Updates to UK stock brokers

There haven’t been many recent updates to the site due to a combination of other commitments and few major changes that I’m aware of among international stock brokers. However, we have seen a couple of UK stock brokers change their fees and this is likely to become more common in the run-up to the Retail Distribution Review and the ongoing Platform Review.

In particular, we are likely to see more providers introduce explicit account maintenance charges for both fund and share accounts, since they will no longer receive trail commission rebates from funds. The advantages and disadvantages of this change can be argued – certainly the improved transparency on exactly what clients are paying seems good – but it will probably mean a net increase in costs for smaller and less active accounts, which have traditionally been subsidised by the fees received on larger and more active ones.


Saxo Modern Wealth Management

[Update 06/10/12: Modern Wealth Management FX charge is confirmed to be 0.5%, in line with the regular Saxo account, not 1.5% (and is being waived until mid 2013) – not clear if this was an error in the original charges sheet or has subsequently been changed. See this update for other additional details of the service. There is also now a separate entry for Modern Wealth Management in the broker directory.]

Saxo Bank has expanded its services for UK investors with a new offering branded as Modern Wealth Management. As the name of the basic account – Saxo Invest – implies, this is aimed more at medium-to-long-term investors than Saxo’s traditional client base of traders.

On first glance, it’s a useful product, with a simpler front-end compared to the Saxo Trader platform and better options for tax-efficient investing. Unfortunately, there seems to be rather a large catch within the small print of the charges.


The best ISAs for international stocks 2012

The tables in this post have been updated with new fees and brokers in the Best ISAs for foreign stocks – October 2012 update.

[Updated 23/04/2012 to include the ISA available from Saxo Bank on its Modern Wealth Management platform]

As we saw previously, the mark-up that many stock brokers put on currency conversions can be a very significant extra cost when trading international shares. And while you can’t ignore these hidden fees at any time, they become an especially  awkward problem for UK investors who want to buy foreign stocks within an individual savings account (ISA) tax wrapper.

While the ISA rules allow a reasonably large number of overseas stocks, they do not allow you to hold any foreign currency – so you need to go through the conversion between sterling and foreign currency every time you trade. As a result, excessively high FX commissions can become costly even more quickly than usual.

So what are the most cost-effective ISAs for dealing in foreign stocks? The table below shows the charges for the main UK execution-only brokers that offer ISAs and allow foreign stocks in them. (Some major firms – eg Interactive Brokers – don’t offer an ISA at all, while others – eg Barclays Stockbrokers – currently only allow UK shares to be held in one.)


The hidden cost of currency conversions

When you’re trading international stocks, it’s not only the charge for buying the shares that matter. The charge for buying the foreign currency the shares are quoted in can also be very significant.

At some stock brokers, this FX commission can be higher than the commission on stocks. And many brokers try to make their rates look better by hiding it deep in the small print or even not mentioning it at all.

This is particularly a problem in the UK, although investors everywhere should watch out for it. For example, take TD Direct Investing (formerly TD Waterhouse UK). It charges a standard rate of £12.50 per trade for international stocks. On an investment of £1,000, that’s a commission of 1.25%. But TD Direct will also charge up to 2% over the interbank rate for converting your currency – almost twice the headline stock commission.

To be fair to TD Direct, it displays its currency charges more clearly than many rivals. But while they may be transparent, they’re certainly not trivial. Charges like that will mount up pretty quickly, especially if you’re an active trader. So minimising your FX commissions is an important part of keeping your costs down and improving returns.


UK CREST personal accounts comparison table

The UK stock brokers section now also has a comparison table for stock brokers that offer personal CREST accounts. If you’re unsure what personal CREST membership is, CREST is the UK’s central securities depository and you can find an explanation of why you might want a personal account there in the notes under the table.

There aren’t that many stock brokers that do this. The table lists the six main ones; some of the other traditional full service stock brokers may offer CREST membership as well, but are unlikely to be any cheaper. Other firms will be added if I get concrete details (many traditional brokers tend to be vague about fees, operating “by arrangement”, which makes compiling comparison tables awkward).

There is also one other small update to the UK listings, with the addition of HSBC InvestDirect/InvestDirect Plus to the stock broker directory.



UK stockbroker accounts for non-residents

One regular question about the UK online stockbrokers list and UK international stockbrokers list is whether any UK stockbrokers will open accounts for non-residents.

Generally, many of the UK stockbrokers are not very helpful on this score, due to a combination of money laundering regulations and a tendency to regard overseas clients as a hassle. (The same problem is true for non-residents wanting to open an UK bank account.)

There are a handful of UK stockbrokers that indicate they will deal with non-residents, but investors report different levels of success opening and using accounts. It may depend on whether you are a UK citizen but non-resident, whether you are neither a citizen nor a resident, whether you are resident in the European Union (EU) or European Economic Area (EEA), whether you have a UK bank account and even who you speak to at the company.

The following firms have been reported to open online trading accounts for at least some non-residents and are probably worth investigating first:


Small updates to UK stock broker details

There are a handful of small updates to some of the UK stock brokers in the stock broker directory and comparison tables, few of which have much impact on international investing.

1) Interactive Investor has now launched its own share dealing service (previously it was a white label of Halifax Share Dealing). The stock broker directory and comparison tables have been updated where relevant, but the company has not yet been given its own entry because this provider is of very limited interest from an international investing perspective and seems to be experiencing some severe teething problems with the new Interactive Investor service.

If it introduces any major improvements to the service – there is some talk of more countries being added – this will change.


Best Asian income investment trusts and ETFs

This is the second part of a review of Asian income funds and emerging market income funds for UK investors, focusing on investment trusts. Click here for Asian income funds – unit trust and oeics.

Asian income funds – investment trusts

There are three Asian income investment trusts in the UK market. And it shows how keen investors now are on the income theme that none trade at a significant discount to net asset value (NAV) – for most ITs, a small discount to NAV is normal.

The Aberdeen Asian Income Fund (LN:AAIF) has a rather different geographic focus to the funds we’ve already looked at in part one – it’s much more geared to Southeast Asia. Singapore is the single biggest holding at 20%, followed by Australia and then Malaysia and Thailand. It doesn’t include a sector breakdown in its factsheet, but I estimate that the biggest holdings are the familiar duo of financials and telecoms at 25% and 20% respectively


Best Asian income funds and emerging market income funds

Asian income funds and emerging market income funds may sound like a contradiction. After all, Asia and emerging markets are supposed to be growth investments. So why turn to a growth market for income?

In fact, Asian income and emerging market income are themes that make a lot of sense when choosing funds, for several reasons.

First, emerging market dividends are no myth. Many emerging markets stocks now have a culture of paying high dividends, so they make up a major part of investment returns in several countries. Dividends accounted for 30% of Asia ex Japan returns over the past decade – about the same as in developed markets.


International stock broker updates – Charles Stanley, Daniel Stewart, HMS Markets, Finasta, Orion Securities

There are a number of updates to the directory of international stock brokers. These include details of five more firms – two from the UK, one from Luxembourg and two from Lithuania – with a few more on the way.

Charles Stanley is a long established UK broker and it offers international stock trading for much of Asia, Greece, Poland and South Africa as well as the usual developed European and North American markets. This is a full-service private client stock broker, which means that fees are a little than the discount stock brokers and you’re probably looking at minimum trade sizes of £2,500-5,000 to be cost effective.

On the other hand, once you factor in better execution and other costs, firms such as these may be more cost-effective for larger international investments. For example, the currency conversion charges that most discount stock brokers charge should be far less with a good private client firm.