Which investing platform is cheapest for you? Which online broker best suits your needs? These are simple-sounding questions, but they twist the antennae of many Monevator readers.
That’s because the online platform / broker market is a swamp of confusion pricing – as one look at our platform comparison table will tell you.
Figuring out which platform is cheapest
Happily, you can work out which platform is cheapest for yourself just by following a few straightforward steps…
Step 1 – Preparation
First jot down the key factors that affect your calculation:
- The size of your portfolio.
- The account types you want – SIPP, ISA, or general investment account (GIA).
- The products you want – Funds, ETFs, investment trusts, shares, bonds, and so on.
- How often you will buy and sell – You may not know for sure, so estimate this based on past patterns or future intentions.
Note that the number of products you own doesn’t matter. No platform will charge you more for owning nine ETFs versus five, for example. (Keep in mind though that a few brokers charge switching fees based on your number of holdings. This only becomes relevant if you decide to move your business).
Next tot up all the charges you’d incur with the most competitive of the flat-fee platforms. (See our flat-fee broker comparison table near the top of our platform comparison page.)
Make sure you count any annual platform fees, trading costs, and other relevant charges listed on the Monevator table or the platform’s own price schedule. Remember to add the cost of multiple accounts if you hold them.
You now have a base cost for the investing services you require.
From here we can compare that cost against the best of the percentage fee platforms. The winner will be the cheapest deal for you.
Percentage fee platforms are generally best for people with small portfolios, whereas competitive flat-fee platforms are typically better for portfolios larger than £20,000 in ISAs.1
Note: The problem with percentage-fee platforms is that as your portfolio swells, the costs may keep rising, too. In an extreme case – say a £1 million portfolio that’s all invested in funds – this cost vampire could be sucking out more than £3,000 a year versus as little as £200 for the same portfolio held with a flat-fee platform. So be aware that which platform is cheapest for you could change over time.
Step 2 – The money shot
To compare flat-fee Platform A with percentage-fee Platform B, make the following calculation:
Total annual costs of platform A2 divided by platform B percentage rate3
= breakeven point
For example, if your fixed rate costs at Platform A = £80 and you’re comparing with a 0.25% rate at Platform B:
£80 / 0.0025 = £32,000
The breakeven point – £32,000 in this example – refers to your portfolio’s size. At this point, your costs will be the same with either platform.
In the example above, we’re better off with platform A if our portfolio is worth more than £32,000. Any less and we should bunk up with platform B.
A few things to remember:
- Subtract any additional fixed rate costs charged by Platform B from Platform A’s fixed costs before making the calculation, so you’re comparing fairly.
- Check if cheaper regular investment trades are available for the products you want.
- Add in your portfolio’s Ongoing Charge Figure (OCF) to compare platform choices that don’t stock exactly the same products, or that offer discounts on certain fund manager’s charges.
- Watch out for caps on percentage fees that can make a broker more competitive in certain scenarios. For example, AJ Bell, Fidelity, and Hargreaves Lansdown set a ceiling on the fees you’ll pay for ETFs, shares, investment trusts, and bonds.
Step 3 – What about zero commission brokers?
Some platforms have abolished the main sources of brokerage income: platform fees and trading fees. For this act of largesse they’ve earned the moniker zero commission brokers. Sounds like a great deal!
But hang on, how do they pay for their salaries, app development, servers, shiny offices… and make a profit?
Zero commission brokers are not a scam, but they do need to earn money, so don’t be fooled into thinking they’re free.
We wrote a piece on zero commission brokers delving into their various revenue sources such as spreads, premium services, currency conversion fees, interest rate arbitrage and so on. Have a read and then you can make a more informed decision if you’re considering this route.
Ultimately, zero commission brokers are like any freemium service. You’re spared the pain of forking out upfront fees, but they must recoup the cost of your custom in other ways, some of which may not be obvious.
It’s worth repeating that zero commission brokers are not intrinsically dodgy. Some of them have been operating successfully for over a decade.
But it’s a good idea to understand how they make money. Then you can pick the one that isn’t poised to profit excessively from your investing behaviour.
Step 4 – What happens next
If your choice of broker hinges on your portfolio’s size then consider how quickly your assets are growing or shrinking when deciding which platform is cheapest.
Are you piling cash into the pot? Or selling out faster than an old rocker being offered a knighthood?
