Which discount broker is the best value?

Keeping recurring costs down is important and investment fees are no different. Below, I’ve broken down the different fee structures for three of the top discount brokers. They each have different charges and each suit a different type of investor. It’s up to you decide which is your best fit.

Disclaimer - I am not a financial advisor and you should make your own independent judgement based on your own personal circumstances. I have made every effort that the information provided is clear and correct but it is provided without a warranty or guarantee that it is so. To make the best choice, you should always do your own research and I’ve provided links to each company’s own site and fee page. It is also recommended that you seek out a certified financial advisor before making any major investment decision.

De Giro

For Buy and Hold Investors

Fees

De Giro is a Dutch broker, and famous for their low transaction fees. Irish shares are €2 per trade, most European are €4 and US shares are just €0.5. Whilst it has no monthly fee for most users, there is also a very low annual charge of 0.25% (capped at €2.50) for each non-Irish exchange you trade on.
It is worth knowing as well that all prices are 15 minutes delayed. You can pay to get a realtime feed but this is then an extra monthly fee. When buying or selling, it’s generaly a good idea to place a limit order, what this means is that the price executed is atleast as good as what you have chosen. Following this practice will ensure that delayed pricing is then not such an isue as you can be sure of the price you’ll pay.

Custody or Basic?

A common practice in finance is to lend and borrow stocks; where the lender charges a rent to the borrower, and the borrower can then short the stock. This highlights the difference between Basic and Custody.
Under Basic, De Giro may lend any stocks you hold and keep any income made.
Under custody your share holdings are never lent out but in return De Giro charges a higher fee for handling dividends. Other fees are broadly the same.
It’s up to you, but you are unlikely to notice the difference as De Giro will handle any loaning invisibly in the background. You can still buy and sell as freely as you would in any circumstance.

Coverage

Worldwide exchanges and products supported so you can buy European, Emerging Market and US stocks and ETFs. Currency conversion adds a 0.1% fee, which adds up and will likely be the largest part of any fee on large size orders.

Ease of Use

The app and online platform are both great, very modern and straightforward. There’s genuine effort to educate the user as they use the app or site, with helpful tooltips to explain terms used.

Non-Equity Products

There is an extra €5 monthly fee for trading US option derivatives, however unless you are a very experienced investor this should not concern you. It is not possible to trade Forex on De Giro.

Interactive Brokers

For Active Traders

Fees

Interactive Brokers transaction fees are extremely low, around ~€1.25 per European trade and ~$0.35 for a US trade - on the tiered plan. The major difference versus other brokers is a monthly minimum fee of $10 per month. In practice this means; pay twice (or not at all) in a month and you’ll still be charged $10 for the month; trade 15 times in the month and you’ll be charged ~$15. There’s no rolling of unused credit to the next month so the minimum yearly charge is $120. The first 3 months have no minimum fee and this is extended if you are under 25 or have more than $100,000 in your account.
Fees for other bits and pieces are very low. You can obtain a realtime price snapshot for a few cents and currency exchange is via forex trading so also extremely cheap. Converting anything less than $100,000 costs just $2 and anything more than that is charged at 0.0015%.

Tiered or Fixed Pricing?

There are 2 pricing structures, fixed and tiered. Tiered scales with amount traded whilst fixed is higher, but agnostic of the trade size. As an average investor in Europe you almost certainly need to chose tiered. You should look at the fee structure yourself at the link provided but I’d be impressed if you are trading the volumes required to make fixed worth it. It’s not the default but you can go to account settings to make the change there.

Coverage

Worldwide exchanges and products are supported so, as with De Giro, you can buy any European, Emerging Market or US product.

Ease of Use

Overall, I found the sign up for Interactive Brokers to be the easiest.
One particularly nice feature is the easy regulatory reporting. If you work for a financial intitution and so have reporting requirements then IB have streamlined the setup; rather than requiring a tedious email with customer services there’s a simple form when you sign up.
With a system geared towards active traders, greater freedom is afforded to the user but this may not be for all. For instance buying a US stock is cheaper, but you’ll need to manually convert some euros to dollars, and then use those for the share purchase. Originating in 2001, IB is the oldest of the three, and as such the app and website do feel a little dated alongside the others.
And finally, there’s some irritating hand-holding - you’ll receive a warning when making an order worth more than 3% of your total; another if you are working on delayed market data should get a snapshot. I’m sure there are ways to adjust or disable these popups but I haven’t found them.

