- by Suki Mann
When it comes to corporate bonds, today, most private investors use an online trading platform. It goes without saying that one of the key factors influencing your choice of platform will be the associated costs. After all, the lower your fees, the more of your hard-earned money you’ll be able to invest. So, how do the WiseAlpha fees compare with that of others?
With so many platforms and types of pricing models available, finding the right one for your needs can be confusing. Here, we’ve selected five of the best low-cost platforms for trading corporate bonds and examined each in more detail to look at their pricing structure and what you actually get for your money. As we’ll see, low fees don’t always mean the best value.
Comparison of fees for the best low-cost platforms
|Platform||Regular charges||Dealing costs||Other fees||Notes|
|Hargreaves Lansdown||£9.99 to £19.99 per month||£11.95 per deal for up to 9 deals per month||Further charges applied to overseas trading||An annual charge of 0.45% for holding bonds in an ISA|
|IG||Quarterly custody fee of £24 (fewer than three trades per quarter)||£3 to £8 per deal||A minimum charge of £40 for telephone trading||Custody fee can be reduced with regular trading|
|Interactive Investor||Three monthly plans ranging from £9.99 to £19.99||£3.99 to £7.99 depending on plan||£49 fee for telephone trades||Additional fees for trades over £100,000|
|Degiro||None||£1,75 per trade & 0.014% (to a max of £5)||Telephone fee of €10 plus 0.1% per order||Low cost, but limited research tools|
|WiseAlpha||0.25% – 1% annually (tiered)||None||0.25% early sales fee||No admin or custody feed|
Pricing structures clearly vary significantly. In all of these instances, we’ve chosen platforms that don’t charge set-up fees, but those that do often charge less in other areas such as a monthly, quarterly or annual maintenance/admin charge.
When charged, this fixed charge typically comes as a set fee or a percentage of the value of your holdings. Obviously, for some investors, a flat fee could be preferable to a percentage, especially if you have a large amount of money to invest. However… fees aren’t the only factor to look at when comparing costs.
Sometimes the cheapest platform won’t offer the best value for your circumstances. Some platforms are more generic when it comes to the investments that they offer, while others have a limited selection of bonds. If you’re just starting out in corporate bonds, then you’ll want some educational tools and materials to help you get started.
Let’s look in more detail at the pros and cons of each, so you can make your own mind up as to which is might be best for your individual needs.
Established since 1981, Hargreaves Lansdown has plenty of guides and market analysis for would-be investors in corporate bonds, along with a handy mobile app. However, you will pay for all of this.
Prices start at £5.95 if you make more than 20 trades per month, but double to £11.95 if you make nine or fewer trades each month, making it one of the more expensive platforms on our list, especially compared to Degiro, IG and WiseAlpha.
Beyond that, the fee structure isn’t particularly clear on the site. And some bonds can only be traded over the phone – attracting further charges.
IG offers a clear pricing structure with competitive commissions of between £3.00 and £8.00 per deal. Additionally, the user-friendly app comes with some useful analysis/trading tools. There’s also a forum where you can share information and tips with fellow traders.
However, IG has a distinct focus on spread betting and there are no research features for those interested in trading bonds. It’s worth noting that IG has charges a quarterly fee of £24 unless you make three trades in that period, so those not looking to trade regularly might be advised to look elsewhere.
With three tiers of fixed fees, Interactive Investor claims to be the best value on the market, and it is true that offering a choice of plans based on your trading needs will be attractive to certain investor types. That said, the most popular plan seems to be the entry-level £9.99 monthly fixed fee offering a single free trade.
However, you’ll have to pay an additional £7.99 for each subsequent trade in that month. Training resources are somewhat limited, so Interactive Investor probably isn’t ideal for beginners.
The cost of trading on DEGIRO is significantly lower than many of its competitors, at just £1.75 per deal, plus 0.014% per trade (up to a maximum £5). While that sounds excellent, but you get what you pay for and there are a number of downsides: DEGIRO isn’t up to the mark when it comes to research and analysis features, or educational tools; you can’t use a debit or credit card to deposit funds and withdrawals can only be made by bank transfer.
Furthermore, the availability of bonds is somewhat limited. Add to that less than glowing customer service reviews on TrustPilot, and you start to see why perhaps those fees are so low.
WiseAlpha fees, while not as cheap as DEGIRO, come with perhaps the clearest and most transparent charging structure. The tiered structure means investors pay 1% on the first £20,000, 0.75% from £20,000 to £50,000, 0.5% on £50,000 to £100,000 and just 0.25% on amounts over that. And that’s it.
There are no other buying fees at all. If you want to sell your bonds before the end of their term, though, there is a flat 0.25% fee which is applied to the principal amount. But, perhaps more importantly, because the platform has a strong focus on the corporate bond markets, investors get a great selection of bonds to choose from and a wealth of information in order to make informed decisions.
Conclusion: Cost isn’t everything
As we can see from this selection of low-cost platforms, price isn’t necessarily the overriding consideration when it comes to choosing a trading platform for corporate bonds. Most experienced investors will opt for a platform like WiseAlpha that I believe offers a good balance of choice, features and tools, as well as a competitive pricing structure.