Trading platforms are, very simply put, a digital hub that allows you to to buy stocks and shares in real-time, 24 hours a day. If only choosing a trading platform were that simple though…right?! Because the truth is, it isn’t easy. There are hundreds of trading options available, some with stocks and shares ISA options, some with pensions and some without. It’s a jungle to navigate and can put many people from taking the plunge.
Which is why establishing the key differences between these types of trading platforms, followed by figuring out what you want, is going to be key to picking the right trading platform for you.
At the end of the day, choosing your trading platform is a very personal and important decision that heavily depends on your own priorities. It will be unique to you, so don’t be afraid to do your research and homework, because with the right knowledge, you’ll feel confident to back your decision.
So where do you start? We’re here to break down the different options available to you and how to weigh up which trading platform is for you.
Stocks & Shares ISA vs General Investment Account
First up, it’s key to understand the difference between the two accounts. If you’re a UK resident and tax payer, you’re entitled to £20,000 worth of savings into ISAs, which can be spread across the different types of ISAs.
The key benefit if you opt for the Stocks & Shares ISA for your trading and investing is that you won’t need to pay tax on any dividends or capital gains (basically growth on investments) - a great way to protect your wealth.
If you go for the General Investment Account (GIA) you may need to pay taxes on dividends and capital gains if you exceed permitted tax allowances.
Some platforms will have both options available. If you’re wondering why this is, there’s a few scenarios in which one might be a clearer winner than the other.
If you’re not a UK resident, or planning to move in the near future, the ISA might not be appropriate.
If you have also used all of your ISA allowances, you might need to move onto the General Investment Account to continue investing and trading.
Finally, if you’re investing relatively small amounts, the tax allowances might mean that you’re not due any tax on your investments, even within a General Investment Account.
We’re going to cover off some of the big names that you might see on your trading platform hunt. All of these have both the ISA and General Investment Account available, it’s just about choosing which one is right for you. Yep, that’s another decision you need to make!
Choosing the right platform is a personal decision.
How do I decide what’s right for me?
It sounds obvious, but a simple Google search is a good place to start when looking for the various platforms out there. But be warned, it will produce hundreds of results, with endless facts, figures and reviews. You probably know that already, and that’s probably why you’ve landed yourself here.
So when being faced with an endless amount of options, how do you pick which name might be the one for you?
When you’re thinking about choosing a trading platform you need to consider your personal situation in relation to these five points:
Each trading platform will have a different range of investments available. Some will have only stocks, others only ETFs, whilst some will have thousands of funds, ETFs and stocks from multiple countries. You need to consider what you want from your investing, and don’t be afraid to say a restricted choice might actually help with the vast quantity of overwhelm in your investing journey.
2. Costs and fees
Trading platforms will vary greatly in the amount they charge. But here’s for some bad news – there is no such thing as a free platform. That being said, the fees that are charged are (hopefully) going towards improving features that the platform has, like the range of investments, the user experience and the ongoing regulation needed to have a platform that is safe and secure.
It’s important to note, however, that everyone has a different budget and will be investing different amounts. This means that you need to assess your own budget in relation to the platforms to work out what is an acceptable level and what you can afford to pay.
Let's take a quick look at the costs or fees that you might be coming up against:
- Annual/platform fees: Most platforms will charge an ‘annual’ or ‘platform’ fee often charged monthly to cover the cost of running the platform and managing your investments. These fees can be fixed or a percentage of the value of your holding, and more often than not they’re taken monthly.
- Dealing/trading fees: When you buy or sell investments you may have to pay a fee. Some platforms offer a certain number of free trades a month, others don’t charge at all.
- Subscription fees: Some platforms offer monthly subscriptions in lieu of platform or trading fees.
- FX fees: If buying or selling investments outside your local market, you will have to pay a foreign exchange fee.
- Other fees: Some (but not all) platforms charge withdrawal fees for when you want to cash out, inactivity fees if you don’t make a certain number of transactions a month and management fees if you hold funds rather than shares in your portfolio.
3. Minimum deposit
On the back of this conversation about charges and whilst you’ve got budget in mind, many platforms will have a required minimum contribution. This can be as little as £1 and can be all the way up to £1,000 (or even more).
