How to Choose a Stockbroker in the UK

Choosing a stockbroker doesn’t have to be difficult. We break down the step-by-step process of choosing the right brokerage for you.

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Deciding to start investing is a big and exciting step to take. However, certain things can make it seem more complicated than it actually is. One of those is choosing a stockbroker. 

When you first start investing, you might not understand all of your options. This article will help you work out what to look for in a broker and how to choose the right one for you.

1. Choose the best type of broker for you 

Before you decide which broker you want to use, you need to establish the type of broker that will be best for you.

There are three main types to choose from.

Full-service broker

A full-service broker will give you financial advice, manage your money and investments for you and offer additional tools to help you along the way.

These stockbrokers tend to offer a range of products and services that you can choose from. These products and services may include significant research, access to alternative asset classes and premium wealth management tools.

The downside of full-service brokers is that they tend to come with higher fees and minimum account balances due to the increased level of service you will receive. 

If you’re going to start investing by putting in a small sum each month – like £200 – a full-service broker may not be an economically viable option for you.

Discount broker

A discount broker will normally leave you to make your own investment decisions and will just execute what you ask them to. 

Some will offer more general information and recommendations to help you make your decisions.

Many discount brokers will offer you access to speak with a broker for specific circumstances or a one-off consultation. You will be charged an extra fee for using this service.

Online broker

An online broker is very similar to a discount broker, particularly now that nearly all brokers have a mobile app or online portal.

Online brokers can be a really good option for new investors. They offer a lot of tools and information, but they tend to cost less than full-service brokers as they do not offer face-to-face advice.

Online brokers also tend to offer a lot of flexibility and low account minimums, but the fees can rack up if you’re not careful.

2. Determine your investing style

Before choosing a broker, you should consider what your investing style is. This will help you establish which broker is best for your needs and circumstances.

For example, are you an active or passive investor? 

Active investors, who are likely to be making regular trades in high volumes, will want to avoid brokers with large transaction fees. A fixed monthly or yearly fee may suit these traders better.

These investors will also likely want to prioritise usability and speed of execution in a broker. A broker that takes hours or days to execute a trade won’t suit active traders.

On the other hand, passive investors probably won’t be making many trades at all. These investors will want to avoid brokers with inactivity fees but probably won’t mind higher trading fees.

3. Compare costs and fees

You don’t want to end up paying over the odds for a broker, so it’s important to compare costs and fees before committing to one broker.

Here are the main types of brokerage fees to look out for:

Account minimums

Some brokers set a minimum amount that you must have invested in order to have an account.

Full-service brokers may want several thousand pounds invested as they offer a comprehensive service. Other brokers may only require a minimum of between £100 and £500 in your account at any time.

There are some brokers that let you start investing with as little as £1.

Check the terms and conditions to make sure you can meet the minimum requirements of your chosen broker.

Some brokers may charge you to withdraw your funds too – particularly if the withdrawal will take you below the account minimum.

Trading fees

You should also check what trading fees a broker charges. The actions that incur fees will vary between brokers but may include buying and selling stocks, commissions, inactivity fees and management fees.

Check which charges brokers apply to accounts and how much they will expect you to pay.

Overseas fees

Some brokers will charge extra to conduct foreign investments or investments in another currency. This will usually come in the form of a currency exchange fee. 

To get an idea of what you might have to pay, use our Brokerage Calculator to compare the costs of different brokers based on your investing strategy.

4. Consider extra tools and education

You may think you simply need a way to execute your transactions and that paying for extra tools and education is a waste of time.

However, these additional tools may really help you, particularly if you’re new to investing.

Brokers invest a significant amount of time and money into producing tools and guides to help you. Brokers typically understand the markets really well, and by using the information they offer, you can benefit from their experience and expertise.

Many investors panic when markets are volatile. Hearing a company’s house view and understanding their response may help prevent you from making a decision you come to regret.

A lot of tools – like tax calculators and live market feeds – are designed to make your life easier. It may cost a bit more to gain access to these tools, but if it ends up saving you time, stress and potentially money, then it could be worth it in the long run.

5. Vet your broker 

Your broker should provide a top-quality service and help you achieve your investing goals.

To make sure they’ll do this, you should check a few things before you hand over your hard-earned cash

  • Customer service. See what other people think about the broker. You can search for online reviews that should give you an idea of how customers find the broker. 
  • Check that they’re regulated. In the UK, you can check the Financial Conduct Authority’s public register to make sure the company is legitimate.
  • How long they’ve been around. You might be sceptical about putting your money into a company that has only been around for a year or two. You can check a broker’s details on their website or check the records held by Companies House to find out how long a company has been operating.
  • Security. Does the broker use two-factor authentication? It’s a good move to check they keep your data and personal information safe.
  • Past performance. This is by no means indicative of future performance, but it can be a good guide. If a broker has lost money every year, you may want to think twice before investing with them.
  • Investing strategy. You can check whether a broker’s investing strategy suits your goals. Do they have the same moral or ethical values as you when it comes to investing? Do they only invest using high-risk strategies? A lot of this information can be found on their website. 

Now that you know how to pick a stockbroker, check out our top picks of brokerages in the UK to start comparing which may be right for you.