≡ Menu

How to open an online broker account and start investing

Image of two medieval traders, the pre-cursors to modern markets and brokers

You can read more articles by The Details Man on his own blog: YoungFIGuy.

There’s a lot of talk at Monevator Towers about investing in shares to build for your financial future.

But how do you actually go about getting started?

Back in the old days, to trade investments you might pop down to the local stockbroker on your High Street or set up a telephone brokerage account.

Nowadays though, it’s all done online.

To invest in funds1 or to buy individual stocks or investment trusts, you need to open an online broker account (also known as a platform or – less commonly – as a fund supermarket.)

It can be quite intimidating to open such an account if you’ve never done it before. But once you know what to do it’s easy.

Here’s a guide on how to set up a brokerage account.

Decide what type of account you need

There are three types of broker accounts for investors:

1. Stocks and Shares Individual Savings Accounts (S&S ISAs)
2. Self-Invested Personal Pensions (SIPPs) or other types of personal pensions
3. Trading accounts

There is little practical difference in terms of the physical mechanics of operating these accounts.

There are however a few investing differences.

The first is that both S&S ISAs and SIPPs are tax-efficient wrappers. This means that they confer tax advantages over standard share trading accounts. There are annual limits as to how much you can put into them.

The second difference is that there are slightly fewer investment options in a S&S ISA compared to a SIPP and fewer again than in a trading account.

The last difference is that money invested in a SIPP is tied up until retirement age, whereas with a S&S ISA you can move money in and out with a few limitations. You’re entirely free to move your money with a trading account (but watch out for capital gains taxes!)

Which account you need then will depend on the access you’re after, what your tax situation is and what investments you intend to make.

Generally it is always best to open a S&S ISA over a standard dealing account, at least until you start running up against the ISA contribution limits. You can read more on the pros and cons of ISAs versus SIPPs at the YoungFIGuy blog.

Find the right broker / platform

In choosing your broker you want to get the broadest investment options with the best possible customer service for the cheapest price.

In practice, there are some trade-offs.

See this beginner’s guide for what to look for when choosing a broker.

Monevator has been slaving away for several years to maintain an up-to-date comparison table for UK brokers. This compares all the charges for each broker. Loyal readers chime in with their personal experiences with the various options.

If you don’t know which broker to go for, the comparison table is a good place to start your research.

Set up an account

To set up your account you’ll need:

  • Your National Insurance (NI) number
  • Address details
  • Bank account and debit card details
  • A pen and paper

You will then need to go through the following stages.

1. Select the type of account you want to open

When you go to your chosen broker’s website, they’ll offer you those three different account options we looked at: S&S ISA, Trading Account, or a SIPP.

For example, here are the options from the broker we will use to illustrate the rest of these steps.

Screenshot showing three main broker account options (Trading Account, Stocks and Shares ISA, and SIPP) We’re going to run through opening a S&S ISA. There is little difference between setting up either of the three account types though, in practice.

2. Fill out your personal details

Screenshot showing personal details required by one broker to set up new account

3. Decide how you want to fund your account

There are three ways to fund your account:

  • Invest a lump sum – You set up the account with a one-off payment, which you can top up with more money later if you want to.
  • Regular monthly savings – You create a Direct Debit to transfer a set amount each month to your account. This can often be as little as £10-£25 per month, but check with your chosen platform. It’s possible to increase the amount transferred each month after the account is set up.
  • A combination of the two – Fund the account with a lump sum and top-up with regular monthly savings.

Depending on the option you chose, you’ll need to fill out either your debit card or bank account details.

Screenshot of a typical broker direct debit capture form

4. Decide what to do with your initial money

The next step is optional at this stage. You’ll be asked if you want to immediately invest the money you’ve put into the account into a fund or shares.

The investment options available will depend on the type of account you’ve set up (ISA vs SIPP vs trading account) and what broker you have opened an account with.

If you’re not sure where to invest yet, leave it in cash for now.

Screenshot of initial investment option with new broker account

If you need some help in deciding what investments to put your money into, have a look at the Slow and Steady model portfolio for inspiration.

5. Choose what happens to your distributions

Depending on what exactly you invest in, your funds or shares may pay out distributions (dividends or interest) over time. The last step is to decide what happens to these distributions.

There are typically three options:

  • Keep the distribution as cash in your account
  • Have distributions automatically re-invested into your investments
  • Have the money paid straight into your bank account.

Screenshow showing options for where to send cash distributions you're paid from your investments

If you’re not sure what you want to do, choose to keep the cash in your account. You can always decide what to do later.

