≡ Menu

In search of the best online broker

In search of the best online broker post image

The law of unintended consequences follows regulation like seagulls chasing trawlers, and so far one of the most negative side-effects of the Retail Distribution Review (RDR) has been to sting the pockets of those who can least afford it – small investors.

Monevator readers have registered their complaints loud and clear, as new platform fees, custody charges, and fund dealing costs have weighed down returns that are hardly blazing as it is.

But your pain hasn’t gone unnoticed.

Discount broker Interactive Investor (iii) has contacted Monevator to say it would like to hear your ideas about how it can improve its service.

You’ll remember that iii’s RDR cost hikes caused quite a furore recently.

Previously, iii had been one of the most passive investor friendly platforms in the UK. One price rise later and many Monevator readers were heading for the exits.

If it’s broken, fix it

So how do you think discount brokers should serve investors in a post-RDR world – where platforms can no longer rely on fund providers to pay them commission from a fund’s TER?

Even if you’ve never used iii, you probably have an opinion about online brokers. What would your dream broker be like?

Most here will have experienced frustration, confusion, or poor customer service at the hands of an investment platform. Information is often harder to extract than North Sea oil, responsibilities are opaque, and many brokers are like debt – easy to get into but hard to get out of.

There may also have been times when you agonized over an investment decision, and wished your broker offered easy-to-use tools that made life easier.

It would be easy to say: ‘I want all my services for free. In fact, no, as I’m so special, you must pay me to join you and guarantee my investment returns and send me chocolate hearts whenever I’m slightly down in the dumps.’

But well, that would be too good to be true, and no-one (sane) begrudges a business’ right to turn a profit.

My own broker wishlist is pretty extensive, but I’ll kick off the discussion with a few thoughts:

  • Charge small investors a percentage fee to hold their funds rather than a flat rate.
  • If that’s too costly then provide small investors with preferential rates on ISA accounts only – encouraging investing in the first place will surely benefit brokers over the longer term.
  • Sell discounted bundles of trades that an investor can buy upfront and then use over the course of a year.
  • Offer an X-Ray scanner that analyses and compares funds in a portfolio.

Those are a few of my ideas, but we’d love to hear yours. This is a unique opportunity to make yourself heard by an interested party who can improve our investment lot. Maybe together we can conjure up the best online broker that’s practical in the real world.

Rant if you need to – by all means tell ’em where they’re going wrong – but then let’s have your ideas for where they could be going right.

Take it steady,

The Accumulator

Note: There is no commercial angle to this post for Monevator. Interactive Investor approached us because it wants to hear the ideas of our investment community. If this helps iii and anyone else who is listening to improve services for small investors and to understand our views, then that’s all to the good.

Receive my articles for free in your inbox. Type your email and press submit:

{ 34 comments… add one }
  • 1 John H, Kidsgrove August 21, 2012, 11:58 am

    So, iii want to know how to imrove its service… where do I start!

    Well, nothing much will change as long as they hold on to the management that caused all the problems, so get rid of Tomas Carruthers should be numero uno.

    Secondly, develop a business culture where customers are treated with respect and in a fair way.

    Also, how about consulting customers BEFORE any major changes to T&Cs are introduced and explaining what needs to happen and why. It almost goes without saying that customers who do not wish to accept major changes should be given the chance to leave without penalty.

    Next, be honest and straight with customers rather than trying to suggest that imposing £20 quarterly fees will benefit them by churning their portfolio.

    It really is not rocket science, but without the right management, I suspect the lessons will not be learnt and are likely to be repeated.

    Just my two penn’orth.

  • 2 The Investor August 21, 2012, 12:05 pm

    @John — I appreciate there may be frustration from some customers over management — what company doesn’t get that? — but in this thread can we focus on benefits to consumers that we’d like to see, rather than speculate about the company’s management please.

    I have no opinion either way about management, but I think that focusing on what we’d features, benefits, and pricing structure we’d want to see as clients is the most constructive way to proceed in an open forum like this, leaving them to work out how and if to deliver it. (And needless to say I don’t want to start having to delete comments for legal reasons or similar).

    Your point is made and made on behalf of others who share it, but from here on let’s focus on the flaws/improvements in the service.

