoy reading everyone's thoughts and comments. They really are a great source of learning.
And so with that in mind, this week I have attempted to harvest some of those insights and delve a little deeper into the platforms available for stock pickers in the hope that together we can help more people make the right choices.
Fees are important
Starting with a more comprehensive overview of the fees.
Clearly fees are not the only consideration for private investors choosing a platform, but investors should be aware of the extent to which they can eat into returns.
Last week I compared some of the cheapest providers available and concluded that for a regular trader looking to buy international and domestic companies, IG, Freetrade and Dodl offer the best value. But there are problems with all of these platforms, which you can read about here.
And so I have started to gather a more comprehensive overview of the prices available from a wider field of platforms in this spreadsheet. Alternatively as sevwarn suggested, Boring Money’s fees calculator is a very useful comparison tool. You can find that here.
One thing is clear - picking a platform is a very personal decision and investors should take care to make sure they find the option that is right for them. To help, here is a run through of some of the platforms and who they might suit:
1. AJ Bell has no ongoing fee for portfolios greater than £500,000. You’ll pay 0.25% on your first £250,000 of investments and 0.1% on your next £250,000. But you’ll also make 0.25% interest on cash above £100,000 which chips a little bit off your ongoing fees. Trading charges are £4.95 per stock no matter how often you trade.
These fees suit: Investors with large portfolios who aren’t planning on buying and selling shares regularly.
2. Degiro is a Dutch brokerage with no ongoing fee for any portfolio size and relatively cheap trading costs for shares in the UK and US. Foreign exchange fees are also very competitive at 0.25% above the spot rate.
These fees suit: Investors with a large portion of their portfolios in the US
3. Freetrade’s basic account is free, but can’t be used to open an ISA (so savings you will have made will be gone when you pay your capital gains tax). The cheapest account with which you can open an ISA is just £4.99 per month - which works out cheaper than Degiro if you are buying more than two stocks per month.
These fees suit: Regular traders with small portfolios
4. Hargreave Lansdown charges no custody fee for shares but the trading fees are very high at £11.95 (unless you buy more than 10 shares a month). These can really eat into regular traders’ returns. Fund fees for portfolios under £250,000 also aren’t particularly cheap at 0.45% (plus any fees charged by the actual fund managers). But these fees fall to zero for investors with a portfolio larger than £2m.
These fees suit: Investors with a large portfolio who hold predominantly funds and trade shares infrequently.
5. IG’s ongoing fees fall from £24 per quarter to £0 for those who make more than 3 trades in a quarter and the trading costs are cheap (£3) for those buying more than two UK shares a month and free for those buying more than two US shares a month.
These fees suit: Investors with large portfolios looking to trade regularly especially overseas.
6. Interactive Investor costs £9.99 per month and comes with one free trade per month or £19.99 for two free trades per month and a discount on share buying beyond that. Even for the superior account, investors are looking at £9.99 fees for international share buying which is far more expensive than some of ii’s competitors. The fixed ongoing fee comes into its own for larger portfolio sizes.
These fees suit: Investors with large portfolios of mainly UK-based stocks.
There are, of course, many more interesting platforms out there so do please keep sharing your insights in the comments.
Prices beyond fees
For many investors in the Stockopedia community it is clear that execution prices are of far greater importance than basic trading costs. That is understandable, especially as it is in the small caps space where private investors can truly outperform the market and these are the companies where it can be difficult to get a good price.
Thank you to TS23 for this interesting suggestion:
As a portfolio becomes larger (hopefully) over time the transaction fee becomes less relevant. If your trade is, say, £9k then HL may charge £8.95 but this is only 0.1% of the transaction so if they can achieve a better spread/execution price by more than this then no problem. Not sure how you can compare this though.
It is true that comparing this is difficult - especially as most platforms claim to execute their transactions immediately.
