Choosing an investment platform or broker

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6 ways to find the best investment platform or broker for you

Consider these traits when choosing your ideal ETF investing home:

1. A good fit

Pick the platform that most suits your investing needs. If you like to trade a lot then a broker that doesn’t charge for the privilege could be ideal. Whereas if phone-based customer service is a deal breaker then a more traditional platform may suit. See the What’s important to you section below for more considerations.

2. Fee structure

Price-wise, platforms broadly split into three distinct groups. Keeping your fees low is mission-critical for growing your wealth, so it’s important to pick the structure that’s best aligned to your stage of the investing journey.

Fee structure 1: Commission-free brokers

Commission-free brokers stand-out because their platform fees and trading fees are typically zero. That’s a nice price! However, it doesn’t mean they’re free. If you google “How does [Broker X] make money?” then you’ll find the web page where they tell you. There’s a range of ways: pocketing the interest on parked cash, cross-selling ancillary services, or charging higher spreads on some investments. So long as you know, you can make a good decision. For example, if you like to keep a lot of cash in your account then you may prefer a broker who pays you a great rate of interest. Examples: InvestEngine, Trading 212*, Lightyear*.
 

Fee structure 2: Flat-fee brokers

You pick a plan and pay a fixed monthly platform fee for your services. Dealing fees and other charges are usually levied on top, depending on usage, but your plan may discount those or bundle in some extras to sweeten the deal. Flat-rate fees favour investors with high value accounts who want to know what they’re paying for, and would otherwise be landed with a large bill if paying a percentage platform fee. Example: Interactive Investor

Fee structure 3: Percentage fee brokers

In this scenario, you’re charged a percentage fee based on the ongoing value of your investments. For example, a 0.25 % platform fee on an account worth £10,000 amounts to £25 per year. In reality, you’ll pay approximately a 12th of this per month, but the amount will vary in line with your investment performance. A percentage fee is good for newbies with relatively small sums in their accounts. That’s because 0.25 % of £1,000 is £2.50, for example. While at the other end of the scale, 0.25 % of £1,000,000 is £2,500. Paying £2.50 per year on your investments is an exceptionally good deal while forking out £2,500 is eye-wateringly expensive. Watch out for minimum and maximum charges in this space though. Minimum charges may mean small investors are better off elsewhere, while maximum charges (fee caps) can turn a percentage fee into a competitive flat-rate for large account holders. Examples: AJ Bell, Hargreaves Lansdown, Saxo

3. FSCS investor compensation

UK based investors are protected by the Financial Services Compensation Scheme (FSCS). The scheme is designed to pay up to £85,000 per person should your broker go into administration or suffer some other calamity that leads to a shortfall in the value of your account. Naturally enough, the scheme does not cover consumers for losses incurred by poorly performing investments. Check your broker is explicitly covered by the scheme. They should say so on their website and you can double-check the facts on the Financial Conduct Authority’s (FCA) Financial Services Register. Pay attention to how your broker ensures protection for your cash under the FSCS as well as your actual investments. These are two separate arrangements and all good brokers operating in the UK cover both. You can find out more about the scheme here.

4. Regular investment plans

Regular investment plans are an awesome way to automate your ETF investing while cutting trading fees to the bone. Tick the boxes on your broker’s screen and you can invest a set monthly amount into the ETFs of your choice. The money goes in via direct debit while your broker automatically executes the trade without you having to lift a finger. Just align your monthly contribution with pay day and watch your shares accumulate. Of course, you can always change your mind, pause the payments, or switch up your ETFs. Good brokers make it easy.

5. ETF choice

Make sure you pick a platform that offers the choice you need. For example, although most platforms stock ETFs, some provide a wide range while others offer only a handful. A small line-up can be useful if you find yourself overwhelmed by the sheer diversity of ETF products available. On the other hand, the most interesting and lowest cost ETFs are usually found at brokers who offer a large selection. A good broker will provide a search function that’ll enable you to quickly scan their product list. If you’re not sure they have what you need, then email the platform’s customer service team for a definitive answer.

6. What’s most important to you?

The UK broker market is diverse and competitive. You should be able to find a great range of low-cost ETFs as standard. But what else? Here are some potential priorities to think about:

Investing environment

Execution-only means you open an investment account online, or in-app. You are then free to trade your investments on a do-it-yourself basis. Of course, this means that your broker will not help you decide which investments to pick. Although justETF offers up-to-date information on best and worst ETF performers and plenty more market data besides. That said, many platforms do offer some degree of handholding: from investing opinion, to tutorials, to paid investment management services. An underappreciated consideration is whether your broker’s interface matches your temperament and expectation level. Some brokers have slick, clean smartphone apps that play well with people who enjoy constant engagement. While others have invested more in their website. This often suits investors who prefer a calm investing experience with a lean information flow. If portfolio tools are important to you then a few platforms offer demo accounts so you can try before you buy. Very few brokers levy exit fees anymore, so it’s relatively simple to switch if you decide a platform isn’t for you.

Account types

ISA and GIAs are universal but Junior ISAs, flexible ISAs, Lifetime ISAs, and SIPPs may not be available. Some offer SIPPs but you’ll have to transfer to another broker when you want to drawdown. A few platforms offer a discount for family accounts although most do not. Check a platform’s account services page or its FAQ before committing.

Customer service

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 online forums, or websites like Monevator, or Money Saving Expert.

ETF Investing with ....

• InvestEngine: InvestEngine is a unique ETF-only investment platform that doesn’t charge for trading and doesn’t levy a platform fee either. After making the minimum initial deposit of £100, you can invest from as little as £1 and can also take advantage of a range of useful tools including savings plans that automate your investments and a superb one-click portfolio rebalancing feature. If you’re looking for an attractive, easy-to-use, commission-free ETF investment experience then check out InvestEngine: We dig into key features in our review about InvestEngine.
• Saxo: Saxo is a sophisticated trading platform that enables you to invest in a huge range of ETFs across up to 31 global stock exchanges. The platform fee starts at 0.12 % and trading fees start at 0.08 % of the transaction amount (minimum £3) for London Stock Exchange ETFs. Saxo is a richly-featured platform that's ideal for advanced traders, but doesn't provide much in the way of hand-holding for beginners. Check out our review about Saxo to learn more.
• Lightyear: Lightyear* offers a clean, attractive and easy-to-use investment app, while the fees could scarcely be more competitive. Read our whistlestop review of Lightyear’s ETF costs and services.
• Trading 212: Trading 212 provides an innovative, zero-commission investing platform that’s available online and via their mobile app. Learn more in our review article.