    Thanks everyone. 🙂

  • 3 Midlands Simon August 21, 2012, 12:14 pm

    My ISA investments are in three distinct blocks: a number of tracker funds and ETFs that form a “lazy portfolio”; a number of individual shares in a Motley Fool style HYP and a number of individual bonds in a bond ladder. The HYP and bond ladder are in their early stages on construction and should be “complete” within 5 years. I am very committed to a buy-and-hold style.

    Being a passive investor charges are VERY important to me. That said I understand the need for a platform to charge for it’s services. Like everyone I want maximum quality for minimum price.

    I have experience of three ISA platforms: iWeb Share Dealing; Interactive Investor (ii) and TD Direct. I am in the process of transferring my investments on the ii platform to TD Direct. The reasons are:

    Leaving Interactive Investor:
    When ii first decided to introduce platform charges as a result of the RDR they sent me (and many others) an incredibly patronizing and misleading email that showed that they have no respect for their customers. There was also a lot of misinformation about charging for those wishing to transfer away as a result of the changes and holding on to dividend payments after transfer. The company changed it’s policy in both areas after complaints from customers. Regardless of the level of their fees this is the behavior of a company with NO respect for it’s customers and therefore (in my opinion) no commercial future.

    I have also had a number of small issues with ii – for example they took the new fee from my ISA account when they knew that I was leaving (and had said that the fee would not be charged). They promised (verbally and in writing) and then failed to return the fee on several occasions. After a lot of chasing the money has now been returned but it has been credited to my Trading Account rather than my ISA Account effectively meaning that it is lost to the tax shelter forever.

    Moving to TD Direct:
    I don’t think that TD Direct’s platform is the most useable but I have found their customer support to be both friendly and accurate. Of the platforms that I am aware of that that responded to the RDR and announced new fee structures they are the cheapest for my needs. In other words TD Direct are the best compromise between price and quality for me at this time.

    So, if ii want to know what I, as a customer, need from them the answer is:
    – let me get away from you (transfer my ISA) as quickly as possible
    – remove those in your staff with a poor attitude towards your customers
    – fix your customer service
    – set your pricing levels so that they are competitive and reflect the service that you provide
    – try and stay in business for another five years at which point I MAY consider returning

    Simon
    (NB I have no commercial interest in any of the platforms mentioned)

  • 4 Andrew Knox August 21, 2012, 12:26 pm

    Number one point for me is the first one you mentioned:

    Use a percentage-based fee for the annual charge.

    And cap it to what it’s set at presently.

    I’ve not got a problem paying a fee at all, but a flat rate is a kick in the nuts for the smaller investors.

    Surely II benefit in the long run by attracting younger people who have less money to invest initially, and then increase their holdings as their disposable/investable income climbs over the years? It’s a win-win!

    No brainer surely 🙂

  • 5 Alex August 21, 2012, 12:36 pm

    Measures to help smaller investors, such as percentage-based platform fees, would be welcome. A huge plus for me would be lower exit fees (e.g. just a flat fee, rather than additional per-fund transfer fees). This would help convince me the platform was transparent and less likely to try ‘bait and switch’ tactics – offering a cheap platform then upping costs knowing that it’s expensive to leave.

    Perhaps changes from providers happening now are an anomaly due to RDR. The fact remains, with a lot of money in a platform there’s a big risk of increased platform fees or £££s of exit fees somewhere down the line, should the provider so choose. Low exit fees factor strongly into my assessment of a platform as they reduce risk.

    Even better, fees should be waived in the event of a change to T&Cs/fees, as was done (eventually) in response to iii’s recent changes. This would be a significant selling point.

    Low minimum top-ups on each fund are great, making it easier to buy a diversified bundle each month. Vanguard availability would be a major advantage. A clear web interface with top notch security is essential. Data export (e.g. to Excel) of portfolio performance over time, broken down by holding, would be a great bonus along with the X-ray scanner mentioned in the article. A simple and complete list of charges should be easily accessible.

    One thing that annoys me about my current provider is it can take days for fund units to appear in my account. It would be nice to have an estimate of trade/settlement dates listed before purchasing (e.g. funds will be available on Thursday if you purchase by midday).

    Well done to iii for choosing to engage with its customers and thanks to the Monevator team. And apologies for the length of the above – just a few points off the top of my head!

