UK licensing and security
The world-renowned Financial Conduct Authority (FCA) is the UK’s licensing and regulatory body for all things financial, including stockbrokers. It was established in 2013 following the Financial Services Act (2012) and replaced the now-defunct Financial Services Authority (FSA).
The FCA has a robust regulatory framework and works towards these operational objectives:
- To secure an appropriate degree of protection for consumers
- To enhance market integrity and protect the UK financial system
- To promote competition in the interests of consumers
There are many excellent UK-regulated stockbrokers to choose from and for the average trader, really no good reason to look beyond them.
Stockbrokers all work differently and the ways they charge clients can be very different as well. As you have already seen, there are a variety of account options available, varying from self-service to full service. Let’s take a look at the fees on hand when trading online.
Trading stocks fees and costs
Regardless of the description the broker uses, it is a business after all, which must cover its costs and show a profit, so there will always be fees of some sort to pay. A commission-free brokerage will still charge you for certain services, including administration, currency exchange, deposit/withdrawal and software subscriptions.
As we explained earlier a full-service broker charges an all-inclusive fee, calculated as a percentage of your total portfolio value which usually equates to about 10%, payable monthly or quarterly. The middle, advisory option varies in terms of cost to maintain and may just be something you are offered free of charge as an added incentive if your portfolio is suitable.
In the UK, there are two taxes applicable to stock trading, Capital Gains Tax and Income Tax, which are both administered by HMRC (Her Majesty’s Revenue and Customs. Your liability will depend on whether you are classed as an ‘investor’ or a ‘trader’, based on any profit you make over and above the tax-free threshold. Tax for stock traders is a complex subject in the UK and we recommend that you keep accurate accounts related to all trading activities and consult an accountant if you have any doubts.
Finding the right stockbroker
It is entirely understandable that more experienced traders might opt for an offshore brokerage, due to the potential for tax savings. But the onus really is on the word experienced here. Before you start counting the extra profit, please be aware that some overseas licensing authorities offer little protection for investors under their jurisdiction.
Otherwise, UK stockbrokers come in a variety of shapes and sizes, offering various share purchasing opportunities and several different types of account. All you need to do is to find the one that is closest matched to your needs and of course, your budgetary constraints.
It’s important that you find an online broker that caters to all your trading needs. There’s no need to settle for a sub-par broker that does not provide the services you are after. As such, we’ve tailored a platform that caters to a range of different traders. Finding a top-notch platform should not be a hassle!