Are you looking to start your investment journey by finding the best UK stock brokers of 2020? If so, you’ve certainly come to the right place. Take note, the online stocks and shares arena can often feel like the Wild West, not least because the industry is now home to hundreds of platforms.
The key is finding a stock broker platform that is right for you. This might be a broker that lists thousands of shares across multiple markets, or a platform that offers super-low trading fees. Either way, we’ve got you covered.
Within our guide on the Best UK Stock Brokers of 2020, we’ll start by explaining what a stock broker actually is and how they work. After that, we’ll then list the best UK brokers currently active in the market. We’ll also give you some handy tips on the factors you need to look out for prior to joining a new platform.
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Best UK Stock Brokers 2020 – Best Brokers Compared
Who are the best stock brokers in 2020 and who wins the UK stock broker comparison?
If you’re a newbie investor, then we would suggest using one of the following online stock brokers, most of which also offer investing apps to facilitate your trading experience.
Best CFD Stock Broker
CFDs allow you to perform a range of trades that traditional stocks do not allow. Crucially, they give you the ability to go short on a company, meaning that you will make a profit if the price of the stock goes down. Here's our top pick for the best CFD stock broker in the UK.
Best Stock Brokers for Reputation
If your main concern is choosing a UK stock broker with an impeccable reputation, you'll likely need to stick with an established platform. Although such brokers provide a first-grade service with heaps of trading and research tools, you will likely encounter higher fees. Nevertheless, here's our list of the best UK stock brokers for reputation.
How We Rank Online Stock Brokers
With hundreds of UK-based stock brokers now active in the market, knowing which platform to go with is not easy. As such, we have a very strict criteria in place to ensure that platforms meet our super-high standards. If they don't, they simply don't make our list.
Below we have listed the main metrics that we look for when reviewing a new broker.
What is a Stock Broker? Stockbroker Definition
In its most basic form, a stock broker is simply a third-party between you and a publically listed company. In other words, a stock broker allows you to buy and sell shares with ease. In a time not so long ago, you would be required to call your stock broker up over the telephone and place a manual trade.
The vast majority of brokers would also be required to physically buy and sell shares on the trading floor. This is what may newbie investors picture when they think of the traditional stock trading arena.
However, fast forward to 2020 and things are a lot different. The industry is now dominated by cutting-edge technologies, meaning that you can buy shares at the click of a button. Not only does this include a desktop computer, but mobile trading is also a thing.
When it comes to actually buying a stock, all you need to do is open an account with an online broker, deposit some funds, and choose the company that you wish to back. Once you have decided how much you want to invest, the stock broker platform will typically execute the trade instantly. In terms of selling your shares, the process is exactly the same but in reverse.
How do online stock brokers work?
Below we have outlined a more in-depth overview of how stock broker platforms work.
✔️ Once you have found a stock broker platform that meets your needs, you will need to open an account. If you're an everyday retail trader, you should be able to do this in a matter of minutes. You'll need to provide the broker with some information about your identity, such as your full name, home address, date of birth, national insurance number, and contact details. You will also need to answer some questions about your experience in trading.
✔️ You will then need to go through a KYC (Know Your Customer) process. This is to ensure that the stock broker complies with UK and EU laws on anti-money laundering. You simply need to upload a clear copy of your government-issued ID, which can be either a passport or driver's license. Most platforms can verify the document automatically.
✔️ Once your account is verified, you will then need to make a deposit. Most online stock brokers allow you to deposit funds with a local bank account. The best brokers will also support debit/credit cards and e-wallets like PayPal, Neteller, and Skrill.
✔️ Now that you've funded your account, you are ready to buy some stocks and shares. You will need to search for the company that you wish to back, and then decide how much you want to invest. There is no longer a need to purchase whole shares, as stock brokers can split the difference with other investors on the platform.
✔️ Once you have purchased your shares, you will then be entitled to dividends (if applicable). You can sell your shares at any given time. If you try to sell them outside of standard trading hours, you will need to wait until the market reopens in the morning.
How do Stock Broker Fees Work?
? Stockbrokers are in the business of making money, so you will need to pay a trading fee when you buy and sell shares. Some brokers will charge you every time you trade, meaning you'll pay a flat fee at both ends of the transaction. This is beneficial if you are planning to trade large volumes.
? If you are trading small amounts, then you are best off choosing a broker that charges fees on a percentage basis. For example, if the broker charges 0.5% per trade, and you purchase £300 worth of shares, you will pay £1.50 per trade. Once again, you'll need to pay this when you buy and sell your shares.
