For far too long we British investors have been stiffed by excessive share dealing charges. The first wave of online pioneers provided a huge boost by enabling internet dealing and cutting charges per deal to the £10 level. But unlike in the US, we’ve not seen a more determined price war where prices are pushed below £5 a trade – or even lower. Even the best full-service platforms such as IG still peg their share dealing rates above the £5 level.
Some very small and frankly questionable operators have tried to push prices below this level but so far the only quality budget player is the excellent DeGiro – who I use. Their rates are by far and away the best rates on offer for what one can call a near full-service platform – they lack tax wrappers unlike bigger competitors such as HL and IG. Crucially DeGiro have also focused attention – like IG – on ETFs although slightly bizarrely their main low/free ETF service is focused on European and US-listed ETFs.
What we really need is a proper price war where some bigger competitors enter the market and push down prices – especially for ETFs. The first hint that this might be about to happen came this week with the news that the brilliant banking app Revolut is looking to launch a free share dealing service that will in effect be a mirror of the US Robin hood operation – free dealing for mainstream stock but a freemium service for other add-on services such as margin trading. No date has been given for the Revolut launch but my guess is that it probably won’t be out until next year.
In the meantime, though this week brought much more interesting news – eToro is in launching a share and ETf trading platform that won’t involve a dealing fee. Instead, their costs are incorporated into the dealing spread (0.09% per spread). Outfits such as DeGiro already incorporate dealing spread fees but they also make a dealing charge.
I’ve pasted in more blurb from the eToro release but I think this hugely important. eToro may be registered in Cyprus – and currently very focused on social trading and crypto copy funds – but they are an exciting, well-recognised brand that appeals to the millennial generation and active traders. Crucially if you want to run your own robo ETF portfolio, this service could be a huge plus – there’s nothing stopping you putting together a long term portfolio of cheap trackers and then sitting back and watch it grow (or collapse in value!). Why pay a robo between 30 and 75 basis points to do all the assembly of ETFs for you???
Anyway here’s the eToro press release, with the added ‘further notes’ at the end (I’ve done the bold highlighting at the end)….
Global investment platform eToro has announced that clients can now invest directly in shares on the platform. This means that for the first time investors can hold shares, cryptocurrencies, ETFs and thousands of other financial assets all in one portfolio. eToro will charge no ticket or management fees to users buying shares. The pricing is highly competitive and transparent as fees are included in the spread which is just 0.09% per side.* For UK shares, eToro will absorb stamp duty.**
Until now eToro has enabled users to invest in shares via a ‘contract for difference’ (CFD), meaning they have the option to apply leverage to their investments, or even take short positions. Now, users also have the option to own the underlying asset.
eToro users buying shares will be charged no ticket or management fees. The pricing is transparent as fees are included in the spread which is just 0.09% per side.
For UK shares, eToro will absorb stamp duty meaning costs will be particularly competitive. Stamp duty is charged at 0.5% on transactions over £1,000. With other investment platforms, a £10,000 investment in a UK listed company such as Lloyds Banking Group PLC (LLOY) usually incurs a £50 stamp duty charge for the investor (on top of the platform’s own fees and charges). On eToro the investor pays no stamp duty, and the total fee for investing is just £21.*
eToro users can:
- Buy shares with the cost of stamp duty excluded from the price
- Receive dividends on the ex-dividend date rather than waiting for issuance
- Enjoy instant execution & settlement at a fixed price
- Copy hundreds of Popular Investors and match their performance in the markets
- Invest in eToro’s specially curated CopyFund portfolios
- Apply leverage or open a short position to trade stocks via CFD.
Investors can also be charged:
- $25 withdrawal fee when removing funds from the platform
- Conversion fee (GBP/USD) of 50 pips when depositing and withdrawing funds from the platform
- When depositing accounts run 12 months without any login an inactivity fee of $10 per month may be charged against uninvested balances (no investments are closed to fund this charge), and the fee is only applicable if there are still funds in the available balance.
**eToro reserves the right to withdraw the practice of absorbing stamp duty in future.