Only you will know how much you’re planning to invest and how much is appropriate for your budget. So make sure your platform is going to match up with your financial plan.
Let’s be honest, there is nothing worse than finishing a long day at work, only to commence battle number two of the day: navigating your way through a jungle to get to your investments. For some who spend all day in tech, usability might not be such a worry. But we all have our own preferences, skills and experience, so make sure that your trading platform is easy and fun to use. Don’t make it a battle.
Key things to look out for when considering usability are the app and or desktop abilities, investor support, dashboard view, investment filter features and any additional research tools that they offer.
5. Inclusivity and ethics
Last but not least, the way that the platform is run may well need to be factored into your journey. Because if you want to be investing sustainably, but the range of investments only has two or three named sustainable funds, this isn’t going to be the dream match. Dig around and do some research.
What’s the percentage of women in leadership positions? How many women make up the wider team? Do they have any dedicated areas to sustainability? What is their social impact? If you’re religious, do they have investments that align with your faith? It’s important to marry your investments up with your values – the same goes for the trading platform you choose.
Platform deep dive
It’s all very well having your personal situation set up, but actually finding some of the trading platform names that work and are trustworthy is the next big hurdle to cross. This is an extra task, but we’ve got a breakdown of those big names and put them into categories. This gives you an idea of platforms that might be similar to one another, as well as the ones that might work best for you.
Big trading names:
They’ve been around for a while, they’ve usually got quite a big range but not always the cheapest on the market.
Examples include: AJ Bell, Hargreaves Lansdown, Interactive Investor, Money Farm
Banks and insurers:
You might have other products like pensions or bank accounts with them already, it doesn’t mean they’re the most specialised in trading but they have a certain reputational pull.
Examples include: Aviva, Barclays, Fineco, Fidelity, iWEB, Lloyds, SaxoMarkets
Fintech app based:
These are the new kids on the block, they’ve emerged as our finances have become ever more online. They’re often app based only and usually quite friendly on the wallet, but don’t always have the biggest range of investments.
Examples include: Degiro*, E-Toro* Freetrade,Lightyear, Moneybox
*Note: Degiro and E- Toro don’t currently have an ISA option
If you want to cut down on the vast quantity of investments available, some platforms only offer their own funds or one category, like ETFs. This usually works out as lower cost but doesn’t give you flexibility down the line.
Examples include: Best Invest, Invest Engine, Vanguard
US nationals compatible:
If you’re a US dual citizen or expat, finding a platform that will accept you can be tricky.
Examples include: Charles Schwab, iDealing,Money Farm, Selftrade
Is there anything else that I should know about when choosing a trading platform?
Ah yes, the last few things to think about before taking the leap into trading.
Firstly, it’s worth pointing out that these trading platforms are all about choosing your own investments, rather than handing the management over to a robo-adviser or a managed portfolio.
Secondly, having thought about reputation, making a note of relevant protections in the UK will save you some sleepless nights. If the platform is located and regulated in the UK, it will be covered by the FSCS scheme, which protects investors from the platform or bank going bust.
You will be able to recover up to £85,000 in this scenario, so if your savings are greatly in excess of this amount, it could be worth considering having multiple. Under this amount, your protections are still in place.
Lastly, remember that the platform decision you make might be different to your colleague, your friend or even your partner. This doesn’t mean that one of you has made the right or wrong decision about which trading platform to use. It simply means that you have chosen the platform that works best for you.
Please note: Information provided on this article is for guidance only and should not be deemed as financial advice. If in doubt, seek professional advice from an FCA regulated advisor. All financial investments involve an element of risk. The value of your investment may fall as well as rise and you may get back less than your initial investment.
Cryptocurrency is not regulated by the UK Financial Conduct Authority and is not subject to protection under the UK Financial Services Compensation Scheme or within the scope of jurisdiction of the UK Financial Ombudsman Service. Investing in cryptocurrency comes with risk and cryptocurrency may gain in value, or lose some or all value. Capital gains tax may be applicable to profits from cryptocurrency sales.