Free trades. Lower dealing charges. No fees.
Even if you are happy with your current online share dealing broker, these kinds of offers can naturally lead you to wonder: Should I switch brokers?
I get it, I often have the same thought occur to me.
Should you invest £1,000 in Ocado right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Ocado made the list?
So should you change to a new platform or stick with the tried and tested? Here are four reasons that you can take into consideration if you’re considering changing brokers.
Fees and charges
When you make a trade, you cannot control if the share price goes up or down. But you can control how much you pay for a trade, and what fees you pay to access the platform.
If you make frequent trades, the fees can add up very quickly. Calculate how many trades you made last year and compare what the dealing charges would be with other platforms. Do the other platforms offer a frequent trader discount? Do they charge less on a higher trade amount? What are the fees on a £1,000 trade compared to a £5,000 trade? Are there any annual or quarterly charges?
By actually calculating the difference, you put yourself in a better position to make an informed decision with regard to different fee structures.
Keep in mind that low fees are just one piece of the puzzle to consider. Just because a platform has the lowest fees, doesn’t necessarily mean it is better or worse than a higher-fee platform.
Education and research
Your investor “type”, your experience level, and the sources you typically use for investment research may determine the platform that you choose.
If you are a beginner, you may choose a platform that offers some educational videos/webinars that can help you understand how the share market and the platform works. Extra free trades or a slightly lower dealing charge may not be worth sacrificing these resources. On the other hand, a more experienced investor may not worry about the education content on a platform.
At the same time, having access to good, reliable research is important for any investor. Quality research helps investors make informed, and hopefully better, decisions. Different platforms have access to different research providers, and this may be reflected in the fees that the broker charges. Information costs money, after all.
If it is likely that the broker will be your major source of information, then you may want a platform that can offer you the best research at a competitive price. If you source your research elsewhere (like The Motley Fool, for instance!), the cheaper platform that doesn’t offer any research or education could make more sense.
When considering the switch, if it may save you fees while costing you access to research and education that you rely on, then you may want to press pause. But if you can find a new broker that can potentially save you money and offer you additional research or education, then that’s great!
Platforms and tools
Do you prefer to use a desktop to place your trades and view your portfolio, or are you happier using a tablet or mobile phone?
In our connected world, most platforms will be accessible via multiple devices, but their usability on different devices could vary, and may influence your decision. Some platforms have high-quality share screeners that can help you narrow down investment ideas across many variables, while other platforms have more basic screeners with less functionality. Note making and journaling is slowly creeping into some platforms, so that you can review your investment decisions later on.
If you know that you want features that your current broker doesn’t offer, that can help push you to switch. But if you like certain features that your current broker offers, you better make sure the new broker offers them before making the jump.
Investment offerings
If you’ve ever felt constricted by the investment offerings at your broker, this could be a further enticement to make a switch.
What products does your current platform offer compared to its competitors? What markets do you invest in? Do you only go long equities or do you short, take options and puts or invest in ETF’s and funds? These are some of the questions you need to ask yourself when you are looking at changing trading brokers. If you are just investing in equities on the London Stock Exchange, then you may not need access to these other products and markets. But if you think that in the future you may want to trade these products and markets, then this may influence your decision.
Making the switch… or not
Is it just about cost and saving a few quid on dealing fees? Or do you want access to education and research, or certain markets and products?
Carefully considering the four factors above and make a list of what you want out of a platform. Work your way through each platform and make notes to see which one is best suited to you. When you narrow down the field, you may be able to take a trial on the account to see if it matches your expectations.