(There are rules around withdrawing money from and putting money into both ISAs and pensions. Make sure you know all about these restrictions before you take any money out of those accounts.)

Getting stared with your new broker account

At some point you’ll be given some log-in reference details and such like. Make sure you remember these, or you could be locked out before you begin!

You’ll then usually have to wait a few days to begin playing around with your shiny new account.

Your broker will send you some letters to you in the post. You should expect two or three letters. They’ll usually arrive within a couple of working days. (Brokers act quick when they want your money!)

The first letter will usually confirm your account number and other details and that you’ve set up an account. The second will give you a PIN or password to gain first-time access to your account. You may get a third letter if you’ve set up an ISA. This will be a copy of your ISA application form.

Once all that’s arrived you’ll be able to log into your account.

A few pointers

Once you’ve got your account set up, you should do a bit of admin to make sure things run smoothly.

Every broker account will have an account administration menu, labelled ‘my account’ or ‘account settings’ or similar. Here you’ll be able to view and update all the information and options we went through in setting up the account. It’s worth taking five minutes to make sure it’s all correct.

The next bit of admin is to find out where you can access all the documents for your account. Usually, it’s under ‘documents’ or ‘portfolio history’ or similar. Consider setting up a folder on your computer to save new documents as they come in. Good records can save a lot of hassle down the line, particularly when it comes to tax affairs.

You’ll usually receive a yearly or bi-yearly statement showing all your investments. There are various other documents to look out for over the year, too:

  • If you have a SIPP you’ll receive a pension illustration – a projection of your future pension pot.
  • If you have a trading account, you’ll get what’s called a Tax Certificate, which gives you the information you need for completing a Self-Assessment tax return.
  • When you buy or sell an investment you’ll receive a Contract Note which sets out exactly what you’ve bought or sold, how much you paid or received, and the settlement date of the trade.

You may want to download these documents to that desktop folder you set up for safe record keeping.

When you are ready to add or withdraw money from your account, you can usually find the option to do so under ‘cash’ or ‘add/withdraw money’. This menu will also typically let you access some sort of a cash statement showing how much cash is in your account, as well as how your money has moved around as you’ve bought or sold investments, paid charges, and received distributions.

Over to you

If you have yet to set up an online brokerage account to start investing, then hopefully this guide has given you the confidence to get going.

Of course, many of Monevator readers are grizzled investing veterans. What tips or guidance would you give to somebody looking to set up their first broker account? Please share your suggestions in the comments below.

Read all The Detail Man’s posts on Monevator, and be sure to check out his own site at Young FI Guy.

  1. Variously known as Unit Trusts or Mutual Funds or Open-Ended Investment Companies, which are all basically the same thing for our purposes here. []

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

{ 29 comments… add one }
  • 1 Gentleman's Family Finances July 31, 2018, 1:47 pm

    Very simple but effective – good work.
    Often the biggest hurdle to anything is just getting started, maybe this will help those yet to start investing.
    Thanks!

  • 2 FinancialPrudence July 31, 2018, 2:53 pm

    Nice article for newbies. This lays out what to expect when setting up an account. Well written. I am looking for some sort of article which deals with portfolio rebalancing. When I tried to do mine on Cavendish online aka fidelity, by simply switching (sell one and buy another) the charges detailed were not clear at all. In some cases, it even suggested there is an on-going extra charge (under variable investments costs – Transactions costs it said 0.07% on top of the ongoing charge figure of .20% bringing it up to .27%.) There is no mention of if this is a one off switch cost etc.

    To add to this ambiquity there is also another line in the charges document which read “You do not currently pay our standard £45 Investor Fee, but you may have to in the future.” – I am going to call them asking for explanation, but any advise here would be good.

  • 3 Bob July 31, 2018, 8:08 pm

    You seem to have missed out the step where they say:
    “We don’t know who you are, please post your passport to us for an unspecified amount of time.”
    Or is that a thing of the past now?

  • 4 Peter East July 31, 2018, 8:50 pm

    You are so lucky in the UK. It is so easy and cheap.
    Here in NZ we are still in the clutches of brokers. No cheap options are available that I am aware of. Maybe someone will respond with a “Have you tried so and so” comment.

  • 5 Nat July 31, 2018, 9:09 pm

    Great article. Posted a month too late for me – I finally bit the bullet and opened my first S&S ISA in June – but reassuring that I did everything right!
    I appreciate that many readers are experienced hands at investing but occasional articles like this for us newbies will be great. Thanks for giving me the confidence to get started.

