Saturday 20 January 2018

Foreign companies break online trading stranglehold, but costs remain high

Thomas Molloy

THE internet has removed much of the mystique surrounding stockbrokers, allowing a new generation of small investors to trade from their kitchens and bedrooms.

This has become so commonplace that it is hard to remember that the first stockbroker to offer such a service to Irish customers was NCB, who were the first Irish broker to allow clients to buy and sell shares online for a minimum charge of £40 just 12 years ago.

Today, prices at some internet brokers are much lower and internet trading has moved from novelty status to the norm although most Irish brokers' minimum charges remain high when compared to their counterparts overseas.

Fexco, once one of the cheapest Irish-owned executive only brokers, hiked fees back in 2002 and now charges a minimum commission of €25 per trade for Irish shares as well as a host of administration charges to hold shares. Over at Goodbody, the minimum charge is €32, as well as €26 a year to keep an account open and €40 to close an account.

At Davy, the minimum charge is €25, although keeping that account open for a year costs €80. National Irish Bank offers an account which allows you to buy and sell shares online, although it demands that customers hold a current account. There is a minimum commission of just €20 and no annual fee on the NIB account.

The smaller brokers all charge large minimum fees, with NCB charging a minimum commission of €100, Bloxham charging €75 and Dolmen charging at least €55.

The good news is that the established Irish brokers no longer have a stranglehold on the local market and several new companies offer cheap access to buying and selling shares here and overseas.

Among the cheapest foreign companies offering trades to Irish residents is TD Waterhouse, which charges a flat fee of just €20 for any trade under €100,000 (and even less for frequent traders) on more than 10 stock exchanges around the world.

The only real snag for those using the Canadian trader, which has an 'AAA' rating from Moody's, is the annual account management fee, which is a hefty €60 a year. While TD Waterhouse is execution only, it also offers good access to data from the likes of Morningstar and Dow Jones as well as cheap access to most of the world's larger stock markets.

Giving TD Waterhouse a run for its money on the cost front is Sharewatch, an Irish online trader, which has a minimum charge of €19.95 for Irish trades and just €14.95 for UK trades, making it an obvious choice for those interested in buying small quantities of UK shares -- although there has been some criticism of the site's reliability during busy periods and lack of information on individual companies. Management charges are €60 a year.

While minimum charges are one way of calculating costs, there are a many other hidden fees, such as foreign settlement fees, commission on foreign equities and the like which make true comparisons almost impossible.

Still, the general consensus appears to be that TD Waterhouse offers the cheapest service for those willing to use nominee accounts (rather than CREST) and trade with a foreign company while Davy is probably cheapest for small investors who want an Irish broker with offices here and who are happy to stick to online trades.

Anybody who wants to trade over the telephone or anybody who wants more than an execution-only service would need to investigate the costs because each brokerage offers completely different price structures for these trades which mean that it can be much more expensive to use their services.

Irish Independent

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