Over the past month or so, a whole load of blue chip companies released their YTD earnings and stock market discussion in the Strabo office went into overload. Which sparked a debate in the team — what’s the best platform to buy stocks on in the UK? Does it all come down to cost, or are there other things you should be concerned about?
Clearly the first thing is to make sure the platform is compliant. Not only FCA regulated for trading activity, but also FSCS compliant. This means that it deposits will be guaranteed by the UK government up to a maximum of £85,000. So if the brokerage goes into insolvency, you would still have a claim on your assets (although given you will have probably already invested most of this, your investments would be more likely to roll over to whoever buys up the client book). It might seem unlikely that a UK brokerage would completely collapse, but you have to remember that some of these platforms are still startups (or scale ups). There is risk involved (however small), placing capital with them, which you are usually compensated for with attractive terms like free shares and low (or no) transaction fees. It’s also not completely unheard of for UK financial institutions to go under (see Northern Rock in 2008).
So on to the good stuff: who's on the shortlist?
The simple option. For the investor who wants to allocate a set amount into their investment account each month, choose a low cost index fund and forget about it. The fee structure is particularly attractive: 0.4% a year up to £250k and 0.2% beyond that. However, this does come with a few drawbacks. The platform isn’t particularly easy to navigate, there isn’t a mobile app and not all global equities are available for purchase. Still, some might see that as an advantage — makes it much easier to stop tinkering and let your investments run! It's also very easy to transfer out, which we think is one of the signs of a trustworthy and competitive platform.
Great for: low fees
Negatives: no mobile app, no US equities
As the name suggests this is a straightforward, simple to use brokerage platform that provides simple access to some of the more esoteric financial products, as well as the charts, tools and infrastructure for frequent trading. It has also begun to emerge as a provider for ISA and long term savings accounts, although is still one of the newer names on the block. There is also no possibility to buy funds, only individual securities, and no research available for analysis.
Great for: Trading & high volume
Negatives: No funds or research, customer service is average
By far and away the simplest. Download the app in seconds, sign up and trade stocks almost immediately. Some have called Freetrade the European answer to Robinhood, and the parallels are clear. The debate as to whether the gamification of stock trading is good or not is one for another day, but it certainly makes the experience enjoyable. We like this as a platform for “fun” trading on the side.
Great for: simplicity
Negatives: still a new company
Somewhere in the middle. A blue chip company where capital will likely see little risk, but one with a solid app and comprehensive access to both funds and individual securities worldwide. Regardless whether you set up an account or not, you can also access equity research reports from their fund managers for free. However, you do pay for the service. Fund holding fees hover at 0.45% up to £250k, falling to 0.25% up to £1m. There are flat fees of around £10 buying individual stocks too, so it doesn’t really make sense to make a purchase unless it’s towards £1000+. It's also not possible to register online from outside the UK, and only offers GBP as a base currency.
Great for: all rounder
Negatives: High fees
What we like about II is that it has the feel of a fairly new company, a dynamic team and strong product, but has actually been around a little while. The flat fee structure means that there is complete transparency around what you’re paying. They also offer a monthly subscription which caters well for those who trade in high volumes, and from our experience, the customer service is top tier.
Great for: transparency & customer service
Negatives: app is a little clunky
Which platform is your favourite, and why? We recommend opening accounts with a couple: perhaps a low cost long termer for your ISA & index funds, and one of the newer more dynamic platforms for your moonshoot invesments (yes we know you have them, we all do). Even better, they’re all available to manage on Strabo, so you’ll immediately forget they’re in different places!