Brokers galore for online SA punters
The few South Africans who play the stock market are spoilt for choice, with more than a dozen online stock brokers competing for their business.
Online broking has grown hand-in-hand with Internet banking, prompting many novice investors to sign on with their bank’s online broking service. The reality is that the broking arms of the various banks tend to be autonomous units, and setting up the electronic transfers between your broking and current accounts involve the same steps, irrespective of whether your bank and broker are in the same group.
Standard Bank’s minimum brokerage of R70 (banks have a bad habit of quoting charges excluding VAT) makes it the cheapest broker for trades under R20000, but its 0.6% flat brokerage rate makes it the most expensive out of the four graphed for buy or sell orders over R500000.
Absa has the lowest flat rate of 0.4%, but its R120 minimum makes it a pricey option for small investors who will mainly enter buy or sell orders worth under R30000 per trade.
Kagiso Securities is unique among local online brokers in that it sets its fees in fixed bands rather than as a percentage. Its R250 brokerage on deals up to R100000 makes it expensive for small investors. But from R50000 deals onward, it progressively undercuts the other players.
Brokerage is not the only factor. There are also admin fees, and here you tend to get what you pay for.
For instance, Absa is essentially free. It nominally charges R535 a year, but only extremely patient buy and hold types — who do not even trade three times during a year — get billed this admin fee.
Absa pitches its online stockbroking service as cheap but bare boned. Share prices on its website are 15 minute delayed, and you get no analyst reports or research data.
Real time prices and analyst reports generally cost extra. Nedbank and sister brand BOE separate these costs: real time prices are available for R70 a month and analyst reports an extra R80. And you only have to make one trade during the month to get these fees waived. The bank uses a traditional stock broking sliding scale for its fees. Similar to tax brackets, transaction values are split into bands which are charged at different rates.
Nedbank’s 0.7% brokerage on deals under R250000 makes it more expensive than Standard’s flat 0.6% for lower amounts. But as the graph shows, the 0.5% in Nedbank’s R250000 to R750000 makes it cheaper than Standard from R500000 onwards.
Besides not offering real time prices, the cheaper online brokers tend to limit their menus. This is not a bad thing: sensible people do not want to buy single stock futures anyhow.
Considering how the “experts” keep burning their fingers on the JSE’s more exotic offerings, it is easy to believe anecdotal evidence that most novice investors blow their entire life savings within six months of opening an online broking account.
FNB has created a service for beginners. Branded “Share Builder”, it limits the menu to a few blue chips and exchange traded funds.
Though the brokerage is high at 2%, the minimum is only R50 with R17 monthly admin, making it the best deal for anyone looking to dip their toe into the market.
Once you feel confident, you can switch to FNB’s “Share Investor” service which seems to have been pitched as a direct competitor to Standard Bank at 0.6% brokerage. FNB’s minimum is slightly higher than Standard’s, but its monthly admin slightly lower. Both FNB and Standard are making education a strong component of their online broking offerings.
Though Sanlam is not pitching itself as the cheapest, it may be the best value for money. Its R50 a month admin fee includes real time share prices, along with company data and analyst forecasts. It also lets novices run a virtual portfolio before putting real money in the market.
My personal experience is limited to Absa’s online broking service. A perk of my job is an I-Net terminal, so Absa’s no-frills trading website suits me fine.
In due course, Money will give the various online broking services a thorough driving test.
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