Execution only - The broker will not provide you with any advice. This is the cheapest method of buying and selling shares. The Internet has dramatically reduced the price of this service.
Advisory dealing - Suitable if you wish to get advice from a broker but want to maintain control over your own investment decisions. You can expect this to be more expensive and some brokers only provide this service for transactions above a minimum amount.
'Full service', 'discretionary' or 'portfolio management' - Here the broker takes the responsibility for investment decisions. This is the most expensive form of brokerage. Brokers will generally insist upon a high minimum investment, typically between £50,000 and £100,000. With this service you are likely to get additional services such as tax advice etc.
Internet brokerage tends to be execution only. You may be able to link to your advisory or full service broker via the Internet to access research, perform valuations and execute transactions etc. Note that the information provided on most Internet broker's web-sites is for information only and cannot be relied upon as advice.
On-line brokerages are not necessarily cheaper. There are two types of dealing through the Internet. The first is merely an alternative route of sending your order to a broker - it may speed up the process but is unlikely to lead to lower costs. The broker will be required to obtain the best price but there will be a risk that prices move between you sending your order and it being executed. The second method allows you to access prices in real time at which point you can choose whether to trade. If you proceed the trade will be concluded immediately.
Points to Watch: Check that the Stockbroker is authorised. Unless it is, you will not be covered by the Financial Services Compensation Scheme should the broker go bankrupt or if you are badly advised. You can check whether a person or company is authorised and the business they are allowed to undertake at the following web-site www.fsa.gov.uk/register.
Read the terms and conditions of any contract thoroughly and compare charges and fees. A broker may ask for a deposit before setting up an account. Check the interest you will receive on it. Will you transact regularly or infrequently? Different brokers may be better suited to one or the other. Don't forget that stamp duty will be charged on purchases of shares at 0.5% of the share price.
General
Stockbrokers
Choosing Shares
