What makes a good online-broker?

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Anyone looking for an online broker today will encounter a wide range of offers as shown on Trusted-broker-reviews. In addition to the established online banks, specialized online brokers have entered the market in recent years and These usually do not operate a banking business, but exclusively a trading platform. Due to their lean structure without branches, these so-called neo-brokers can entice customers with attractive conditions. Already with the establishment of online banks, trading in shares became cheaper and custody account management fees fell. The modern neo-brokers  completely waive a custody fee, some providers even waive an order fee.

Choosing the best online broker

A broker is an intermediary or middleman. He works at the interface between investors and the securities market and is responsible for the execution of securities orders, known as brokerage. In this work, the broker trades securities for the account of the customer, such as shares, foreign exchange, commodities or raw materials on stock exchanges, but also on over-the-counter trading venues. An online broker does essentially the same thing. The only difference: unlike the broker, online brokers enable brokerage predominantly or exclusively via the Internet.

  • Commissions
  • Reliability
  • Great selection
  • Account minimum
  • Account fees
  • Pricing and execution

Commissions

The broker arranges securities transactions for the account of the investor and charges fees for this. For Dax shares, these can amount to up to 0.08% of the respective price. This cannot be avoided. The amount depends on the scope of the service and the pricing policy of the provider. Brokers of regular credit institutions in particular offer market and company analyses as well as advice. Less experienced investors thus have advantages, but branch banks are more expensive than online banks and investment tips are generally to be treated with caution. Brokers have their own interests, e.g. commissions, in mind. In this respect, it is worthwhile to acquire a lot of specialist knowledge of one’s own in order to be able to better assess purchase recommendations – for example for shares. Online or direct banks are more favorable. Setting up a securities account is often free of charge.

Reliability

Above all, it is important that a broker is easily accessible. Technical weaknesses in the system or input errors can quickly cause trouble. Sometimes orders do not arrive because the trading platform crashed at the crucial moment. In all cases, you should keep the broker’s phone number handy for quick contact.

Great selection

The selection is mainly characterized by the availability of trading venues. The more trading venues are offered by an online broker, the larger the selection of tradable securities. At the same time, you benefit from different exchange prices, which allows you to optimize your spread. Here, it is also advisable to take a look at the number of funds and ETFs as well as the range of savings plans. Whereas almost all online brokers offer fund and ETF savings plans, very good brokers stand out with an additional offer of stock and ETC savings plans.

Account minimum

A good online broker offers monthly capital accumulation even with low savings rates. After all, not every investor has the opportunity to save larger amounts on a regular basis. In addition to the amount of the minimum savings rate, the number of free savings plans is also an important comparison feature.

Account fees

In the past, it was unthinkable for banks to offer a free securities account for private investors. The branch banks in particular paid well and dearly for this service. Since the advent of direct banks, the cost model has changed fundamentally. With most online brokers, a free account is now standard. In fact, it can be said that it is rather unusual to still charge custody account management fees these days. Free securities account management and unbeatable low-priced securities orders – this is the simple denominator of the advertising claims of most online brokers. However, this is only partly true, as hidden fees are also charged. Banks do not provide all services free of charge. It is therefore worth taking a closer look at the fees.

Pricing and execution

Custody fees

Many online brokers now waive custody fees for the safekeeping of securities. If you choose a provider with custody fees, the fees are usually charged as a fixed monthly amount or depending on your order volume or the market values of your securities portfolio.

Order or transaction fees

As already mentioned, the amount of the order fees differs significantly among the providers. Especially for traders who trade many or high volumes, a fixed amount is often more favorable than an order fee calculated as a percentage of the trading volume.

Exchange fee

This fee includes the brokerage fee as well as the costs for using a trading venue. Therefore, a large selection of trading venues is another way to optimize your returns in a cost-saving manner.

Additional services with costs

Additional services, such as limit orders, may be subject to a fee depending on the online broker you choose. Therefore, it is also worthwhile for your comparison to take a look at the price-performance list of the broker.

Conclusion – Finding a reliable online-broker is essential

The investor has to check many criteria when choosing the right broker for him. In particular, the cost of trading is an important point. However, when choosing a broker, not only favorable fees should be important but also the broker’s reliability as well as his commission fees.

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