If you’re likely to smash through the breakeven point within a year or two, it may be worth going with the platform that will suit you in the foreseeable future.
Also watch out for switching fever – the unbearable pressure to take action just because your platform is a smidge less than optimal.
In our example above, the difference in fees would only be £20 per year if the portfolio grew to £40,000 in size. Switching hassle can make bolting for the door an exercise in self-harm every time your platform falls off the Best Buy spot.
Pay attention to entry and exit charges when you switch brokers – see our table. Some readers have reported success in demanding their platform waives its exit charges.
Also beware that switching brokers can be a (too) lengthy process, and it may leave you out of the market for some time if you’re forced to cash out of your positions before switching.
See our guides on transferring an ISA and on transferring a pension for more.
Protect your portfolio – Remember there are limits to compensation should the worst happen to your broker. You might therefore decide to use two or more brokers to spread your risk. See the Financial Services Compensation Scheme for more information.
Some canny Monevator readers time their switching to take advantage of temporary cash back offers.
We wouldn’t suggest you let such antics risk derailing a once-a-decade push to sort out your finances. But if you’re on top of this stuff – the sort who checks the comments on the Monevator broker table before you open your email – then it could be a way to pick up some free loot en route.
Take it steady,
The Accumulator
still can’t subscribe to comments without making one 😉
Useful article, am anticipating useful comments too!
When I first clicked on this article I was hoping to see at least a link to the totally brilliant spreadsheet that I think it was ‘Snowman’ had posted in a comments section elsewhere.
It enables us to enter the values etc. of our portfolio/anticipated trades etc. and automatically populates to update with the various platform’s costs making it a doddle to compare.
With his/her full permission and collaboration, would it please be possible to adapt/incorporate that spreadsheet into this (or perhaps another) ‘official’ Monevator article?
Many thanks!
I wouldn’t move for £20 pa but I’ll be saving £400 pa for my ISA, £150 pa for my wife’s ISA, and £125 pa for my wife’s SIPP by moving from HL to BestInvest.
Fortunately, my SIPP is already with BestInvest (I had the HL paperwork done but not sent when they introduced their £2pcm tracker fees!) as it woould cost me £1250+ pa more to hold this with HL.
Note that BestInvest are only this cheap for us as they will leave us on the fixed custody fees (which are also having VAT removed!) as long as we move from trackers to ETFs.
I second snowman’s spreadsheet as a great tool, please link it somewhere. I think it is a mistake to think that you should select a single “best” platform for all your investment types, which is what the article suggests; especially with a SIPP in the mix. Each investment type should be tested individually against each platform.
@gadgetmind – Make sure you have factored the (known) trading costs, the (obscured) bid-offer spread and the (unknowable) possible loss from time out of the markets into your decision to move from funds to ETFs.
I am in a similar position to you, but because of all of these, and in particular the last one, I decided I would rather move to a flat fee provider than uproot my entire portfolio just to satisfy a platform’s odd requirements. As a wise commenter once wrote, platforms are “entirely fungible middlemen”…
many thanks again mr accumulator for your helpful, enlightening and simply put clear advice. we are lucky to have you.
Thank you, TA. I only wonder if I am able to make TD waive their exit fees for me.
From the Telegraph “campaign” article linked at the end:
“In an early victory, one fund shop – TD Direct – will scrap all charges for Isa savers who leave for a competitor, The Telegraph can disclose.”
One of the things that gets in the way of me returning to TD Direct is that they seem to have a problem with plain English.
In their new pricing, and if taking your ISA away to a competitor from them is indeed now subject to no charge (other than residual ISA administration fee if due) why on earth not just say that clearly in the new rates and charges. As they’ve written them, you could still be left thinking that switching your entire Plan away to a competitor would come under “Stock Withdrawal” (charge for plan transfer to another ISA provider applies) rather than “Account Closure” (free) given that I can’t be the only one who would read account closure as, well, closing the account rather than transferring the entire ISA out.
(I’m assuming that the charges from 14FEB14 are the ones the Telegraph is referencing and that the free transfer isn’t a subsequent change to the new charges, and that the Telegraph aren’t mistaken).
Very timely post….I began to build a xls this morning to review the best place for my SIPP!
@Learner
Thank you, this is great news. Apart from their percentage based fees which soon will be too much for me I quite like them after all.
^^ 🙂
Thanks for continuing to beat the drum on this….you are prompting me to act.
