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Charles Schwab introduces no-fee trading in US stocks for UK investors

Charles Schwab is looking to tap into the growing pool of DIY investors with the launch of its no-fee platform

Faced with the growing demand for “democratizing” investments, retail investors are spoiled for choice when it comes to the platforms offered.

As platforms fight to offer the lowest possible price, top US broker Charles Schwab now wants a piece of the pie.

Investors can now use Charles Schwab’s platform to invest in US-listed stocks with $0 commission for online trades and no sign-up fees, This Is Money can reveal.

Previously, investors had to make a minimum investment of $25,000 to use the platform.

Charles Schwab is looking to tap into the growing pool of DIY investors with the launch of its no-fee platform

Charles Schwab is looking to tap into the growing pool of DIY investors with the launch of its no-fee platform

Investors will not pay any fees for online trades in listed US stocks or Treasuries. Those looking to trade corporate and municipal bonds will pay $1 per bond, while trading options will cost $0.65 per contract.

“Over the last five years we have seen very significant growth in the number of UK investors using Schwab’s platform to trade in the US… part of this growth has enabled us to reduce the minimum investment by 25,000 $ to zero,” Richard Flynn, UK managing director of Charles Schwab told This Is Money.

“We have a number of US expat clients who find the service immensely valuable as all of Schwab’s transactions and custody take place in the US and therefore for them it is very attractive that their assets are not held outside the United States, which is useful for tax reporting purposes.’

How does the Charles Schwab platform work?

Unlike other UK-based investment platforms, Charles Schwab’s platform only trades in US dollars.

“For people who would have used UK brokers to trade US stocks and pay these exchange rates, we believe there are potentially significant benefits to trading US stocks through a US dollar platform,” Flynn said.

Richard Flynn, British Managing Director of Charles Schwab

Richard Flynn, British Managing Director of Charles Schwab

“And we’re hoping that lowering that minimum will encourage people to use Schwab for their US trades, while perhaps continuing to use UK traders for their sterling investments.”

You should always convert your British Pound before opening an account, but this should not be done exclusively with Charles Schwab.

As a UK taxpayer, you must complete a W-8 BEN form which confirms that you are not a US taxpayer.

Any dividends received on US stocks you may hold in the account, you pay 15% withholding tax on the dividend which can then be offset on your UK tax return.

You can open an account online by submitting supporting documents including your ID and a copy of a utility bill.

Once the account is opened, you can fund your account and start investing.

How does Charles Schwab compare to other investment apps?

The market for low-cost investment platforms has become increasingly crowded in recent months.

Startups like Freetrade* and eToro* charge no stock trading fees on stocks, ETFs, and investment funds, although there are exchange fees for buying US stocks.

Although Charles Schwab’s platform trades in dollars, investors will still need to convert their money and incur exchange fees as a result.

This year, Freetrade surpassed one million subscribers thanks to its generous referral program and low-cost plans.

Its basic plan offers GIA, commission-free trading, and free fractional US shares, but only 1,500 shares are offered.

Its standard plan costs £4.99 per month and customers can open a GIA and Isa shares and shares, although this is a standard Isa and not the flexible offered by CMC.

Freetrade also offers a Sipp for Plus customers, which costs £9.99 per month.

As stock trading and investing has grown in popularity since the pandemic, a new generation of investors has been increasingly drawn to big-name US stocks.

An attractive part of new DIY investment platforms like Freetrade is the ability for investors to acquire fractional shares: a way to back stock market behemoths for a fraction of the cost of a share.

Fractional stock investing allows investors to own a portion of a stock rather than one or more whole individual stocks.

The upside is that these may otherwise be out of reach for small investors or require too much of an individual’s portfolio to remain diversified.

Flynn told This Is Money that Charles Schwab does not currently offer fractional shares, but will offer them to investors later this year.

The platform hopes to gain advantage by rolling out a range of educational resources during 2023 and 2024 at no additional cost.

Flynn said: “With the retail investment boom, we think there’s a huge market for people wanting help.” They don’t necessarily want guidance, advice or recommendations.

“They want help making their own investment decisions and getting the most out of a platform like the one Schwab can provide.”

Compare the Best DIY Investment Platforms and Isa Stocks & Stocks

Investing online is simple, inexpensive and can be done from your computer, tablet or phone when and where it’s convenient for you.

When it comes to choosing a DIY investment platform, Isa stocks and shares, or a general investment account, the range of options can seem overwhelming.

Each provider has a slightly different offering, charging more or less for trading or holding stocks and providing access to a different range of stocks, funds and investment trusts.

When choosing the one that’s right for you, it’s important to consider the service it offers, as well as the administration and trading fees, and any other additional costs.

To help you compare investment accounts, we’ve analyzed the facts and put together a comprehensive guide to choosing the best and cheapest investment account for you.

We highlight the major players in the table below, but advise you to do your own research and consider the points in our comprehensive guide linked here.

>> This is Money’s complete guide to the best investment platforms and Isas

The platforms presented below are independently selected by This is Money’s specialist journalists. If you open an account using links that have an asterisk, This is Money will earn an affiliate commission. We do not allow this to affect our editorial independence.

Administration fees Expense fund trading Standard Stock, Trust, ETF Trading Regular investment Reinvestment of dividends
A.Bell 0.25% Max £3.50 per month for stocks, trusts, ETFs. £1.50 £9.95 £1.50 £1.50 per transaction More details
Bestinvest* 0.40% (0.2% for out-of-the-box wallets) Account maintenance fees reduced to 0.2% for ready-to-use investments To free £4.95 Free for funds Free for income funds More details
Charles Stanley live 0.35% No stock platform fees if a trade is made that month and an annual maximum of £240 To free £11.50 n / A n / A More details
Loyalty* 0.35% on funds Fees from £45 up to £7,500. Max £45 per year for stocks, trusts, ETFs To free £10 Free funds £1.50 stocks, ETF trusts £1.50 More details
Hargreaves Lansdown* 0.45% Capped at £45 for stocks, trusts and ETFs To free £11.95 £1.50 1% (minimum £1, maximum £10) More details
Interactive Investor* £9.99 per month or £12.99 for Sipp £5.99 per month back in trade credit £5.99 £5.99 To free €0.99 More details
iWeb £100 single £5 £5 n / A 2%, maximum £5 More details
Free exchange* Free for standard account £3 per month for Isa Freetrade Plus with more investments is £9.99/month including tax. Isa Fee no funds To free n / A n / A More details
Avant-garde 0.15% Only Vanguard funds To free Free Vanguard ETFs only To free n / A More details
(Source: June 2022. Administration fee shown annually, can be monthly or quarterly)

Some links in this article may be affiliate links. If you click on it, we may earn a small commission. This helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any business relationship to affect our editorial independence.

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