Choosing a platform or online broker

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The cheapest way to trade ETFs is to sign-up to an online, execution-only investment platform.

Choosing a platform or online broker What should you look for in a good online investment platform or broker? The following are the key features to tick off your checklist:

Make sure you choose a platform that offers the range of investments you want. For example, some platforms do not carry ETFs or only stock a limited number.

You can quickly check by using a platform’s search function or investment research centre. If you’re still not sure then email their customer service team for a definitive answer.

 

Execution-only is the cheapest way

An execution only service is the cheapest way to invest as you do not pay fees for advice. Most online platforms or brokers now offer execution only trading.

Note, this means that your platform will not help you decide which investments to pick although justETF offers up-to-date information on best and worst ETF performers plus market data.

When it comes to fees, choose the platform that best suits your situation and style of investing.

If you’re an active trader then look out for generous dealing fee discounts for frequent trading. If you intend to buy several ETFs every month then consider regular investment schemes that offer fees as low as £1.50 per purchase in exchange for dealing on a set day of the month.

Low frequency investors can worry less about dealing costs and focus on platform fees. This charge covers the administration of your account and varies depending on provider and whether you hold an ISA, SIPP or taxable investment account.

Most platform fees will fall into one of three main categories:
 
  • The percentage fee – the platform charges a percentage of the value of your assets. This is best for investors who have relatively small accounts.
  • The flat rate fee – the platform charges a fixed amount per quarter or year regardless of the size of your account. This is best for investors with large accounts.
For example, it makes more sense for an investor with £100,000 in assets to pay a £100 flat rate fee per year than to pay £300 to a platform that charges 0.3% per year.
 
  • The best platform fee of all is the zero rate charged for ETFs by a few brokers. See the table below for a few suggestions
 

Fee schemes vary – check which platform is right for you

Note, there is no one low cost platform that suits everyone. The cheapest platform for you will depend on the size of your assets, the number and type of accounts you hold, the type of investments you trade and how often you trade.

It’s also important to check that a platform offers the right accounts. ISA and taxable investment accounts are universal but Junior ISAs or SIPPs may not be available. Some platforms will link family accounts and some do not. Check a platform’s account services page or its FAQ before committing.

Generally, you’ll fund your account with a debit card or direct debit payment and can move cash back to your bank account using a BACS transfer.

Bear in mind that most online, execution-only platforms offer a no-frills service. If you want to place telephone orders or receive paperwork in the post or access investment research then you will pay a lot more.

If online portfolio tools are important to you then a few platforms offer demo accounts so you can try before you buy.

Customer service levels are the trickiest of all to gauge as they depend greatly on personal expectations, experiences and the complexity of your individual situation.

If your needs are intricate then think twice about picking the cheapest platform and try polling user opinion on justETF as well as blogs, online forums and money saving expert.

 
Broker Comment
AJ Bell Youinvest No platform fee for ETFs plus discount for regular trades
X-O.co.uk No platform fee, low dealing fee
Clubfinance Frequent Trader Very low dealing fee
Selftrade Low flat rate fee
Hargreaves Lansdown High-profile, well regarded for customer service
Interactive Brokers Well regarded for ETF trading beyond the London Stock Exchange