  • 6 Neverland August 21, 2012, 1:04 pm

    The three most important things for me would be:

    – to know for a fixed period of time, ideally 5 years, in advance what the fee structure for me would be
    – to be able to trade instanteously
    – to be sure that the administrator is financially stable and has a strong balance sheet

    Personally I use ATS because they satisfy a couple of the criteria above

  • 7 Neverland August 21, 2012, 1:09 pm

    @Andrew

    Any broker that offers % based fees with no minimum fee is going to end up with a large number of cost concious small account clients

    Those same small cost concious customers will go only two ways
    – move to a fixed £ fee broker once their accounts get big enough because it becomes cheaper
    – stay small uneconomic customers

    So this is why when you do find a broker that tries it as an approach they either impose hidden charges to make it pay for them or soon change their fee structure

    You want loyalty – get a dog

  • 8 Jonny August 21, 2012, 1:11 pm

    I too was really disappointed with the changes iii introduced, and ended up moving them to Hargreaves Lansdown as a result.

    For me the ideal list would be
    – minimum trades of £20 for index trackers (to allow a diversified portfolio, or even for those with just £20 per month to get a start – which could be increase later)
    – no trading charge for index trackers
    – percentage charge for holding, capped (as mentioned above), and perhaps even guaranteed for a period*
    – guarantee that should T&Cs/charges ever change, that the transfer out would be free of charge*

    * Again, as mentioned above to convince me this this isn’t a ‘bait and switch’

  • 9 Loads O' money August 21, 2012, 1:29 pm

    Actually I like flat fees. I find they are better value in time once the balance of your portfolio has grown (I’ve been using my ISA allowance for a good number of years now, so this matters to me). Therefore maybe give customers the choice. Once of my brokers does give customers the choice and I’ve been with that broker a very long time.

    Make the terms easy to read and fair. This is what stopped me using iii last time I needed to expend to a new broker.

    Make sure customer service reply to all queries quickly & fairly. When I questioned the customer support team about the iii terms last year I did not get a good result. I usually make up some question to test a customer support team before using any new on line or financial service.

    Good clear web site.

    Good security – both on site and off site, for example I don’t want customer support staff resetting passwords over the phone!!

    Good research information – although this is optional. One of my brokers provides virtually no research information and they are dirt cheap. This is great if you subscribe to something like ShareScope, Stockpedia, etc.

    Good portfolio tracking. This is vital. How can anyone re-balance, track, improve etc without this. It needs good download options too (CSV, MS Money, etc)

    Low spreads – each broker I have seems to come up with different prices although this is hard to test as of course sometimes prices move.

    A fast & reliable site – vital!!

    Avoid fancy technology that might not work on all mobile devices and often takes longer to load (although I don’t care about i-phones, just make android work well:-) )

    Whatever the charging structure, make it fair, easy to understand and consistent. Don’t go tweaking it every ten minutes so no ones knows what is going on, and make sure all support staff know it backwards.

  • 10 Frugal August 21, 2012, 2:22 pm

    I’m looking forward to Nutmeg – http://www.nutmeg.co.uk. Very exciting model though would prefer if I could select a portfolio and set it. Would probably transfer most of my holdings there. (no financial interests)

  • 11 Dave August 21, 2012, 3:00 pm

    I suppose the fee structure depends on their costs. Looking at HL(a plc so theire accounts are freely available) they have 380k customers, £207m revenue and profit of £126m(costs are therefore 61m. This gives them a cost structure of around £200 per customer(£15m of this cost is commission rebated to clients), so the infrastructure costs are probably around £150. that would be quite high as a flat fee, but as a percentage of their average holding £63k(£22billion under management) is 0.24%. My guess is that there are quite high fixed infrastructure costs and there will be some consolidation in the industry.

    A lot of discount brokers seem to offer quite similiar services and it is probably hard to differentiate. It would be interesting if a company like Tesco or M&S could enter the market with a different focus. There balance sheets would be an attraction if nothing else. Perhaps you could have a “Basic” upto “Finest” level of service with different costs.

    If you are a buy and hold type person you can probably do your own research, don’t want spreadbetting, don’t need to trade on a mobile and might even not be so bothered about the odd bit of site downtime. If you are a spreadbetter you can’t afford sitedown or to be away from the trading desk.

  • 12 Beagle August 21, 2012, 3:24 pm

    I’m currently moving from III to TD.

    I felt that III explained quite well that I was not the type of customer they wanted and I appreciated them waiving the exit taxes. No hard feelings and thanks, but no thanks to the new pricing model.

