Brokers' fees compared

From Moneyweb, 10 January 2008

by Julius Cobbett

Reserve Bank governor Tito Mboweni is concerned about price increases of various goods and services. But he does not have to worry about the costs of online stock brokers, which have actually been in a declining trend over the past year.

This is good news, especially when one considers how empowering an online broking account can be. For a few thousand rand, you can become a part owner in any business listed on the JSE, or, if you prefer, a basket of businesses through an exchange-traded fund such as Satrix. Many of these businesses will pay you passive income in the form of tax-free dividends. These dividends are likely to grow over time, and so should the value of your shares.

Once you've made the decision to open an online broking account you will need to choose a broker. This is not a decision to be made lightly: opening an account requires a daunting array of documents, which could include certified copies of bank statements, identity books, water-and-lights accounts, tax
certificates, and the list goes on.

Furthermore, most stockbrokers will charge you a fee if you wish to transfer your account to a competitor. So choose your broker carefully.

To the benefit of investors, there are elements of a price war among online brokers. Two brokers - Nedbank and Standard Bank - have reduced their minimum brokerage to R70 per trade, making sub-R100 trades
possible, even when peripheral charges and tax are taken into account.

But price should not be the only consideration when choosing a broker. Additional services such as live prices, research, graphs, SMS notifications and handy documents for the taxman are usually well worth paying a bit extra for.

The cheapest broker will also depend on the type of investor you are.

For example, if you make infrequent, relatively large trades, then Absa Stockbrokers may be the best option because it offers a low flat brokerage of 0,4% and waives its administrative charge if four or more trades are made each year. 

However, if you make small, frequent trades, then you may be suited to a broker like Standard Bank, which has a lower minimum brokerage than Absa, but only waives its administration fee if you trade three or more times per month.

The table below summarises the costs of 11 prominent online brokers. Most of the information has been gleaned off the websites of the respective companies.