As a 34 year old with 100k in an ISA, 150k in a SIPP + regular contributions to both, I can’t stomach the forthcoming uncapped percentage fees with HL. I’m somewhat of a reluctant leaver given their good website and service – in fact, if they had retained their capped fee even £50-100 p.a. above some of their fixed fee competitors, I would probably stay put – particularly given the heartache associated with the in specie transfer to them in the first place. Nonetheless as you say…..the compounded savings are eye-watering.
Whilst they claim to be competitive for those with ‘average’ portfolios (apparently around £50K) I can’t help but think that those with larger pots will now be leaving in hoards…….
I’m tempted to stick around to see how their new low-cost trackers look but with them still subject to the uncapped 0.45% annual management fee (up to £250k) they can’t be considered ‘low cost’ in my opinion.
Now all I need to do is decide on which fixed fee provider to go to…and place a tight-stopped short on HL 🙂
press articles on the issues with HL:
http://www.moneymarketing.co.uk/2006816.article
http://www.whatinvestment.co.uk/comment-and-analysis/2454442/hargreaves-lansdown-et-al-need-to-make-isa-transfers-easier-and-cheaper.thtml
Agree with Aidan – I have made a decision in principle to split up my portfolio amongst at least two platform providers; may be 3 even.
During the last 6 years I have made concerted effort to centralise all my investments including Money Purchase Occupational Pension into HL AND look where its got me.
My rational …….. I believe it’ll take time (anticipating 18mth) for the dust to settle wrt Platform fee structures. Many providers will watch competitors to see what disgruntled investors will tolerate albeit begrudgingly! Then they will start inching toward the most successful model while making it their life ambition to make like-for-like comparisons pretty much impossible. Just like the banking & energy sectors while regulators just stand by & watch!
seen this: http://www.thisismoney.co.uk/money/diyinvesting/article-2555801/Direct-investors-casualties-price-war.html
i don’t think i agree – for sure the broker needs to be economically viable, you don’t want the mess of them going bust, but i’m not sure they need to provide tools/advice etc.
in fact quite the opposite – they should not be providing advice due to clear conflict of interest. In fact isn’t it against the rules for them to do so?
far better to contact an independent 3rd party (like finmetrica) if you want to figure out how you should be investing?
so don’t see how lack of or poor advice is in any way an issue relating to cost-cutting between brokers..
Talking of Finametrica, they’ll give you a free go on their industry-standard, risk tolerance questionnaire in exchange for an email address:
https://www.riskprofiling.com/your_risk_tolerance
FWIW I pinged H-L with a secure message the other week telling them I was leaving due to their fee hikes and they phoned me up – first offering 0.25% and then down to 0.20% – I have an £80k SIPP with them but it still wasn’t worth it. Although I appreciated them trying to accommodate me, they wouldn’t go down to a fixed fee and that’s the deal breaker for me. So, anyway – point is, they will negotiate.
Much like Bob, I would be prepared to pay around £200 a year or so for my portfolio (which I think is reasonable) but much more than that is not worth it and I am piling in too quickly to make 0.20 p.a. worth it for more than 6 months or so.
I wonder what it was about your 80k SIPP that prompted HL to break out the under-the-counter deals. It seems that folk with larger portfolios than that have not received such offers when their transfer forms have landed on the desk. Maybe you’ve got a bunch of dirty funds in there that will still be paying commission til 2016? Or maybe it is something to do with the rate at which you are depositing cash with them? Its a bit unclear what properties HL is looking for in clients it is trying a bit harder to retain..
I only started investing last year, and have found this website hugely helpful. Along with Tim Hale’s must read book.
At the time I started, H&L were my best option as I simply wanted to invest in one fund. The Vanguard Lifestrategy 60% Acc fund. For various personal reasons, I use the Fund and Share account rather than the ISA or SIPP.
I’ve got about 25K in there now and putting in approx 2.5K per month. So it would seem that my best option will now be one of the fixed fee platforms. Shame as I find H&L website easy to use and their customer service good. But fees must.
For someone like me, investing in one fund, 12x a year, I think Sharecentre of ii look best. But I’d appreciate being told otherwise if anyone thinks I’ve messed up my calculations.
The old compare chart had a little entry showing which provider best for Vanguard Lifestrategy investors. Would be great if that could be put back into the new one.