    Things I look for in a passive trading platform.

    Minimal research material and marketing gloss. I’d rather you saved the costs and passed the saving on to me. The internet is full of information so such services are not a vaue add for me.

    Vanguard funds. Say no more.

    A simple website that works. Apps are no replacement (TD site won’t work on iOS, the III mobile site was awful, however the III full website was fine on a mobile device)

    Yes I buy shares and ETFs, but this doesn’t mean I’m a caffeine fuelled day trading machine. I want to trade cheaply and occasionally.

    For these things I will pay a flat fee if required.

  • 13 Paul S August 21, 2012, 3:33 pm

    The problem for the platform provider in giving percentage costs is that it encourages small investors to have multiple mini-funds…….lots of administration with little income for the provider. The really small investor can minimize the platform fees and get plenty of diversity with a couple of well chosen funds…..say a UK tracker and a Global ex UK tracker. Also having percentage charging with a cap gives the worst of all worlds (bit of an exaggeration, that)……lots of low paid work on the mini-funds that would have to be counterbalanced by a cap raised well in excess of the current flat rate charges.
    Flat rates recognize that a small account takes the same amount of administration as a large account.

  • 14 ermine August 21, 2012, 4:17 pm

    The thing that stunned me was charging for funds. The unilateral declaration, and the attempt to preserve transfer-out charges until they saw sense were things that suggested to me these weren’t people I wished to continue dealing with. TD direct, which I am in the process of moving to (for the last two months, come on guys!) don’t charge for fund transactions in the ame way as stock transactions. The way III went, there’s no difference in regular purchases of funds or as an ETF, in which case why bother with funds (in a passive case and where an ETF of similar performance exists). That move is the one that sticks out as being different, and different wrong, to most others.

    IIIs platform move was ropey, too. Buying funds took an inordinate (several-days) time to execute, I never worked out when I could expect it to happen, and the lag was a lot better when they were using the previous Halifax platform.

    So most of what III want to learn is the art of customer handling, though performance improvements in timeliness of fund trading and dividend handling wouldn’t go amiss.

    But ultimately what made me move was the opacity of their accounts and the feeling this was a company on the ropes. I could have lived with their fee structure as funds weren’t a huge part of my activities, and I got right out of funds when iii proposed charging dealing fees on them.

  • 15 Ritchiewags August 21, 2012, 4:38 pm

    I left III after they introduced their charges. I had only been with them for 5 months, expanding from HL to take advantage of better terms for individual shares. The flat rates compared to my holdings and expected returns would have meant a minimum return of 7.5% to match my cash ISA rate. I also left because of their attitude in assuming I would benefit from churning my buy and hold portfolio. So I would expect all platforms not to justify charge increases as benefitting the customer.
    To offset the negative comments about percentage fees and caps I would look for a cap and collar system, with a percentage in between.
    This would stop too many too small investments and reap a suitable level of return for the company against yield/costs balance for investors.

  • 16 Alex August 21, 2012, 5:21 pm

    1. For me, everything started to go wrong when II brought its trading platform in-house. The new interface was, and continues to be, clunky and unreliable. I won’t rehearse the problems here. Customer service via the phone really deteriorated after the migration, too. The interface and customer service were fine before.

    2. My current experience of transferring out my ISA has involved some of the worst – if not the worst – customer ‘service’, electronically and on the phone. Different people responding to electronic queries have given conflicting answers. People on the phone have been rude and dismissive – and again contradicted each other.

    3. I’m appalled. II hasn’t completely followed my instructions on the transfer out, despite me putting them in writing. I think II doesn’t care because it knows I’m leaving. Some of the electronic messages I have received have been full of spelling mistakes and non-grammatical. Slapdash – and rude in tone.

    4. I will never go near II again. I’m VERY ANGRY indeed.

  • 17 Robert August 21, 2012, 5:41 pm

    Offer a basic ISA/SIPP/Trading account with a limited number of investment vehicles that will keep the costs low. This may be a way to service small holdings and encourage new investors into the market place.

  • 18 Ben August 21, 2012, 7:12 pm

    Vanguard funds are the main one. I used different index funds with III but the fee changes gave me the impetus to switch to HL.

    Ideally I’d also like transparency about where they incur their costs, and a fee structure to match. If their costs scale with the size of a customer’s holdings then account fees should too; if it makes no difference I’d like a flat fee. The same goes for trading fees.

