European investment platform Degiro has launched in the UK, charging fees that are on average 80 per cent less than those of other stockbroking platforms.
Degiro, which launched in the Netherlands in 2013 and now also operates in Spain, France and Brussels, offers UK and international shares, bonds, exchanged trade funds (ETFs), options and leveraged products including contracts for difference (CFDs).
The firm is charging private UK investors a fraction of the cost of mainstream platforms to trade securities, instead offering fee levels only before available to large institutional investors such as pension funds and asset managers.
Should an investor purchase £1,000 of Royal Mail shares, Degiro will charge just £1.79, which consists of a £1.75 flat charge plus 0.004 per cent (see table, click to enlarge). This compares with costs ranging between £5.95 and £15 with the UK's mainstream platforms, including execution-only giant Hargreaves Lansdown (£11.95), HSBC (£12.95) and TD Direct (£12.50).
The challenger platform is able to do this using a regulatory framework that treats European retail investors as one large institutional investor, as well as by virtue of its relatively new technological infrastructure and by not offering supplementary investment analysis that it says is 'already available for free elsewhere'.
According to founder and director Gijs Nagel, the launch 'heralds an end to hidden costs in the UK retail market'.
'The discrepancy in market access between retail and institutional investors is completely unnecessary and nothing short of a scandal. At Degiro it is our mission to rectify this. The way we see it: it's not that our fees are low, but that those of our competitors are too high,' says Nagel.
According to Nagel, the average institutional investor pays a total of around 1 basis point (0.01 per cent) on each of its trades.
He says that even at Degiro's cost levels, the company is making up to 300 per cent profit, which should give investors some idea of how much mainstream investment platforms are currently making at the expense of private investors.
Published costs do not include Stamp Duty Reserve Tax (SDRT), which the UK government levies on all shares transactions outside of tax-free wrappers. For this reason Nagel has introduced CFDs to his model for the first time, as they do not incur SDRT.
Degiro does not currently offer an Isa or Sipp service, but plans to do so in the future.
UK investors can currently buy and sell ETFs for €2 (£1.46) plus 0.02 per cent and a select range of European investment funds at varying costs. Nagel plans to offer UK-domiciled funds within a few months and, based on his Netherlands model, hopes to be able to offer them completely free of charge.
The company is currently active in 18 countries across Europe (including the UK from 11 June) and claims to be the fastest-growing broker in the continent.
Less than two years after launching in the Netherlands, it now has over 30 per cent of its market share and around 10 per cent of Brussels' market. The firm processes €30 billion of transactions per year and has €3 billion of assets under administration.
Nagel concludes: 'All of our progress has culminated in this point, and the UK is a natural next step for us. We're excited to be launching in Europe's financial heart and we look forward to liberating UK investors from the hidden costs that have plagued them for so long.'
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