In practice though this is not necessarily true. Anecdotal evidence from Freetrade users suggests that orders can take longer to execute than other platforms. The company does offer instant orders (in addition to the basic orders which are the default when the market is closed). Freetrade uses market makers registered with the Retail Service Providers (RSP) network just like many of its peers to complete these orders. There are also stop losses and limit orders available for those with the superior account which can help investors target a specific price.
Hargreaves has received high praise for its ability to execute transactions quickly for stocks of all sizes. That said, even this mega-platform sometimes struggles - when markets crashed in 2020 following the outbreak of Covid-19, many investors struggled to sell shares in time. IG suffered a similar outage around the same time, although neither platform has complained of problems since.
The larger platforms with a longer history are more likely to be able to offer the shortest execution times, but the newer companies with more resilient tech stacks are catching up.
The spread is also important and, again, anecdotal evidence favours the bigger providers. A narrower spread allows investors to execute their orders at closer to the market price. An often overlooked feature of IG on this count is the fact that the company can execute part transactions at a lower price - something not on offer at Hargreaves. One observer has also commented that the lower fees mean transactions can be completed in smaller, regular chunks, allowing investors to take advantage of the best prices when they are available.
Service matters too
It’s not just prices that are important to private investors. Service is also crucial and here is where Hargreaves shines the brightest. Expensive fees seem not to matter to many of the customers who are long-term users of the platform for buying funds and shares.
By contrast, IG has received a torrent of complaints, especially from investors who have encountered specific difficulties:
IGG are alright until something goes wrong then they are completely unless. The site works well but the support staff are useless. Took me months to sort out a very simple matter.
There are times when superior service is worth paying up for and that is where personal experience and recommendation is hugely valuable. I will keep monitoring all your insights in the hope that one day we can formalise a platform comparison system which will help everyone make the right decision.
About Megan Boxall
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hi, I use IBKR with my personal and 2 family office portfolios. I don’t need UK tax reporting but it’s capital gains and dividend income report formats is excellent! I’m also personally comfortable holding a good % of our family capital there, but you should do yo ur own dd before deciding your level of comfort on that front.
i live their mobile apps and their max desktop app as well. Very easy for equities and options execution. Spreads are great, costs are low, and pricing for live data is also very reasonable.
Interactive Brokers website says that they are hoping to start 'in-specie' transfers into their ISA later in the year. That will be a game changer for me as apart from them (IKBR), Interactive Investor (ii) are the only platform in the UK that enables US & international smallcap trading, but ii charges are horrendous in this area.
For UK only trading I can heartily recommend Jarvis/x-o for outstanding customer service and a strong balance sheet which can be easily observed.
Another important point to consider is the platform itself. ii have a lamentable website, looks like it's 20 years old and often 'close for the weekend' to perform maintenance. And it's very slow and takes an age to update post-trade. And really messy to get data out of.
For example, you would think the transaction listing history would show the full price you traded at - nope, it's 2 decimal places... so you have to go into your order to find the full price. And of course you can't open that in another window... and when you go back the filters you had are lost. Rubbish!
Compare against someone like Charles Schwab (who fingers crossed could move into the ISA space?) it's like comparing Kitty Hawk to Concorde... A website that works and has most of the tools you could think of - for free.
5. IG’s ongoing fees fall from £24 per quarter to £0 for those who make more than 3 trades in a quarter and the trading costs are cheap (£3) for those buying more than two UK shares a month and free for those buying more than two US shares a month.
Sorry Megan but these figures do not seem to reflect my experience....
I've never seen a quarterly fee at IG ?
From what I've seen it costs 3 trades a month (not a quarter) to qualify for the lower transaction rate and similar next month to requalify for the lower rate, so lower rates are ongoing.
Once qualified, transaction costs are US £0, and UK is £3 per trade - there are no "two" US or UK transaction criteria ? its just the number of trades per month - US/UK does not matter.
The initial month one qualification costs 3 X £10 per trade, after that, 3 trades per month keeps the £0 US and £3 UK fees which is very easy to maintain.