    I would much prefer such transparency to “redistributive” fees that are designed to attract other customers at my expense. Equally, I want to pay for the services that I receive. If other people are subsidising my fees then I can’t expect the service to stick around for long.

    This is why I like Vanguard’s 0.5% up front fee for UK equities. It precisely covers stamp duty, and is preferable to hiding it in the expense ratio or the tracking error.

  • 19 David August 21, 2012, 8:19 pm

    I’m currently with iii for my HYP portfolio. It’s large enough that I’m agnostic on flat vs % fees, but when I’m advising my sons on their more modest portfolios, it’s – look for $ based fees and an attitude that encourages the smaller investor. If iii want to attract investors across generations and economic circumstances. they have to address those two points.
    I tolerate iii, but am not enamoured by their service. Most of the points have been covered in prior points , but there is one that REALLY MAKES ME MAD (yes, I am channelling John Cleese at this point). Dividends can take up to 10 working days after the ‘Payment’ date to arrive in my iii account. Other providers in my experience manage to credit dividends ON Payment date. iii is getting use of MY money for 5-10 days – a hidden fee if ever I saw one. The whole point of having a HYP is to generate income to live on and just like a pay-packet, I need it arrive on pay day!

  • 20 David August 21, 2012, 8:20 pm

    That’s % based fees not $ based fees, BTW.

  • 21 Gubbanoa August 21, 2012, 9:06 pm

    I’m an II customer, and I like flat fees. Clearly, the lower the better, but flat fees are good. I find flat fees much more tidy than proportional fees, especially when the latter are tiered as is often the case.

    The trouble with a almost-no-fees model, as in the previous incarnation of II, is that its hardly sustainable. I’d rather stick with II now that it is charging more realistically, than join the race for the next provider who will offer almost-no-fees in order to build a customer base on a loss-making basis, and than feel aggrieved once more one or two years down the line.

    I also found it a nice gesture from II that with the new fee structure, they only charge once per ‘household’, ie I don’t pay separate admin fees on my wife’s ISA account.

    I have two suggestions for II:

    1. I dislike the fact that trading fees erode my ISA allowance. Why not make it possible to have all trading fees taken out of the trading account, even for trades that happen in the ISA account.

    2. Please offer the full range of Vanguard UK funds and ETFs. Now that you make all your money from trading and quarterly fees in any case, why hold back on this?

    All in all, I’m happy with II and won’t be switching in the near future.

  • 22 SemiPassive August 21, 2012, 10:25 pm

    Nothing iii can do will make me switch back to them, its too late if people have already moved platform. My ISA pot went to H-L as I already had my SIPP with them and they offer Vanguard funds, so even with their platform fees it worked out much cheaper to hold a LifeStrategy fund than stay with iii.
    Once you exceed £24,000 per fund the H-L platform fee effectively drops under 0.1%. Granted that is a hefty amount for an investor just starting out, so I can see the popularity of LifeStrategy funds growing – or even active funds until you are into 5 figures.

    I am happy with H-L’s platform for now, it suits my 100% tracker OEIC funds (+ cash) strategy, although its no surprise they will fail to mention any Vanguard funds, or their 0.1% TER SWIP FTSE All Share fund in their monthly fund infomercials.

  • 23 SemiPassive August 21, 2012, 10:33 pm

    Oh yeah, the ability to change regular investments online with H-L doesn’t exist unless you are funding your SIPP with personal (not company/employer) contributions. Thats a bit rubbish, you have to contact them everytime you want to make a change.

  • 24 westy22 August 21, 2012, 10:57 pm

    I had no problem with the fee structure iii introduced – it made no difference to me as a regular share trader with a sizeable portfolio. What I objected to most strongly was the WAY it was introduced – too little notice was given; benefits were poorly explained; initially no waiver of charges for clients wishing to leave; unresponsive customer service; patronising tone of communications to customers etc.

    I left iii because I believe that they had a ‘Ratner’ moment and ignored and disrespected their clients.

    The other thing that I am very annoyed about is the fact that I still do not have a 2011/12 Tax Certificate – how difficult can it be? My other platforms provided my Tax Certificate by the middle of May at the latest.

  • 25 Adrian Steele August 22, 2012, 2:56 am

    No surprise to see that the smaller investors want a percentage fee and the larger investors want a capped rate.