Thanks again to Monevator and its contributors. This is a priceless resource.
hello mr accumulator or friends who would know.
been reading about how vanguards life strategys are doing.
on the citywire site its saying VLS 60% grew at 5.8%
and VLS 80% grew at 7.58%
have I read it correctly?
From the Telegraph “campaign” article linked at the end:
“In an early victory, one fund shop – TD Direct – will scrap all charges for Isa savers who leave for a competitor, The Telegraph can disclose.”
That’s not the answer I received from them when I questioned them, this is there response:
“I can confirm that from the 14th February we do not charge an ISA closure fee; we do however still charge £25 per holding for stock withdrawal to paper form, and £50 + the relevent ISA administration Fee for transfer to another ISA provider”
Another ISA provider would be a competitor so that’s not scraping all charges is it?!
I’m not sure this tool works if you only use the low cost ‘regular investment’ facility with fixed trade dates
So is it worth sticking with HL for the time being ? I’ve just requested my cash isa to be transferred to them with 50k inside
I also have 50k invested with them already
@ancienti if your buying funds then HL are expensive once your past about £50k, as there is no cap.
If your planning to buy ETF’s or IT’s they have a cap of £45 a year , so are competitive.
Good customer service and website also, if that matters to you.
Just to add to the above, you have to take into account dealing fees on ETFs and ITs with HL. Whereas fund dealing is free.
Err, sorry about the apostrophes in the earlier answer.
I have £850k in a SIPP with Hargreaves Lansdown, only investments trusts and ETFs. I pay the £200 pa cap which is equals 0.0002% admin charge – fantastic value!!!
Chris, I thought with HL you had to pay a % fee regardless. I have recently gone with ii for this reason as I will have a large sum to invest and did not want to pay 0.25% or more for just purchasing IT’s or ETF’s. Choosing platforms seems to be a minefield. Wish I had known this earlier.
[malc1111] “Choosing platforms seems to be a minefield”
Too right it is. With TD Direct and ii merging, just when you thought you’d picked the correct platform for you everything changes.
Has anyone else been affected by the merger of ii and TD? There appears to be a massive limitation on the ii monthly drip feed in that you can only buy funds up the value of your monthly investment. This is very annoying if you have spare cash in your account as you can’t use the drip feed facility to invest it *grrrr*
I think we just have to accept that things change. Strategically, the most important regulatory change would be banning exit fees, so I think its well worth continuing to make complaints about platforms changing fees and locking you in with exorbitant exit fees.
But I think you have to accept that you will likely need to switch platforms every few years, and also that there is little point trying to optimise to the nth degree or future proof your choices too much.
Regarding inflexible regular investment schemes – ii aren’t the only ones to do this, Alliance Trust also have a similar approach. I started with them and later opened accounts with Youinvest, and couldn’t quite believe the flexibility that was allowed! Its one of those things that you’re unlikely to twig the significance of before you are actually signed up to a platform (another reason why exit fees are so insidious – you have no idea whether a platform is really going to suit before you actually use it in anger).
[vanguardfan] “you have no idea whether a platform is really going to suit before you actually use it in anger”
This is very true. I tried 3, then chose ii. Now I have SIPP, ISA & Trading accounts with ii. It’ll be a royal pain to move.
The new ii system (inherited from TD) appears to be more restrictive in several ways. Presently, I can’t even remove a regular investment until I set up a new DD, even though that investment is no longer available following the new TD/ii merger.
The previous DD payment has gone through so I have this month’s money to invest but no way to select what I wish to invest in, or not.
There are too many restrictions where once there were none.
When II first introduced charges that affected funds (2012 I think) I switched to HL. Then HL first introduced £2 fund dealing fees, then % based-fees (at which point I switched back to II to take advantage of family savings).
Recently II failed me (for the second time), at which point I made the decision to switch to Vanguard. Being percentage based, they’re not necessarily the cheapest (I think Halifax and iWeb worked out cheaper on paper), but I feel I trust Vanguard more (as they have a tendency to reduce costs over time, not increase them), with the hope this decision will increase the time between me needing to make my next S&S ISA transfer someone else!
I also agree with raising complaints about exit fees. When II first announced the recent changes, I requested a free transfer out. They declined my request. I raised a complaint (along with probably hundreds/thousands of others) and a few days later they contacted me to let me know they’d made a ‘mistake’, and offered to let me exit for free. At the very least raising a complaint will cause some hassle for them at their end too!