Non-Equity Products

There is ample scope to trade options and bonds on the platform and fees are very low, around €1 a trade. You can also trade currencies as if they were any other asset; with limit orders or otherwise. I would however warn here that IB are very cautious in giving the ability to trade non-equity products; as with all brokers one must do an online aptitude quiz, but IB’s is the most stringent.

Freetrade

For Small, Local Currency Trades

Fees

As the name suggests, provided the trade is in local currency, there are no transaction fees and no monthly minimum charges.
However this is not the whole story. With Freetrade there is limited price transparency, you can see what the price was 15 minutes ago, but you can only choose ‘Buy Now’ or ‘Sell Now’. What this amounts to is submitting a market order blind. A potentially dangerous proposition as with 15 minutes having passed, the price could be far worse now than what you were willing to pay when you clicked.
Trading a non locally denominated share is not free. 0.45% is the currency exchange fee. That’s 4.5 times higher than De Giro and potentially 225 times the Interactive Brokers rate. It’s therefore only realy worth going for Freetrade if you’re trading such small amounts that a €4 transaction fee from one of the other brokers would be more than 1% of your investment.

Ease of Use

There is no website to trade on, so you are limited to the app only, but it is extremely easy to use. With only buy and sell there are not many places to go wrong.
There are no advanced or even intermediate features one would expect from a broker. There are no limit orders, but also there’s no ability to setup trade regulatory reporting. This makes it very difficult to trade with if you are an employee of a financially regulated trading company.
I would say that customer service was the most responsive of the brokers I investigated. Unfortunate then that the reply was mostly “Apologies, we don’t support that…".

Coverage

Only shares and ETFs are supported, and even then not all of them. Major names, especially US ones, are covered but do not be surprised if your slightly off the radar pick does not appear. They have recently added support for fractional trading; furthering their focus on the casual, small sum investor.

Summary

If you’ve skipped to the end to get the quick answer then place yourself in one of the below categories:

  • Buy and Hold - De Giro - This is the Warren Buffet mantra. Buying and holding for the long haul. You make a handful of trades a year and nothing more complex than Stocks or ETFs.
  • Active Trader - Interactive Brokers - Trading several times a month and potentially options and forex too.

Monthly charge breakdowns by Broker

I’ve attempted below to calculate the costs with various monthly trading amounts. I have used the fee tables but treat these as ballpark figures rather than exact calculations. I’ve taken $1 = €0.90.

Once a month, trading €500 in shares of a German stock

Broker Transaction Fees Currency Fees Monthly Charge Total
De Giro € 4.25 € - € 0.21 € 4.46
Interactive Brokers € 1.25 € - € 7.75 € 9.00
Freetrade € - € - € - € -

Once a month, trading €500 in shares of a German stock and $500 in a US stock

Broker Transaction Fees Currency Fees Monthly Charge Total
De Giro € 4.76 € 0.50 € 0.42 € 5.68
Interactive Brokers € 1.60 € 1.80 € 5.60 € 9.00
Freetrade € - € 2.25 € - € 2.25

Twice a month, trading €1000 in shares of a German stock and $1000 in a US stock

Broker Transaction Fees Currency Fees Monthly Charge Total
De Giro € 10.02 € 2.00 € 0.42 € 12.44
Interactive Brokers € 3.20 € 1.80 € 4.00 € 9.00
Freetrade € - € 9.00 € - € 9.00

Overall the active trading frequency cutoff is about 3 times a month, every month. Trade less than that and you’ll save money with De Giro vs the $10 minimum monthly charge with Interactive Brokers.

An interesting potentially hidden difference between the three are the currency conversion charges. The $2 floor for Interactive brokers makes De Giro cheaper on non-euro trades up to $2000, but past that it’s better to go with IB. A $100,000 trade with De Giro would cost $100 in currency exchange alone, vs just $2 with Interactive Brokers. A $100,000 US share purchase with Freetrade would cost a staggering $450.

A Note on Spread Bets and CFDs

Some of these agencies boast low or even free share purchases. Don’t be fooled, this is way to reel you in so they can push leveraged spread bets and CFDs.
81% of new users lose money on this platform. This is the ad that appeared in Connolly station last year. The losses they refer to are mostly down to the fairly astronomical fees on their leveraged products. Be aware that trading turbos and leveraged 3x CFDs are much riskier than a straightforward share purchase. Look to invest, not gamble.