There are dozens of investment brokers out there – which one is right for you?
You want a broker which:
- Offers the type of service you want (DIY investing, or managed accounts)
- Offers the type of account you want (ISAs, LISAs, SIPPs, GIA)
- Offers the products you want to invest in
- With the lowest costs
There are also other factors that may influence your decision, such as their reputation, customer service and the user experience on the app or website.
Contents
DIY investing vs managed accounts
When you use a broker for DIY investing, you make all your own investing decisions, and instruct your broker on what you would like to buy or sell and when. It is up to you to decide on your preferred asset allocation, research which fund(s) to use, and make transactions according to your plan. To learn more about this, start with our investing 101 page then move on to some more in depth books or videos from our recommended resources.
Some brokers will also offer managed accounts in which you invest directly into a pre-made fund. The platform will first ask you some questions about yourself – for example about your age, investment horizon, and risk tolerance, and match you up with the appropriate fund from their portfolio. These funds will likely have a higher charge than ones used by cost-conscious DIY investors, but can be an easy way to start investing if you’re not confident.
Account type
Most brokers will offer ISAs, SIPPs and GIAs. Their website or app will list the types of account they offer so you can easily confirm.
For LISAs, there aren’t a huge number of providers. Moneysavingexpert have a list.
Some people like all their accounts with one provider, so want them to offer everything in one place. Others don’t mind (or prefer) using multiple providers.
Product availability
If you are planning on choosing your own investments, note that not every broker offers every possible investment. Before you open an account with a broker, check it offers the investments you want.
Notably:
- Some brokers, such as Trading212 and InvestEngine, don’t offer ‘funds’ – see our funds vs ETFs explanation.
- Most brokers won’t permit you to buy ‘fractional shares’ of individual company stocks or ETFs. This means you won’t necessarily be able to invest exactly £100 in something – if a share costs e.g. £70, you will end up with £30 of uninvested cash. Note this limitation does not apply to funds as they are structured differently. Brokers which don’t offer funds generally do permit fractional shares.
- Vanguard Investor offer a subset of Vanguard funds only.
Cost
Keeping costs down is key for long-term investors. Broker fees eat into your gains, eroding your wealth over time. The less you pay the better.
Brokers usually charge fees in some combination of:
- Fees for holding your investments on their platform. This could be a flat fee, or calculated based on how much you hold
- Fees for trading e.g. buying funds or shares
There are many possible variations on how these fees are structured. For example, percentage based fees could be subject to a minimum or maximum charge. Brokers that charge users to make trades may offer a certain number of free trades per month, or free/discounted trades for regular investing (set up with a direct debit).
The blog Monevator have put together a comprehensive analysis of the UK’s cheapest online brokers. Follow the link and have a read to make your decision.
What about free brokers?
Some brokers charge no platform fees at all for DIY investors. They may do this as an introductory offer to attract a user base, or as a long term business model where they make their money in other ways, whether charging users for other kinds of services (such as managed accounts), or profiting from the spread of buy/sell prices. Monevator have a post about this if you are interested in learning more.
Promotional offers
Sometimes brokers put out promotional offers such as cashback incentives, referral offers, or free or discounted fees for a period of time.
We don’t track these here as they change often, but they are worth checking for.
How safe are my investments?
Please see our page on how your investments are protected in the UK for more information on how to assess this.
What is the app/website like?
Each broker has a slightly different target market. Some are geared towards frequent stock trading, whilst others focus on long term investors who only make infrequent transactions. This will affect their fee structure and also how they design their service.
You may not mind if your broker interface is a little clunky, or only available through a website rather than an app, because once you set things up you may not need to log in any more than a few times a year. Alternatively you may value a smooth user interface, especially if you plan to interact with it more frequently. If so you may want to try a few, or look on youtube for user guides to see what the app looks like.
Note that there is no inherent problem with using a ‘trading’ app for long term investing – so long as you are confident you won’t be influenced by the app design to e.g. check your portfolio daily and start buying and selling more often than you’d originally intended.
What are the most popular or recommended brokers?
A good source for recommendations is the website Boring Money, who do an annual ‘best buy’ award in different categories (ISAs, pensions, beginners, experienced traders and so on): https://www.boringmoney.co.uk/