A share trade involves a broker or Investment Manager acting as the intermediary between buyers and sellers in return for commission.
So far, so simple. However, you need to do some research to ensure you get the right one for you.

Before considering how to buy shares, you should ask yourself a few key questions to identify the type of investor you are:

How often will you trade?

Every time you trade you will incur a commission charge (plus a tax called Stamp Duty). You should find out how much this is and whether it reduces when trading frequently.

What will you be trading?

Some investors are happy with a relatively narrow choice of shares, however, should you want to trade international shares plus perhaps other securities such as bonds and funds, pick a broker who offers them all.

Do you want share certificates?

These days share certificates are largely meaningless since legal ownership of shares is now recorded electronically on a register. That said, if you would still prefer to have shares certificates and/or hold shares in your name rather than that of your broker (as “nominee”) then ask about it and find out what it will cost.

Will you be buying using tax wrappers?

You can buy shares inside tax-efficient wrappers such as Individual Savings Accounts (ISAs) and Self-Invested Personal Pensions (SIPPs), or outside them. Find out whether your provider offers these services and at what cost.

How much help do you want?

Some investors are happy fending for themselves when it comes to investing, perhaps because they already have a decent level of knowledge and experience/ Plenty of others however prefer to seek help. How much will affect the type of broker you choose:


Some investors are happy fending for themselves when it comes to investing...

Execution-only (“XO”)

An XO broker does what it says on the tin – they purely exist to get trades done for you in return for a commission. They won’t offer you advice on how to buy shares or highlight the sensibly priced, good or bad equities available. As such, you can often execute XO trades online once you have gone through the broker’s regulatory checks and once you have set up the relevant payment method.

XO trading may suit anyone who wants to be a DIY investor and is happy to go it alone, perhaps because they are relatively experienced or happy to commit the time needed for successful investing. However, for other investors additional help is available.

Plenty of others however prefer to seek help...

Advisory services

Here your broker, or Investment Manager, may offer you two types of service. With an Advised Dealing service you will pay a bit more commission than on a pure XO dealing service but you will get stock-specific advice in return. For example, you may want to discuss a stock so that you can fully assess its strengths and weaknesses, weigh up alternatives and time your purchase or sale.

The next option is an Advised Portfolio service where you will not only get stock-specific advice but also wider guidance on your entire portfolio. For example, if you keep buying stocks in sectors that are geared to the oil price, you will pretty quickly end up with an unbalanced portfolio that is at risk of a sharp drop in value should the oil price collapse. With an Advised Portfolio your investment manager will be able to recommend changes that create a more balanced, less exposed and better diversified overall position. They will also be able to help you build a portfolio around important themes and trends, plus help you to make tactical moves in and out of different sectors and geographies.

Discretionary management

Here your investment manager takes full control over your money and makes the decisions about where to invest it and when, based on their own knowledge and experience. This is sometimes seen as the “lock up and leave” option for brand new investors, or more experienced ones who may not have the time, or inclination, to build and manage a share portfolio. Instead your Investment Manager will do all of the hard work for you and send you regular portfolio updates. Inevitably, the fees for this sort of “full service” tend to be higher than for say, pure XO.

To pre-order a complimentary copy of our new upcoming guide, How to Invest: An Introduction to Investing in Equities, please email us here.