    All the good brokers have sophisticated websites with often lots of useful information so I see no reason why smaller investors shouldn’t pay a fee to access this.

    The fairest system to my mind would be a flat rate fee – say around £40 pa with a low commission (ie 0.5% or less) for those with more (in these example figures more than £8,000) with a cap at a higher level perhaps £100-£150. This fee structure probably roughly reflects the costs to the platform of different investors without penalising small investors too much or at least only by the cost of a small tank of petrol!

    I did leave iii partly because £80 was uneconomic for the size of my account with them but also because I didn’t like their focus on trading as a benefit to the client when as Monevators know frequent trading is wealth destroying.

    As has been noted by others we buy and hold index fund investors have had a free ride in the back of the wider investment community for quite a few years and with RDR we will have to accept some additional costs. No point in complaining too much about that!

  • 26 JC August 22, 2012, 4:26 pm

    I really liked Interactive Investor and never had any issues until they introduced the platform fee. The problem was that it was a flat fee that hit those with small portfolios really hard. Maybe if it was a percentage fee I would have stayed with them.

    Also, being told that this fee wasn’t really a fee but forced credit to pay for trades was annoying as a passive investor as trading more often is a temptation that I do not need reinforced. By introducing the fee the way they did it felt like I would be missing out if I didn’t make at least 2 trades each quarter.

    Ideal online broker:
    Execution only
    Low proportionate fees
    Passive investor Friendly

  • 27 AnAdmirer August 22, 2012, 5:21 pm

    Good article and discussion.

    – Agree with transfer out free of charge if charges are changed.
    – Fee discount every year you stay with the same company. Small discounts over a long time to encourage staying/holding e.g. 5% p.a. capped at 25% (5 years).
    – Individual itemised billing/transparency p.a. of what I personally cost (see below for variables).
    – I only need a valuation once per year, thanks.
    – Free trade per month (can be on a date they dictate). Fixed cost for trading irregularly/more than once per month.
    – Fixed cost per product you hold each month. Discounts for multiple products.
    – Nominal fixed account charge to cover admin costs p.a. based on account type (e.g ISA/SIPP) reflecting real admin cost.
    – No percentage based fees. Just Say No. It is less transparent and is a means of cross-subsidising i.e. unfair.
    – Discount for bundling ISA/SIPP/Dealing, “friends/recommendation” etc.
    – Nuke your marketing material/spam department telling me what funds to buy even though you are “execution only” (H-L, I’m looking at you – ATS also does this more subtly with rank lists etc.).
    – Market your services only, not products; keep costs down.
    – Don’t be clever. Plain, no nonsense.
    – Pay a fair price only for what you actually use; no cross-subsidising e.g. small/large investors with fixed/percentage fees; passive vs rebates etc. This means small passive investors probably being hit the hardest; the free ride is over.

    A £1k portfolio must cost similar amounts to administer as a £1m portfolio in terms of admin costs; it is all on computer. Only variables are individual:

    a) Frequency of trading
    b) Products held
    c) Type of account, ISA/SIPP/Regular etc.

    If I start a broker like this, who will move their money over to me? 🙂

  • 28 AnAdmirer August 22, 2012, 5:23 pm

    Oh and:

    – Be overly generous to customers who think they have been wronged; you will gain much more business in goodwill/recommendations that you will lose through abuse.

  • 29 Greg August 22, 2012, 11:57 pm

    I use TDDirect but I have a little exposure to HL and ATS.

    TDDirect are best value by a country mile and I’m extremely satisfied by their fee structure and service.

    Their site is reasonable, though not without minor technical issues. (e.g. last time I tried you couldn’t put HSBC American index in a regular investment trade, it estimates stamp duty on Jersey domiciled CEFs & they don’t offer every share / fund in their regular dealing and it is hard to work out which. Finally, on UTs where they give a discount, it doesn’t factor it in in the quoted price when you make the order, so it looks like you will pay more than you do!)

    Their customer service on these technical issues is very good. They investigated my quite technical queries and gave honest, clearly explained answers. (Even if the HSBC American response was “er, yes, we’ll fix that in several months’ time” but that’s better than misleading.) They also gave proper responses, rather than template answers. It did take a 1-2 days for them to answer but I think that’s ok for the sort of queries I had. I was particularly impressed by their clear explanation addressing my concerns of the bid-ask spread on Jupiter European (as mentioned above, it looks like it is 6%, where actually is is about <0.5%.)