Generally, the regulators really need to clamp down on exorbitant exit charges and provide standard guidelines for the investment transfer process much like they have simplified current account transfers and handover. Personally, I’d like to see transfer fees after the first year to be reduced zero or at least on a sliding scale whereby exit fee go down to zero once an investor has been with a broker/platform for say 3 years.
The level of complexity and opaqueness now in this area is becoming unmanageable.
Do people advise that you spread your investments across several providers? Despite the cost increase it’s less risky in terms of something catastrophic?
Hi Nick, yes at some point that’s a good idea. This piece gives you the gist on the UK compensation scheme: http://monevator.com/investor-compensation-scheme/
I’m not neurotic about it. I don’t hire a new platform every time I get over the compensation limit. There’s a balance to be struck between prudent diversification and an unwieldy admin burden.
Hi!
I’m totally new to the game – a few months ago I didn’t even know that investing is something available to an everyday regular person (or have any savings or a budget plan… Oh boy.)
After having done much research, I’ve realised that I need to spend even more time learning about smart investment decisions!
However I’m also concerned that I’m loosing much valuable investment time, in attempt to build my knowledge from the ground up.
As a quick fix, I’m considering of opening an ISA with Vanguard and investing monthly into ftse global all cap acc- for a year.
I plan on spending that year educating myself further, expanding & diversifying my portfolio and re-adjusting/moving thereafter.
Would you say this is a sound decision, or am I disregarding something very important?
Thank you so much in advance!
@begginer – that’s exactly what I did! Faced with information overload I opened an ISA with Wealthsimple and set up a £100 monthly direct debit in their 80:20 stock:bond portfolio, then spent the next 9 (!) months researching everything before transferring it over to Vanguard (also in the global all-cap) to save on fees and choose my own asset allocation. I found it a great approach as it meant I didn’t rush into anything being “out of the market”, and gave me plenty of time to draw up a solid plan for the next few decades. Sounds like you’ve got your head screwed on right 🙂
@ Begginer – assuming you’re not diving in with a huge lump sum and you don’t get spooked by any sudden falls I think this is a great idea. One of the mistakes I made was waiting too long to invest because I was trying to learn ‘everything’ before I started. Eventually I worked out I was just putting it off and needed to dive in.
Here’s a piece that might help:
https://monevator.com/how-to-estimate-your-risk-tolerance/
This is quite an early article, and I’d say Monevator readers skew richer now. Perhaps that’s the result of 10 years of reading Monevator since first publication.
An important consideration, should you be fortunate enough to have more than the £85k FSCS compensation in an account is what you think of the stability of the platform’s business.
I have favoured big fish listed on the FTSE100 or 250 for that reason. It’s a source of concern for me that Hargreaves Lansdown is going private equity – my experience of life so far is that private equity is good for absolutely nobody other than PE. Not the customers, not the employees, not the longevity of the company due to private equity’s frequent modus operandi of loading firms up with debt, and the fact that the private in private equity means there is no transparency.
In theory your holdings are ring-fenced from the platform, so the platform can go bust but your assets should not be used to pay off senior creditors and eventually you should get them back. But MF Global was a thing. Different jurisdiction but same customer ringfencing story.
Oh deary me, I am 95% in Funds held on AJ Bell and currently paying £60 ish a month.
Yet another issue to sort out, along with the dogs dinner of a portfolio (work in progress) and the FSCS compensation limit.
Thank you Monevator/Accumulator.
@Jane – just rehashing what’s already been said, but the biggest win is going from one to two brokers, diminishing returns from then on. Iweb is waiving it’s sign on fee until Dec 2024.
I’m starting to think that I do need to start worrying about small differences in basis points on the costs front. I reckon each basis point is now costing me just over £10 month. So if I could shave off say 10 that would be worth having?
Agree with @ermine that platform safety is also a consideration if over FSCS and not just which is cheapest – and agree that HL going P/E is not good (I have an HL account, amongst others, above the FSCS).
There is an article from Investors’ Chronicle (from 2019) which says that although broker failures are rare, they happen at a rate of 1 or 2 per year and provides a good insight into Broker failures – a few which have occurred despite ring fencing/nominee accounts – mainly because these don’t guard against fraud/financial malpractice. Administrators can also take money from Investor accounts as their fees are notoriously expensive causing Investors’ to lose out. The article goes on to say that “investors should ensure that a broker is regulated by the FCA, covered by the FSCS and operates through nominee accounts. However, this applies in the majority of broker failures, so is not protective in itself.”
