One of the most important decisions you’ll make in your investing life has nothing to do with what stocks, ETFs, mutual funds, or bonds you’re going to buy. It’s about choosing your online stock broker!
But what is a stock broker? How much does a broker cost? Should you choose an online broker? How to choose your stock broker? Here is our comparison of the best online stock brokers with the best offers of the moment and our 10 tips to choose the right broker to invest in the stock market. Discover without delay the Café de la Bourse infographic “How to start in the stock market”, our video advice to choose a reliable player who will meet your expectations, as well as our detailed opinion on the main online brokers which will allow you to choose the player most adapted to your investor or trader profile.
What is the purpose of a stockbroker?
To position oneself on the financial markets via a stock broker
The broker is an intermediary between the investor or trader and the financial markets. He executes stock market orders on behalf of the investor or trader, whether they are buying or selling orders. As such, it provides individual investors with a platform allowing them to position themselves on the markets and financial products they want via the Internet, via a mobile application, or by telephone with an advisor. It is also the broker who keeps your shares and securities in the envelopes that you have opened with him.
Please note: a stockbroker must be licensed and authorized to operate in France. Before subscribing to a broker’s offer, make sure that the broker is not on the AMF’s blacklist and that he is listed on the Regafi registers.
A stock exchange broker, most often understood as opposed to a real estate broker, certainly allows you to invest in the stock exchange but not only. In fact, it offers the possibility to the individual investor to buy shares but it also allows most often to take a position on the bond market, the commodities market, the currency market, etc.
Buy all kinds of financial products via a stockbroker
Via his broker, the investor will be able to position himself on all the financial markets to buy and sell all kinds of financial products: live securities (shares, bonds) but also UCITS, ETF, stock exchange products, etc.
The only limit to your investment possibilities is the offer proposed by your broker. Indeed, not all brokers offer the same products. If the French brokers will all allow you to place stock market orders on CAC 40 stocks via live stocks or CAC 40 ETFs for example, they will not all allow you to invest in foreign markets. Indeed, you will often find it more difficult to place stock market orders on small caps or midcaps or on stocks listed in Canada or in China for example. It is up to you to verify before choosing your broker that the assets you want to trade are available.
Investing in the stock market via the different envelopes offered by the online broker
The stock market broker allows you to invest in the stock market by housing your investments on several types of supports. Thus, stock market brokers systematically offer an ordinary securities account (CTO) which allows you to invest in all types of financial products without restriction. However, you should know that some stock brokers offer the SRD (Service de Règlement Différé), which allows you to take advantage of the leverage effect and to sell short, while others do not provide this possibility.
In addition, stock brokers very often offer the possibility to invest via a PEA and a PEA PME. These two envelopes, for which the eligible securities are much more restricted than the securities account, allow in return the investor to benefit from significant tax advantages.
Finally, more rarely, the broker Bourse can propose a young PEA that offers to the persons aged between 18 and 25 years old attached to the parental tax household to open a stock savings plan.
What are the different types of stock market brokers?
Indeed, not all brokers offer the same range of products and assets, and not all offer the same investment support. In fact, we can differentiate four main categories of brokers whose offer in terms of products, envelopes, and rates is very different.
Choose a traditional bank as a stock exchange broker
Network banks allow their clients to invest in the stock market from CTO, PEA, PEA-PME, etc. It is thus possible to invest in live securities, ETF, etc., but the offer in terms of financial markets can be relatively reduced (mainly the assets quoted on Euronext Paris). Moreover, the network banks generally propose only the minimum to accompany the individual investors, i.e. an interface allowing them to place their stock exchange orders and that is all.
Make your online bank your broker
The online banks, like the network banks, offer a complete banking service (current account, investment products, loans, etc.) to which is added an online stock exchange brokerage service that allows savers to invest on the stock markets from a CTO, a PEA and sometimes also a PEA-PME. It is possible from your computer or smartphone to make arbitrages in your portfolio anywhere and at any time. You will be able to invest independently in many assets. The rates are more advantageous than those of the traditional bank.
Opting for an online stock market broker
The online stock exchange broker is a pure player who offers a stock exchange brokerage activity entirely online. They generally offer a very large number of assets, on a large number of stock markets, with rates that are sometimes very competitive compared to the banking offer. They often allow the use of the SRD and generally have a relatively developed offer of derivative products. They focus on education with webinars, training, market points, etc. They also often offer sophisticated trading platforms.
Turn to a new broker
New brokers are again pure players who only offer a stock market brokerage activity. These new players generally allow you to invest via an intuitive and attractive application on your smartphone. They participate in the gamification of trading with interfaces that are sometimes closer to a video game application than to a stock broker. They offer innovations such as split shares or automatic investment plans. Very often, only the CTO is offered. Their pricing policy can be hyper-aggressive on stocks and ETFs with 0 commission offers.
How much does a stockbroker cost?
The various expenses to be taken into account
The price of a stock exchange broker varies from simple to triple, or even more. It must be said that not all brokers have the same fees. There are paid services with some and free with others, like custody fees for example. Only brokerage fees are charged by almost everyone. But many brokers charge additional fees.
Generally speaking, we can distinguish between these main types of fees:
- Custody fees, which do not exist in almost all online brokers ;
additional fees for optional services such as access to real-time quotes or certain decision-making software.
- Subscription fees if the number of transactions provided for in the subscription has not been reached.
- Brokerage fees are the only fees charged by almost all financial intermediaries that correspond to the cost of placing a stock market order.
- Exchange rate fees for operations on foreign shares.
- Fees for the transfer of securities or inheritance rights.
- Inactivity fees are sometimes applied by brokers with aggressive pricing offers for active traders.
Extended spreads are sometimes applied by stock brokers offering to buy stocks and ETFs without commission (note that it is difficult to identify brokerage fees when they are in the bid/ask range).
Brokerage fees are more or less high depending on the broker, but they are also more or less important for the same broker depending on the market concerned (foreign, France, etc.), the type of product concerned (live securities, UCITS, derivatives), the use or not of the SRD, etc.
Important differences in rates between brokers and banks
There are very important differences in rates between online brokers and traditional players. Thus, brokerage within a traditional bank (such as Société Générale, BNP Paribas, Crédit Agricole, etc.) will be much more expensive than brokerage with an online bank (such as Boursorama or Fortuneo for example) or a pure player in the sector such as Bourse Direct or Degiro, which has even made low-cost brokerage its specialty.
You should know that some online brokers offer the possibility of subscribing to a subscription with a preferential rate for a given number of orders per month (or even a quarter or half-year). This type of subscription can considerably reduce the bill of the most active investors.
Gifts and bonuses offered by the online broker
Almost non-existent with traditional brokers, gifts and bonuses are regularly offered by online brokers who have made them a real commercial argument to attract future clients. Be careful though, these bonuses, premiums, and discounts of all kinds should be taken into account without making them an exclusive criterion for choosing a broker!
These gifts usually fall into one of three categories:
- Free access to decision-making tools.
- Free brokerage fees for X amount of time or X number of free orders for new clients over a given number of months.
- The cost of transferring the PEA or the securities account is paid by the new broker, usually up to a maximum of $2,000.
Note: European regulations prohibit bonuses corresponding to a percentage of the deposit at the opening of the account, especially if the bonus is only really acquired with a minimum transaction volume obligation.