London Stock Exchange Stockbroker Charges - What Are They?London Stock Exchange stockbroker charges are largely influenced by tow main factors. These are the type of service on offer and the stocks and shares being dealt in. The regulations imposed by the Financial Services and Markets Act (2000) forces stockbrokers and other professional advisers to inform clients of the charges being made. Contract notes, which display the nature of stock broker charges being made must be issued 'promptly' which usually means the same day as the trade. Clients and advisers must have a written agreement so that there is no doubt as to what is required and being offered. There are essentially three different levels of service and therefore multiple possible London Stock Exchange stockbroker charges. The service levels are: Discretionary management Advisory management Execution only
Services like this can be fee or commission based. It is quite common for the manager to charge a fee based on the value of funds being managed. This fee will often be a percentage (eg. 1% pa). Commissions may also then be charged on each transaction. Advisory management is a service where an adviser discusses or reviews the investments of a client on a regular basis or as required. This could relate to formal portfolio management or trading in individual shares. The client will make the final decision to buy or sell. The adviser will normally supply research materials relating to markets, sectors and individual firms. Such services used to be the norm but now are, happily, rare. Very few investors have the time or relevant expertise to appraise investment decisions and even less are willing to pay for the service! Finally, execution only is a 'dealing only' service where no advice is offered. This means that the investor bears all responsibility regarding investment decisions. The instructions to deal are usually made online or by telephone. The service is commission based and usually very low cost to the investor is now the mainstay of most stockbrokers. Commission rates vary (as noted above) depending upon what sort of security is being bought or sold. The largest fees generally relate to foreign stocks and convertibles. Government securities (gilts), loan stocks (a type of bond or debt instrument) and PIBS (permanent interest bearing shares) are usually the cheapest. For obvious reasons, it is difficult to give an exact guide as to the stockbroker charges likely to be paid as each transaction on the London Stock Exchange is different, but I hope that this information will at least offer useful guidance as to the what and how they work. To learn more about the London Stock Exchange and FTSE Index, please visit:
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