Amid the growing demand for ‘democratising’ investment, retail investors are spoilt for choice when it comes to the platforms on offer.
With platforms battling it out to offer the lowest price possible, top US broker Charles Schwab now wants a piece of the pie.
Investors can now use Charles Schwab’s platform to invest in US listed stocks with $0 commission for online trades and no sign-up fee, This Is Money can reveal.
Previously, investors were required to make a $25,000 minimum investment to use the platform.
Charles Schwab is looking to take advantage of the growing pool of DIY investors with the launch of its zero fee platform
Investors will not pay any fees for any online trades in listed US stocks or treasuries. Those looking to trade corporate and municipal bonds will pay $1 per bond while options trading will cost $0.65 per contract.
‘In the last five years, we’ve seen a really significant growth in UK investors using Schwab’s platform to trade the US… part of that growth has allowed us to reduce the minimum investment from $25,000 down to zero,’ Richard Flynn, UK managing director at Charles Schwab told This Is Money.
‘We have a number of US expat clients who find the service to be of immense value because all of Schwab’s trading and custody takes place in the US and so for them, it’s very attractive that their assets are not held outside of the US, which is useful for tax reporting purposes.’
How does the Charles Schwab platform work?
Unlike other investing platforms based in the UK, Charles Schwab’s platform trades only in US dollars.
‘For people who would have been using UK brokerages to trade US stocks and paying those FX rates, we feel there’s potentially significant advantages to trading US stocks through a US dollar platform,’ said Flynn.
Richard Flynn, UK managing director of Charles Schwab
‘And we hope that reducing this minimum would attract people to use Schwab for their US trading, whilst maybe using they’re continuing to use UK traders for their Sterling investments.’
You still need to convert your sterling before opening an account, but this does not have to be done exclusively with Charles Schwab.
As a UK taxpayer, you need to fill out a W-8 BEN form which confirms you’re not a US taxpayer.
Any dividends received on US stocks that you might hold in the account you pay a 15 per cent withholding tax against the dividend which can then be offset in your UK tax return.
You can open an account online by submitting some supporting documents, which includes your ID and a copy of a utility bill.
Once the account is open, you can fund your account and start investing.
How does Charles Schwab compare to other investing apps?
The market for low-cost investment platforms has become increasingly crowded in recent months.
Upstarts like Freetrade* and eToro* don’t charge any share dealing fees on shares, ETFs and investment trusts, although there are currency fees for buying US stocks.
While Charles Schwab’s platform trades in dollars, investors will still need to convert their cash and will incur any FX fees as a result.
This year Freetrade surpassed 1million subscribers due to its generous referral scheme and low cost plans.
Its basic plan offers a GIA, commission-free trades and US fractional shares for free but just 1,500 stocks are on offer.
Its standard plan costs £4.99 a month and customers can open a GIA and stocks and shares Isa, although this is a standard Isa and not the flexible one offered by CMC.
Freetrade also offers a Sipp for Plus customers, which costs £9.99 a month.
As share trading and investing has surged in popularity since the pandemic, a new generation of investors have been increasingly attracted to big name US shares.
An attractive part of the new DIY investing platforms like Freetrade is the chance for investors to snap up fractional shares: a way to back stock market juggernauts for a fraction of the cost of one share.
Fractional share investing lets investors own a piece of a share rather than one or more whole individual stocks.
The advantage is that these may otherwise be out of the reach of smaller investors, or require too big a chunk of an individual’s portfolio for it to remain diversified.
Flynn told This Is Money Charles Schwab was not currently offering fractional shares but would roll this out to investors later this year.
The platform is hoping to gain advantage by rolling out a range of educational resources over the course of 2023 and 2024 at no additional cost.
Flynn said: ‘With the retail investing boom, we think there’s a large market for people wanting help. They don’t necessarily want guidance or advice or recommendations.
‘They want help to make their own investment decisions and to get the most out of a platform such as the one that Schwab can provide.’
Compare the best DIY investing platforms and stocks & shares Isa
Investing online is simple, cheap and can be done from your computer, tablet or phone at a time and place that suits you.
When it comes to choosing a DIY investing platform, stocks & shares Isa or a general investing account, the range of options might seem overwhelming.
Every provider has a slightly different offering, charging more or less for trading or holding shares and giving access to a different range of stocks, funds and investment trusts.
When weighing up the right one for you, it’s important to to look at the service that it offers, along with administration charges and dealing fees, plus any other extra costs.
To help you compare investment accounts, we’ve crunched the facts and pulled together a comprehensive guide to choosing the best and cheapest investing account for you.
We highlight the main players in the table below but would advise doing your own research and considering the points in our full guide linked here.
>> This is Money’s full guide to the best investing platforms and Isas
Platforms featured below are independently selected by This is Money’s specialist journalists. If you open an account using links which have an asterisk, This is Money will earn an affiliate commission. We do not allow this to affect our editorial independence.
| Admin charge | Charges notes | Fund dealing | Standard share, trust, ETF dealing | Regular investing | Dividend reinvestment | ||
|---|---|---|---|---|---|---|---|
| AJ Bell | 0.25% | Max £3.50 per month for shares, trusts, ETFs. | £1.50 | £9.95 | £1.50 | £1.50 per deal | More details |
| Bestinvest* | 0.40% (0.2% for ready made portfolios) | Account fee cut to 0.2% for ready made investments | Free | £4.95 | Free for funds | Free for income funds | More details |
| Charles Stanley Direct | 0.35% | No platform fee on shares if a trade in that month and annual max of £240 | Free | £11.50 | n/a | n/a | More details |
| Fidelity* | 0.35% on funds | £45 fee up to £7,500. Max £45 per year for shares, trusts, ETFs | Free | £10 | Free funds £1.50 shares, trusts ETFs | £1.50 | More details |
| Hargreaves Lansdown* | 0.45% | Capped at £45 for shares, trusts, ETFs | Free | £11.95 | £1.50 | 1% (£1 min, £10 max) | More details |
| Interactive Investor* | £9.99 per month or £12.99 for Sipp | £5.99 per month back in trading credit | £5.99 | £5.99 | Free | £0.99 | More details |
| iWeb | £100 one-off | £5 | £5 | n/a | 2%, max £5 | More details | |
| Freetrade* | Free for standard account £3 month for Isa | Freetrade Plus with more investments is £9.99/month inc. Isa fee | No funds | Free | n/a | n/a | More details |
| Vanguard | 0.15% | Only Vanguard funds | Free | Free only Vanguard ETFs | Free | n/a | More details |
| (Source: ThisisMoney.co.uk June 2022. Admin charges quoted annually, may be monthly or quarterly) |
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