If there is nothing I want to trade I do a US £100 buy and 2 x £50 sells to maintain the low rate - this costs 0.5% FX fees so £1 round trip + the tiny US spread - simple really....
Just message AJ Bell if you want to attend an AGM and they will send you the paperwork to confirm that you are a shareholder so you can get in.
I'm a new member and have read through some of these comments wiht interest.
Here's an ancilliary question - what are views on the most effective way of trading UK AIM or other small caps with leverage, such as CFDs or spreadbetting? Thanks
Any suggestions to what the best platform is to trade Polish stocks? And US OTC stocks?
Hi Cuddle,
I also recently used interactive brokers (IBKR) and I would love to transfer my ISA to them, but am unable to for the reasons you mentioned. A few months ago the ISA transfer process did allow in-specie transfer but was in an invite only basis and I missed it. Selling all my ii holdings for 3,4,5 months for thE transfer is not very practical.
Pros
- Trading fees minuscule ( couple dollars )
- Wide range of exchanges available. Including Singapore and Australia.(love my Chinese coal stocks
It depends - I use IG for spread betting (tax free in the UK, while CFD's are tax chargeable). I'm considering moving to Pepperstone as spreads are similar, but bet sizes look smaller (i'm still learning so need to reduce risk).
I'm not sure if leverage is still possible in retail UK spreadbet accounts as the government has decreed that nobody can loose more than their deposit, so companies have cut back on leverage, to the point where I dont think it exists anymore for Joe Public ?
As far as I'm aware the only way to get leverage is to prove you are a profesional trader (£500k+ and years of experience needed), to my mind that would make your profits potentially taxable according to current UK tax rules, so not a route I'd persue at the moment.
Of course different countries have different rules....
That said, IG recently (a year or so ago) cut back on a large number of shares you could spread bet on - I recall a lot of AIM shares were removed, but one share I was in became a close only option - gutted because I wanted to buy more :-)
I've always used Mitto Markets, about half the price of HL and always someone there to pick up the phone. Have also used Jarvis too who are good, just rip off on FX if I trade US stocks.
Couldn't agree more. Was very happy with the tools and costs at Share.com
ii bought them, and ported Share.com holdings over without any attempt to incorporate the superior tools from the Share.com platform, despite this taking more than 6 months.
Less than 2 years later, ii is now owned by Abrdn, and the period for the two free trades has been reduced from 2 months to one, so unused trades are a trade-off for lower fees in moths with higher trading.
Customer service is unapologetic, and little better than a chatbot could manage.
I've found Degiro very good for all european stocks including polish ones, with low costs for both trades and currency conversion. Unfortunately they don't do ISAs, so I also have an Interactive Brokers ISA which in theory gives you good access to most european and other major world markets. But if you go to IB you need to use their way over-complicated Traders Work Station, as the much more straight forward to use "Portal", will not get you far and explanations about what the problem is, tell you nothing. For example, you can buy Norwegian shares but many of them not through the Oslo exchange, you go through Stockholm, iirc, but "portal" doesn't allow you to choose an exchange and therefore you have no access to those shares and no informative explanation of the problem . The other difficulty which initially annoyed me was that because you cannot keep foreign currency in an ISA, the "normal" IB method of making a trade does not apply (ie change currency first) - no explanation given, and then when you get over that hurdle, they withhold a decent currency exchange cushion on any foreign trade - again without explanation. When I first opened my account with them I put in a relatively small deposit to test their system before bringing it up to full ISA allowance, which meant much fiddling about to make things work without knowing about the currency cushion.
I would imagine that IB would be excellent for US OTC stocks but I've never been interested in them so cannot confirm that.
Forgot to say two things: Degiro were good and cheap for UK shares also, and IB had somewhere in their conditions a clause saying that they charge an "inactivity" fee of £3 or 3.50 for any month without trades but I've not seen any charges for this on my (& my wife's) accounts as yet.
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Sorry got the wrong ticker!!