  • 6 TheFIREShrink July 31, 2018, 9:10 pm

    Great to see a post from YFG here, getting the recognition he deserves. I’ve found his blog posts clear, informative and eloquently, and would recommend everyone starting out read his work as an adjunct to Monevator (and Smarter Investing etc etc).

    This also seems perfectly timed as I’m going through these motions now. I’ll be going back to the Monevator beginner’s guide again!

    Thanks again!

  • 7 Brown Owl August 1, 2018, 5:29 am

    @Peter East. I have never tried it, but in New Zealand I would have a good look at interactive brokers. They seem pretty international.

  • 8 fitandfunemployed August 1, 2018, 9:15 am

    Rolling with the big boys YoungFIGuy! Congrats on the guest spot, well deserved indeed. I’d have found this massively useful when I set up my first online trading account. I can’t even remember who it was with now… Square Deal? Square Trade? All I can really recall is that their logo was a yellow box.

  • 9 J August 1, 2018, 9:43 am

    Thanks, YoungFIGuy. I’m not entirely new to investing but I am fairly new to the UK, so your guide is extremely useful.

  • 10 YoungFIGuy August 1, 2018, 10:52 am

    Thank you all for the kind words, it means a lot!

    @FinancialPrudence – My guess is that the ‘transactional costs’ that fidelity are referring to are the additional costs the fund manager has above the OCF. MIFID II means that fund managers have to explicitly set out their transaction costs now; whereas before they were implicitly hidden within the return performance of the fund (for example, an index tracker fund with perfect tracking but 0.07% transaction costs would trail the index by 0.07%). Unfortunately, there’s no set way to calculate or disclose these costs so it’s been a dogs dinner. From what I understand from people who have fidelity accounts, the £45 is the opening ongoing charge for having an account, and as you have more assets a percentage tiered-based charge is applied.

    @bob – I don’t think they ask for passport details for setting up an account anymore. Over the past 3 years or so I’ve opened over a dozen accounts and not been asked for passport details. After the account is set up and funded, they may ask, at some point, for them for Anti-Money Laundering purposes. Some brokers are much better at dealing with that than others…

  • 11 britinkiwi August 1, 2018, 11:40 am

    @Brown Owl @Peter East
    Kiwi share trading – Offshore brokers do exist and presumably offer services to Kiwis – but I’ve yet to explore them.

    Have a look at https://www.moneyhub.co.nz/investing–saving.html or https://www.goodreturns.co.nz/article/976485692/comparing-the-online-brokers.html for in country summary. ANZ and ASB seem to give reasonable access to world markets but at a cost. Other brokers exist but are less economic…..at least as far as I can see for the individual investor. Seems like NZ investors are not well provided for and decades behind the competitive edge of the UK/US.

    If anyone knows any different – please post!

  • 12 weenie August 1, 2018, 1:04 pm

    Nice post for newbies, YFG.

    “If you need some help in deciding what investments to put your money into, have a look at the Slow and Steady model portfolio for inspiration.”

    I’d also recommend this one from the archives – http://monevator.com/using-vanguard-lifestrategy-funds-life/ – a few years old but still valid. It’s one which I’ve sent to a friend considering her first steps into investing.

  • 13 Jim August 1, 2018, 1:13 pm

    @ Peter East

    You are right, the UK and especially the US are spoiled for choice for low fee brokers.

    I am not up to date on the local market anymore so you probably have seen this but https://simplicityfunds.kiwi/our-funds/ has a limited range of funds at less extortionate fees than what I remember.

  • 14 Barry August 1, 2018, 4:41 pm

    Great article, way too basic for some I’m sure, but exactly what I needed. Someone holding my hand for me, now I feel brave enough to have a go. Thank you.

  • 15 SurreyBoy August 1, 2018, 6:17 pm

    Its interesting to read someone say we are lucky in the UK because of cheapish brokers. I tend to think of the UK as treasure island for institutional rip offs such as Equitable Life, contracting out, PPI, liar loans, interest only mortgages to the gullible etc. Perhaps one should be grateful for small mercies.

    On the article, it was excellent. Someone made the excellent point that if just a few people read it and cross the bridge from inaction into investing, that will be excellent.

  • 16 Willy August 1, 2018, 6:57 pm

    Hi, This might be a daft question, but I’ll ask anyway. Hargreaves Lansdown have a lower total fees cap for shares, ETFs and investment trusts than they do for unit trusts and OEICs. This applies to both their ISA and SIPP. However, when I look at ETFs, they are often described as “Legal Structure ETF” (as expected) but then also “Fund Structure Open Ended Investment Company (OEIC)”. I’m probably missing something, but why are they described as an ETF and then OEIC? And which category would they fall into for Hargreaves Lansdown’s charging structure?