It also says “personal investors should also look at the business model of the broker – is it sustainable, how does it make its money, is it profitable? It can be easier to find this information for larger companies.” Many of the newer ones aren’t and make large losses year after year – supposedly while they achieve enough customers to make some profit but with so many of them now doing this will they actually achieve it before they go bust – or somebody else sees some value in them somewhere and takes them over? (This was also discussed recently on the “Broker Comparison” Monevator blog.) The link to the article is here: https://www.investorschronicle.co.uk/content/e0da9a63-1e77-5ce5-8747-93325d72a40e
“Banker on Wheels” website also has reviews on some Brokers and categorises them in terms of their safety as a Tier 1 or a Tier 2 broker which is quite useful.
Another issue, as many know, is regarding switching platforms for cheaper fees for those of us who have taxable trading accounts (as can’t use any more of our non-taxable) – and is particularly even more pertinent after todays Budget CGT rate rises – is that if we can’t transfer in-specie then will be disposals and subject to CGT. This will likely far outweigh the few basis points in fees saved and so becomes a problem to switch these accounts to anywhere cheaper.
@Jane
If you are okay with ETFs instead of funds, you would be better off investing in these with brokers such as AJ Bell & Hargreaves Lansdown as I now do. So you could sell your funds and buy ETFs as I did. They have quite low capped fees for these whereas they are expensive for funds charging a % fee. In a full year you won’t pay £60 in an ISA with either of these (I believe it’s around £42 with AJB and £45 with HL a year) and better still as your pot grows in value they don’t increase as they would with funds. You do pay slightly more in dealing cost but this is pretty much irrelevant for a long term buy/hold investor anyway.
I was a bit cautious about ETFs in the beginning due to the fact that they really pretty much only have FSCS 85K protection at the broker level – so if your broker goes bust you are protected but not at the fund manager level i.e. no protection if your ETF fund manager went bust. However this is very unlikely – less likely than a broker. I’ve had a few global ETFs for a while now and been very happy with them – they are cheap, easy to trade etc. and if you stick to the “big boys” of the ETF world such as iShares, Vanguard, SPDR (State Street) the risk should be absolutely miniscule – in fact many say “too big to fail” but I’m not sure whether that is true as some massive companies have failed in the past. (I’m not talking fund managers here just big companies in general.) These are true behemoths though and very difficult to envisage them failing with the many billions they manage for investors.
But if you do want funds you are better off with other platforms such as Iweb with just a £5 dealing fee and no % platform fee or Interactive Investor who charge a fixed monthly fee for any amount (£11.99 per month or I believe about £4.99 up to a 50K pot). They also do a family deal where if one member has a full paid £11.99 account – other family members can get free accounts upto a 50K amount as I got one for my partner. I have both funds & ETFs but just be careful in choosing the platforms with the lowest fees for them.
@Rhino and @Jezza thank you both, the information is very helpful. I aim to have only 2 platforms to keep it as simple as possible but with some protection.
Re: the Investment Chronicle article – it says that 1 or 2 brokers fail per year. That number itself doesn’t make sense when you think about the quantity of failed brokers we’ve had to remove from the Monevator broker table over the 13 years it’s existed. That number is zero.
So the Investment Chronicle article must be using a broad definition of the term “brokers”. What they can’t be talking about are consumer-facing, execution-only, retail brokers who enable us to trade well regulated funds, ETFs, shares and bonds.
I’m not saying that retail brokers can’t fail. There have been two high-profile failures in the last ten years: SVS Securities and Beaufort Securities. The fallout from those failures was limited e.g. I didn’t hear from a single affected Monevator reader. It wasn’t like an AJ Bell or ii going down. But still, it was a warning to think carefully about broker diversification.
In sum, I agree with everything said above but want to write a balancing comment because many readers worry a great deal about this issue.
Personally, I stick to brokers who have operated successfully for years. I steer clear of brokers who are apparently “free”. I know they’re charging me somehow so I’d rather that was transparent. I wouldn’t have a problem using a start-up broker if it appeared to be well-financed and was covered by the FSCS. I’d certainly limit my exposure to the £85K compensation cap in that case. Though arguably, it’s easier for the industry to absorb the failure of a relatively small start-up than it would be if a big player went down. God forbid.