    They have the Morning Star X-ray tool, which although used to break lot, seems ok now, if a little slow to do its work. The site is clear and easy enough to use. (I don't bank on my mobile – that's just one more security risk and I check my account too much as it is!) The account history and "contract notes" are clear and there are various export options. The Yodlee online finance centre also works with TD, though can get confused and try to use dollars for some shares.

    Their fee structure is excellent, apart from a 2% currency conversion fee if you buy non £ shares. Free trading in funds (for £50 a pop if done regularly and you can change every month), cheap trading in shares if regular, no account fees for more than a trivial amount of money, rebates of their trail commission & a fund fee of .35% but ZERO if their trail commission would be less than 0.5% (i.e. all trackers). They rebate the initial sales charge for almost all (though not completely all) their funds. Comparing to HL, they are better for rebates in some (e.g. Jupiter European) and worse for others (Ruffer funds).

    I'll highlight the regular investing again as excellent value and a good way to slowly build up balanced portfolio over time.

    In fact, TD is so cheap and reasonable here, I'm worried they will change it! The only – is no Vanguard, but I live in hope (and you can get the ETFs!)

    As for HL. I like their site. Some of the guides are excellent and there is a wealth of information available. I find it irritating the way the push some of their funds and hide things like CEFs away (and also levy a capped 0.5% fee on them in an ISA) but the funds they do recommend look sound. The trading etc. seems easy and things are clear.

    HL are significantly more expensive though. I can't see any circumstance where they are better value.

    In the middle is ATS; their site isn't as good as HL and they are more expensive than TD. Don't be like that. Their one plus is that they tends to have frequent offers and bring up CEFs more.

    So, my advice to III is:
    – Look at what TD is doing (I assume that you all have accounts with each other to spy on what they are doing.)
    – If you can't compete with their fees, then give something complementary to them:
    + have a similar fee structure.
    + give ISC discounts on different funds to them
    + have cheaper foreign exchange rates.
    + have more/different funds & shares available via regular investing
    + Have an improved X-ray. Perhaps one that generate Trustnet scanner reports and graphs of the whole portfolio.
    + some sort of holding correlation plot would be amazing.
    + A really nice touch would be a "how would this potential holding fit in in my portfolio" showing correlation, what fund it is most like etc.
    +Perhaps it could even suggest possible funds based on you current holdings?

    – Look at HL
    + It is easy to be cheaper that them.
    + perhaps it is better to compete with HL than TD?
    + However, that will take a serious amount of effort in the site / customer service.

    -Look at ATS
    + Don't be like them – I think HL and TD currently sow up the different sorts of customers between them.
    + Perhaps you could have offers like they do – probably very difficult if you have TD's price structure but possible if you only try to beat HL.
    + How about giving people the option to do surveys etc. for free trades?
    + Perhaps make more money from adverts downloadable brochures? (I assume the fund houses pay a decent amount.) However, make it clear which are adverts!

    Oh and perhaps make it easy to leave if people are unhappy and make a point of saying "we'll never charge you more than £xxx if you want to move". Then people would be more likely to try you out? (Probably need to be careful of people taking advantage to avoid trading fees when selling out!) Some sort of loyalty bonus might help keep people.

    I suppose if you still need something different, what about links to articles based on one's holdings? (e.g. like Trustnet's portfolio manager does, but from a selectable list of sites. I assume the sites would give kickbacks?) Perhaps before people are logged in, e.g. the home page, there could be more general categories. E.g. The user selects what they are interested in, in broad categories and you give them a set of articles that match.

    One thing I like is where companies are honest about where they make their money. Perhaps a single page, buried somewhere where people who care will find it, with a pie chart saying "x% from adverts from fund houses, y% from regular dealing fees, z% from our £20 a year platform fee" etc. I'm happy for people to make money from me for good service but not for insidious means. "selling details of your transactions without your consent to market analysts" would no go down well…

    One final note is that the average person on Monevator is not the average person. I'd imagine we are a) more informed b) more easily annoyed & c) more hands-on (but ironically more passive in their fund choices) than the general public. To handle people that don't want to spend time, some hand holding might be in order. (Or jsut point them to the relevant Vanguard fund…)

  • 30 mickyfinigan August 23, 2012, 10:06 am

    DON’T LIE to me and and MIS-SELL your product.

