Quite an interesting story on the fees that various brokers charge. It’s not surprising that the challengers are cheaper but I was expecting a different challenger to come out on top. Obviously this story focuses solely on fees and not user experience (including support) so choosing between the brokers isn’t this black and white for me.
I love these comparison tables, it really highlights just how hard it is to understand what you are paying for and how much your broker truly costs you.
Entering and immediately exiting a trade might give you the feeling of a round trip but the reality is you would hold onto the asset for longer, incurring other ongoing fees. The ongoing fees are the ones that really get you, and it’s also where the newer brokers can and do shine.
A few of the numbers above I’m not completely convinced have all the fees included the conversion fee for instance is a hard one to work out, this would happen on both ends of the trade and it is based on the value of the trade. This creates two problems, the value you are buying changes if the broker does fractions or not and the natural market spread will reduce the amount you are selling afterwards. In short I would expect the numbers will always be always slightly different.
Plus ii should have a conversion fee (1.5% margin for a trade of that size both directions.) Not to mention eToro’s $25 withdraw fee if you wanted that money back
For me when it comes to what broker I use it’s more useful to see the annual cost of holding a portfolio size with a few trades a year for any rebalancing. That is when you start to see the different pricing categories each of these brokers excel in.
The expectation seems to be that zero commission and zero custody will suddenly become the norm overnight and all the old brokers will crumble and a new civilisation is born a new (OK, not quite that dramatic.)
A few of the major brokers are exchange listed, meaning we have access to their financial accounts (in fact why not go check them out in our app while you are thinking about it ) and you’ll see most of the brokers operate between 40-20% margin.
The commission fees are the cherry on top, the real money comes from reoccurring fees (i.e. ISA/SIPP administration, transfers, custody) and interest on cash. Even in this low interest environment that is still the major pillar of revenue.
The established brokers can cut their price and remove commissions For right now they don’t need to. The coming price war still hasn’t hit us yet.
Often we see in the news about new lower and cheaper prices (looking at you ii) which in fact cost the customer more (often if you have a smaller portfolio size.) All in all, how can you truly know what you are paying.
It still feels we are a few years away from a true price war happening with the UK brokers. Until then I agree with @alexs
I expect more and more brokers to offer additional services and solutions for their customers outside of purely transactional relationship. This is where the real value will be found and judged, not on the annual fees but the value you believe you are getting
Personally, the investment universe available on each platform is a key consideration - mid/small caps are often not available on the newer trading apps