? A number of new-age platforms operating in the market now allow you to purchase shares on a commission-free basis. While most of these are in the form of CFDs (contract-for-difference), brokers like eToro allow you to own the share outright. This means that the only fee you will end up paying is the spread.
? You also need to make considerations regarding deposit and withdrawal fees. While most UK stock brokers allow you to fund your account for free, this isn't always the case. As such, check to see whether certain payment methods attract a fee, and whether there is a minimum withdrawal amount in place.
What Types of UK Stock Broker Accounts are There?
If you're just an everyday trader that is looking to buy shares in the traditional sense, you'll just need to open a standard cash account. This means that you can only buy stocks to an amount equal or less to what you have in your account. This is the most sensible option if you are just starting out.
If you have a slightly higher appetite for risk, then you might consider opening a margin account. This will allow you to trade with leverage, meaning that you can trade with more money than you actually have in your account. Take note, margin trading is especially risky. If your trade is liquidated because the trade went against you, you'll lose your entire stake.
A CFD account is ideal if you are looking to place more sophisticated trades. For example, CFDs allow you to go short on a stock, meaning that you are speculating on the asset going down in value. CFDs are also easier to trade, as you will never have any concerns regarding liquidity. Finally, CFD platforms are often fee-free, as the underlying asset does not actually exist.
A Stocks and Shares ISA account allows you to invest in stocks as you normally would. The key difference is that you can protect some of your profits from tax. In fact, the 2019/20 tax year permits up to £20,000 in capital gains before capital gains tax is due, so it's well worth opening an ISA account at your respective stock broker.
Factors to Consider When Choosing an Online Stock Broker
- Account minimum – Most UK stock brokers will require you to make a minimum deposit. The specific amount will vary depending on the platform. While some will allow you to get started from just £10, others will require £100 or more
- Fees or commissions – It is crucial that you are aware of the fee structure at your chosen stock broker. This should include deposit and withdrawal fees, trading fees, and funding fees. Most brokers are upfront about what they charge, while others aren’t.
- Availability of stock analysis tools – You should also assess what research tools the platform provides. At a minimum, this should include fundamental analysis on certain stocks, and technical indicators for those of you that like reading charts.
- Customer service and support – A fully-fledged customer support department is crucial in the online stock space. Stick with platforms that offer 24/7 customer service across multiple channels. This should include telephone support, email, and live chat.
If you've read our guide on the Best UK Stock Brokers of 2020, you'll know first-hand just how difficult it is to find a suitable platform. While some of our readers look for brokers with the cheapest fees, others prefer to stick with established platforms with decades of experience. Either way, you are now armed with the required knowledge to go and find a suitable UK stock broker.
Ultimately, you need to ensure that the broker is in receipt of the required regulatory licenses, and that it does not have any hidden fees. Moreover, it's also important that the broker puts the customer experience at the heart of everything, and that trades are executed in good faith.
What is a stock broker platform?
A stock broker platform is an online trading arena that allows you to buy and sell shares at the click of a button. Everything at an online broker is automated via cutting-edge technologies, so there is no longer a requirement to speak with somebody over to phone to trade!
Do I need to choose my own investments?
You will be required to choose your investments when using an online stock broker. Platforms will not be able to give you any advice unless they are legally qualified to do so. If you do want somebody to manage investments on your behalf, you will need to go with a mutual fund.
What is the minimum deposit required at a stock broker?
This will depend on the broker in question. While some brokers require a minimum deposit of £100 or more, others allow you to get started with just £10.
Are UK stock brokers regulated?
All stock brokers operating in the UK must be regulated by the FCA. This ensures that the platform operates within the law, and that it utilizes segregated bank accounts for client funds.
Should I trade with leverage if I am confident about an investment?
Leverage allows you to trade with more money than you have in your stock broker account. While this can amplify your profits, it can also amplify your losses. As such, you should only trade with leverage if you are an experienced investor and you know how to set up sensible stop losses.
What if I need to cash my stock investments out quickly?
You can sell your investments at any given time during standard market hours. The specific hours will depend on the stock market the shares are listed on. If you try to sell the shares outside of standard trading hours, you will need to wait until the markets reopen.
Will I receive dividends at an online stock broker?
Stock brokers are legally required to distribute dividend payments as soon as they receive them from the respective institution. Don't forget, if you're trading CFDs, you won't be entitled to dividends as you do not own the underlying asset.