It is very exciting to start buying and selling stocks in the UK. However, you will need the services of stockbrokers in order to do so. A stockbroker acts as an intermediary between you the buyer and the seller who holds the stock. The seller could be the company or another investor. Most UK stockbrokers work from The Stock Exchange on Paternoster Square and regulated by the Financial Service Authority (FSA).
Your choice of a stockbroker will greatly depend on your needs and financial circumstances. It is very important that you make the right choice, as it can be the difference between your making profits in the stock market or not. As an investor, you have the following choices in stockbrokers:
1. Full Service Broker
This was the original type of stockbroker. The full service stockbroker will provide you with all the recommendations for stocks in your portfolio. They will give you a financial assessment and depending on your personal situation will give you recommendations on which stocks to buy.
This service is not free and you as an investor need to review your stock portfolio periodically with the full service broker. If you do not know anything about the stock market, you are encouraged to use this type of broker.
The full service broker will handle all the research and portfolio investing. All you need to do is to follow up and provide the capital to trade. It is not a cheap service so you need to research whom you entrust your funds.
2. Discount Broker
The full service broker is now in decline ever since internet technology allowed investors to place their own trades. The discount broker only takes orders from you either through the phone or online. It is up to you to research on the stocks that you wish to buy.
If you are placing your orders online, you are unlikely to meet any staff members. For this reason, discount brokers offer very low fees for transactions. If there is any research offered, it is likely from third party providers and you may have to pay for it.
You should note the difference between a deep discount broker who only takes your orders and a discount broker who may give you some research facility. If you are confident of your stock picking abilities and wish to pay less for your stocks, then discount brokers are for you.
3. Money Managers
Money managers take the responsibility of investing your funds without any input from you. For this, they take a percentage of your returns and some even charge you fees for the service.
Money managers are very expensive and most only serve very high net worth individuals. The only input you have is sending them your funds and collecting any profits made by the money manager. You might never know what they have invested your funds.
Your choice of stockbroker is very important and you should spend some time before you make a decision. None of these types of brokers is immune from failure so you owe it to yourself to do the proper homework.