    E.g. the GBDV ETF below.

    https://www.justetf.com/uk/etf-profile.html?groupField=index&from=search&isin=IE00B9CQXS71&query=IE00B9CQXS71

  • 17 James Smythe August 2, 2018, 5:02 am

    I have been putting off setting up a broker account for over a year now, I know it is the sensible thing to do with my savings but it is just so intermediating!

    This has motivated me to set one up now. Going to start off small so I don’t stress about loss, and then hopefully ramp things up over time!

    Thanks

  • 18 devonico August 2, 2018, 9:22 am

    Hello

    Thank you for a very easy to understand and comprehensive guide to investing. I wish I had read something like this 15 years ago when I was completely afraid of the markets and only cash or bricks would be acceptable for me to put my money in.

  • 19 YoungFIGuy August 2, 2018, 11:46 am

    @Barry and @James Smythe – it’s made my week that this post has inspired you! It’s made it all worth it 🙂

    @Willy – the fund you linked to is an ETF and would be treated as such by HL.

    To try and keep it as short as possible, investment vehicles can either be open-ended or closed-ended. Open-ended means that the number of shares in the vehicle is variable – if new investors add money, additional investments are purchased and in return, the investor gets newly issued shares. Closed-ended means the number of shares is fixed, so new investors have to buy shares from existing shareholders. Open-ended structures include ETFs, OEICs and Unit Trusts. Closed-ended structures are usually Investment Trusts and Life Assurance products. ETFs are basically OEICs that are listed on the stock exchange, so you can buy/sell at any time during market hours and are continuously repricing (funds, on the other hand, can only be traded at close).

  • 20 InvestingNoob August 2, 2018, 2:40 pm

    @Bob

    I recently opened a Vanguard ISA and an NS&I account for a cash bond. Both required ID and address information for anti money laundering purposes. Vanguard only needed a digital photo of my passport and driving licence and this was accepted within 24 hours. NS&I required photocopies of both with a signed declaration on one from a specified professional.

  • 21 Willy August 2, 2018, 6:18 pm

    YoungFIGuy, thanks for the explanation.

  • 22 dearieme August 2, 2018, 9:23 pm

    “Vanguard only needed a digital photo of my passport and driving licence …”: what if one has neither?

  • 23 Pete August 3, 2018, 3:13 pm

    @FinancialPrudence The 0.2% is what Fidelity get, the 0.07% is the annual fund charge. Altogether you pay 0.27%

    I am in the process of leaving my Cavendish / Fidelity Fundsnetwork pension as I found out that currently it is not possible to put this scheme into drawdown or to purchase an annuity. i.e. if you want to retire you will need to transfer out to a different scheme! Seems ridiculous, so I decided to transfer out now, rather than wait.

  • 24 Gentleman's Family Finances August 3, 2018, 3:19 pm

    I think that someone needs to review what it’s like to drawdown a sipp – preferably from their own experience. ^
    It’s a future headache for all of us.

  • 25 Jon August 3, 2018, 8:26 pm

    Great article and something I have also been putting off, like others it seems, for a number of years now. Still finding it quite intimidating though but will get there!

    I was looking to setup a Hargreaves Landsown Funds and Shares account but can’t do that as I live in the US now. Can I ask for a US based recommendation for a similar thing?

  • 26 Funduffer August 3, 2018, 9:28 pm

    Great article, I have recently found your YFIG blog and it is excellent.

    One source of confusion I have encountered with new investors is that income generated in a S&S ISA can be re-invested in the ISA and this does not affect the current year’s ISA allowance. I agree retaining the income in the account is a good starting point, but maybe it is worth emphasising this point as well.

  • 27 Ms ZiYou August 3, 2018, 9:33 pm

    A great post for newbies @YoungFIGuy – you set it all out so simply.

    My advice to newbies would be to do a little research, pick the best broker for today and then just do it.

    When your portfolio grows you can then optimise and review your choices – but getting started is really the first step!

  • 28 Kevin August 4, 2018, 4:57 pm

    Good bye scottish widows 1.5% charge , hello vanguard ls80,thanks to the good people on this site ,,still more home work to do ,,,

  • 29 InvestingNoob August 6, 2018, 5:06 pm

    @dearieme

    Sorry. Those were just what I chose to use to illustrate it was quick and easy. Just took a picture on my phone and sent them. All the normal range of ID etc would have been acceptable.

Leave a Comment