@TA
Yes I agree – the brokers mentioned in that article as some of the more recent higher profile failures (Reyker Securities, SVS, Beaufort Securities, Fyshe Horton Finney and Pritchard) – I’ve never heard of myself but was just pointing out that it’s not just the cheapest cost broker which you should necessarily choose (even though I have the feeling that some do just go on that mainly) as it’s better to at least be a bit safe rather than sorry later on if something was to happen, however unlikely, because as retail investors we will be the last to find out anything until after the event (as in the GFC when some of our banks went down and we knew very little about it until it was too late).
I think your last paragraph makes sound sense. I also steer clear of the newer “fee free” loss making digital platforms, I’d rather the platforms remain solvent but competitive for the long term. Also as you say, any that are not financially sound, I would definitely not risk going above the FSCS limit. Best to have a look at their accounts every so often – it’s free information after all.
I don’t want to be alarmist – I don’t believe anything would happen to the larger long established platforms either – even though I occasionally read stuff which slightly concerns me at times – even with larger established firms which should be most stable.
Such as like earlier this year articles such as these regarding the fund manager ABRDN (merger between Aberdeen/Standard Life):
https://www.ft.com/content/c5df08fd-4a17-42a2-bf25-8c7fe17c1277
and
https://www.cityam.com/abrdn-begins-cost-cutting-push-with-job-losses-reports/
They outline their current problems with large client money outflows and losses and having to cut around 10% of the workforce and with apparently more than 100 funds being cut/merged. It also mentions disgruntled employees and possible legal challenges from them with how they have been poorly treated – which is never a good sign. Not that ABRDN is a broker but Interactive Investor is a subsidiary company, so it makes you wonder how they might be affected if ABDRN don’t come good although ii are one of the biggest UK platforms and profitable, have around 59bn in assets and more than 400,000 customers so can’t really see anything happening to them.
I also have concerns that HL going private equity as @ermine said above, isn’t likely a good thing – won’t be as transparent/possibly taking on more debt so maybe more risky?
There are quite a few articles on this as well (a couple below) which don’t sound too favourable about it’s management/under performance lately. Some articles say “If Hargreaves Lansdown is to resist competitors more effectively, it needs to either improve its offering or become cheaper” and “This is not to say that all the changes from its new owner will be for the better – plenty can go wrong. Price pressures in the wider wealth management world mean the firm is now struggling to match offerings from competitor retail investing platforms like AJ Bell, Vanguard, and eToro. It has also has also struggled to attract younger customers. In addition, the business’s reputation has also been affected by the Neil Woodford scandal in the UK in 2019. Since then, Hargreaves’ share price has been on a downward tear. At its all-time high in that year, its stock was worth over £22 per share.”
https://www.theguardian.com/business/nils-pratley-on-finance/article/2024/aug/09/hargreaves-private-equity-cvc-bid
https://www.thisismoney.co.uk/money/comment/article-13544023/ALEX-BRUMMER-Hargreaves-sells-soul-bowing-private-equity-funny-money.html
But HL are huge – the Uk’s biggest platform, profitable and so not at risk but some of this is maybe a concern into the future, who knows?
@ AS – It wasn’t your thoughtful comment that I was pushing back against – just the numbers in the article. They make failure sound much more common than it is.
I also think you’re spot on when you say: “it’s better to at least be a bit safe rather than sorry later on if something was to happen, however unlikely, because as retail investors we will be the last to find out anything until after the event.”
The main risks we face from a broker failure are fraud / incompetent record-keeping / sudden and disorderly collapse.
I’m pretty sanguine about the ongoing commercials of any given broker. If it’s losing ground to competitors (but basically profitable / with an attractive customer base) then it’s likely to be taken over by a stronger rival if it gets into real trouble. Not a problem.
Fraud / incompetent record-keeping / sudden collapse – we’d find out too late in all probability. So I keep my own records, stick to UK based brokers, diversify, keep my fingers crossed 😉
May be slightly off piste, but just in case anyone else is in the same boat, my flat-fee platform tells me I can’t transfer my Stocks & Shares ISA to another provider as one of my funds is the LF Equity Income C (previously the Woodford Equity Income fund) which has been suspended, pending closure, for nearly five years now.
So after all this time Mr Woodford is still costing me money..!