    Approx 3 weeks before the charges were introduced I spoke with iii customer sevice agents regarding Vanguard Funds. The iii website was saying that you could buy into the funds for a min £20 per fund and when I spoke with iii they confirmed that this was true, I also asked them if there were any charges on the account and guess what they said NO. I was very please, this seemed perfect, so I opened an S&S ISA hoping to take advantage of this and build a modest passive portfolio. However, within a short space of time I was emailed regarding the charges. I fail to believe that the person I spoke to at iii didn’t know about the pending charges, so all I can assume is that they lied to me and mis-sold because the Vanguard funds, I was later told, required £100k min investment! I wasted this years ISA due to this.

    Don’t lie
    Don’t mis-sell
    Introduce fee banding % switching to flat fee.
    Introduce fees when a persons investment gets to a certain size to encourage small investors, who will then stay with you and maybe become large investors.
    Account replication, does it really cost that much to replicate an account on a computer (think burning a CD or opening a facebook account- practically nothing) – a small investor making minimal transactions can’t cost as much as a large investor making large amounts of transacations.

  • 31 The Investor August 23, 2012, 10:27 am

    @all — Thanks for your excellent feedback and suggestions to this post. The Accumulator is actually taking a break for a few weeks (*sob*) but I know he’s reading these comments and preparing a response/recap for when he returns!

    @mickyfinigan — There was significant confusion around Vanguard’s funds on ii, even among its own agents. I agree that it didn’t cover itself with glory in this matter. However if this approach to Monevator readers is any indication, the company does at least now seem to be intent on learning from such episodes.

  • 32 Alex August 24, 2012, 4:13 pm

    Hi TI,

    1. I don’t envy TA bringing together all our points/rants/streams of consciousness… 🙂

    2. Confusion among II’s customer service staff isn’t only confined to Vanguard index funds – it’s been a key problem for me on leaving them (see comment 16 above).

    3. It’s clear to me that all brokers need to be forced to make it much easier for us to move our accounts elsewhere. I remember when the mobile phone companies used to make it difficult and painful to keep an existing phone number when a customer dared to join a competitor’s network. Regulation was necessary to eliminate this anti-competitive behaviour. My leaving II has taken far too long – a point made by ermine, too (see comment 14 above). The exit process is totally non-transparent: it’s unclear why it should take so long.

  • 33 Jess August 25, 2012, 11:08 am

    I actually decided to stay with iii after the price hike although I was offended by the letter and think they need to be more careful with their communications.

    After carefully comparing the rest of the brokers, I concluded that iii was the best value for money. Because I am managing two accounts, I am only paying one fee, whereas with another broker I would have to pay twice. Also, I am very happy with the fact that the fee is credit I can use for trading rather than money down the drain. It actually encourages me to keep investing regularly and I think that’s a great thing. And finally, I think the cheapest way of trading shares is buying via regular investing and selling it normally. When dealing that way, iii is cheaper than TD Direct, ATS, Selftrade and even x-o. So I hope they don’t change the pricing structure in the near future.

    I need to clarify I’m in no way affliated with iii, I just hope this will help anyone who is still doing their research to find the best broker.

    I’m not too fussed about Vanguard funds not being available on iii as there are now ETFs available.

    Things that are really important to me in a broker:

    – Fees – I’m generally happy with iii except for one major gripe. Although I pay one quarterly fee for 2 accounts, the trading credit is only applied to 1 account. Please please please change it so that we can share the credit amongst all the accounts in the same household. That would only seem fair!

    I would also definitely say NO to percentage based fees as hopefully my pot will be getting larger over time.

    – Professional, reliable website – I think iii’s is fine.

    – Payment of dividends – iii is pretty poor in this, please try and pay dividends earlier and on time!

    – Customer service – my experience with iii has been good so far, usually I receive replies to secure messaging within a day or two

    – Dividend reinvestment – I prefer iii with respects to this as the reinvestment is automatic, there is no minimum amount and the charge is 1%. In comparison, ATS will not reinvest your dividends unless they’re over £100 (!!!) I think, and Selftrade charges a flat fee of £1.50.

  • 34 The Accumulator August 25, 2012, 10:01 pm

    Great responses all. Thanks very much for sharing your experiences, opinions and considerable expertise. Plenty there to chew on for iii’s business development department.

Leave a Comment