Share dealers you can rely on

Whether you intend to buy and sell shares once a day or once a year, the share dealing service you use can make a significant difference to the value of your investment. But finding the right account isn't simply a case of picking the one if with the lowest charges. Exactly which service works best for you will come down to a variety of factors.

Your first consideration should be whether or not you want advice. Of the three types of share dealing service available, two - advisory and discretionary - come with advice, while the third (known as execution-only) is a straightforward trading service.

The size of your portfolio will also affect your decision. There are no minimum investment limits on execution-only services. An advisory service, however, typically requires an investment of at least £20,000, while for a discretionary service you'll need around £50,000 to get started.
You also need to think about tax. Your shareholdings will be liable to both tax on the dividends and, potentially, your gains, so if you've not already used your ISA allowance it's worth considering a self-select ISA in which you can invest up to £7,000 a year tax-free.
Execution-only services

If you're happy to pick your own investments, or you haven't got a large enough portfolio to qualify for an advice-based service, you'll need an execution-only service.

You can access execution-only services in a number of ways - over the phone, by post and face-to-face. However, online services are the most popular and cost-effective way of buying and selling shares. (Try Interactive Investor's Share Dealing centre)

Whatever type of service you opt for, the stockbroker will usually ask you to set up a nominee account. This is an electronic account that is held in your stockbroker's name. You retain all rights to ownership of the shares and will receive formal statements and valuations every six months, as well as being able to monitor your account 24 hours a day. You'll also be contacted whenever there are rights-issues, and any dividends will either be rolled up into your account or paid separately into your bank account.

Another key area to check when you're comparing accounts is whether you'll be able to access all the markets you're interested in. Most cover the UK markets, gilts, UK corporate bonds and unit trusts, but some also cater for more exotic tastes.

Tools are also an important consideration; such as portfolio tools, research, news and a virtual portfolio to give you a flavour of buying and selling shares.

How often you want to buy and sell is another crucial factor. If you're likely to trade regularly, you might benefit from an account designed specifically for you.

The dealing charge is one of the key charges to look at when comparing accounts. The internet has forced these down in the last few years and you can now pay as little as £7. Some providers will also offer preferential rates if you're happy to deal online.

Checking out charges
The dealing charge may not be the only charge you'll encounter, however, so it's prudent to weigh up all the charges when comparing services.

Many execution-only brokers levy an administration charge. This is often a set fee, which can range from £2.50 a quarter to £12.50. Other brokers charge a percentage of your portfolio, especially on ISA accounts.

Sometimes administration charges can be waived. Also look out for inactivity charges. You'll also pay stamp duty on any purchase. This is levied at 0.5% of the cost of the shares. And if you buy or sell shares worth more than £10,000 you will have to pay a fee of £1 to the panel of takeovers and mergers.

There may also be charges for certain requests. For example, if you take money out of your account you might be charged if you request a cheque rather than have it paid by BACS.
Likewise, if you want to move your account you might be hit with an administration charge. Most brokers charge between £10 and £20 for each holding you transfer to another broker, although your new broker may cover these costs for you.

Regular savings accounts

Another variant on the standard share dealing account is a regular savings account. There are a number of these available, including Interactive Investor's regular investment account.
The beauty of these accounts is that you can take advantage of bulk purchases, which pushes the dealing costs down significantly. Interactive Investor allows you to buy shares for just £1.50, plus stamp duty.

However, there is a downside. To achieve these discounted dealing charges, you need to commit to a regular purchase, which will be carried out with everyone else's purchase of the same share.
You can change the shares you buy each month, but you will not have any control over the timing of the purchase. You may want a slightly different service if all you want to do is sell some shares certificates that you've obtained through an employee share scheme, for example, or as the result of a privatisation. Although most share dealing accounts are set up with a nominee account, so everything is held electronically, it's still possible to trade paper certificates.

Getting advice

Although you might be able to obtain market and company information through the execution-only services, if you want tailored advice (and have sufficient funds) an advisory or discretionary service may be more appropriate. Advisory services, which require a portfolio of around £20,000, provide you with advice on your investments, allowing you to make a more informed decision about whether to buy or sell a particular share.

With the other form of managed account, the discretionary service, you leave all the investment decisions to your stockbroker. Minimum portfolios vary but you will generally need at least £50,000 for a discretionary service.

Once you're happy with the stockbroker who will look after your money you'll have an initial meeting to determine your investment objectives and attitude to risk. This will help your stockbroker tailor their investment advice to your requirements.

Every time a holding is bought or sold you'll receive a contract note, plus details of why the trade has taken place. You'll also receive a formal valuation every six months and a tax report at the beginning of the tax year.

On top of the dealing and nominee account charges incurred for running an account, you will also pay an additional management fee for a personalised advice-based service. This is usually a percentage of your portfolio, often between 0.25% and 0.75%, although this will usually be subject to minimum and maximum amounts.


Source：Yahoo! Finance