Mixed blessings of the internet

Brokers have rushed to set up websites, but costs for most funds have yet to come down

The internet is an electronic paradise for bargain hunters. CDs, computers, books, wine, holidays, cars are all sold at hefty discounts via websites. But when it comes to investments, the discounts are few and far between.

The internet is an electronic paradise for bargain hunters. CDs, computers, books, wine, holidays, cars are all sold at hefty discounts via websites. But when it comes to investments, the discounts are few and far between.

Investors who want to put money into the stock market, either directly or through a product such as a unit trust, will find plenty of valuable information online. Most fund management groups now have websites with performance statistics, information on their investment philosophies, history and interviews with the managers. The smarter sites have electronic application forms and some even allow investors to move money between funds at the click of a mouse.

This summer has seen a rush by stockbroking companies to embrace the web. From just a handful of online brokers at the start of the year, the number of companies offering net-based trading has grown so much that there is now real choice and the cost of buying or selling shares has fallen as low as £5.

Last week Halifax became the latest, and so far cheapest, company to offer share dealing. Halifax ShareXpress is offering trades for £5 until mid-January. After that the charge rises to £12.50 for trades up to £2,500 and £22.50 for larger deals.

Halifax's move is the latest in a net price war that has driven the cost of dealing in shares down to about half the cost of using a phone-based broker. The cheapest deal on the market, excluding special offers, is with Barclays Stockbrokers, with a 1 per cent charge but a minimum of £11.99. E*Trade charges £14.95 for trades under £1,500, or on any amount for frequent traders doing more than 25 deals.

"The low entry tariff means that smaller investors are catered for," says Julian Costley, managing director of E*Trade. "Electronic broking is much simpler to administer: we have elected to allow people to apply online, hold stock in a nominee account, and open a direct debit online."

Shaving administration costs and reducing the number of dealing errors mean that online stockbrokers can cut charges to the bone. They have little choice: there will be at least a dozen companies offering internet share dealing by the end of the year.

Brokers' commissions are a relatively transparent cost. Commissions and charges are rather harder to identify for collective investments, especially unit trusts. There, investors have to allow for up-front commissions, annual management charges and the spread between the buying and selling costs of the units in the fund. The fact that a large percentage of unit trust business goes through independent financial advisers adds another layer of complexity.

So far, only a handful of fund management companies seem to appreciate the full potential of the internet, even though the scope for savings is considerable. The Government has even made the process easier by allowing investors to open individual savings accounts (ISAs) over the net without the need for a paper application or physical signature.

Fidelity is one of the most internet-aware of the large fund management groups. The company supports online applications, and its website gives investors a high level of control over investments. The company also offers occasional discounts for investors - currently, there are reduced initial fees of 2 per cent for several funds including IT and telecommunications -- but otherwise its charges are in line with other fund management houses. "We tend to use the internet to promote specific funds, although 30 per cent of our online ISA applications are new to Fidelity," says Tristan Brandt, senior manager for electronic channels. Prices for managed funds will fall, he suggests, as more companies enter the market. But for now the scope for discounting is limited.

"In managed funds, the back office is not automated, so cutting costs is difficult," he says.

Tracker funds, with their low management charges, ought to offer more scope for discounts. The specialist tracker fund company, NetISA (formerly NetPEP) is only sold through the net. Other popular trackers, such as those from Virgin or Legal and General, cost the same bought over the net or over the phone.

Internet experts believe that there are simply not enough people investing online to force financial companies to offer meaningful discounts. "It will take time for cost savings to show through, and it will depend on the take-up of online investment in the UK," suggests Alan Griffin, finance channel director for AOL UK, the internet service. "Savings will initially come in banking and in share trading, but technology and competitive markets will mean cheaper pricing."

John Blowers, managing director of the personal finance website Interactive Investor, agrees that there are still few examples of meaningful discounts. But he believes they will come. Financial services companies need to link with websites that generate traffic. In turn, Mr Blowers suggests, this will give popular websites the power to negotiate better deals on behalf of their users. "Websites will be able to ask the product providers for deals that are internet friendly: simple and convenient to buy on the net," he says.

Investors can make use of all the research facilities the net has to offer. Information that was expensive or only available to professional brokers and financial advisers is now on the internet, free of charge. Sites such as Interactive Investor and Money- world have stock portfolios and information, including performance tables, for unit and investment trusts. MoneyeXtra is a good source of comparative prices and interest rates for a range of financial products from a basic savings account upwards.

Hemmington Scott's valuable range of company information is accessible, much for no charge, on the company's website or through its free internet service provider arm. Free quotes gives real time share prices to subscribers of its associated internet service provider, themutual.net. Sites such as UK Invest and FT.com have good investment information and articles. Investors who make full use of the internet will be better placed to manage their own finances, saving money on commissions and financial advice.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Life and Style
love + sex A new study has revealed the average size - but does that leave men outside the 'normal' range being thought of as 'abnormal'?
Arts and Entertainment
TV
Voices
The Palace of Westminster is falling down, according to John Bercow
voices..says Matthew Norman
Sport
Steve Bruce and Gus Poyet clash
football
News
Graham Norton said Irish broadcaster RTE’s decision to settle was ‘moronic’
TV
Arts and Entertainment
Jake and Dinos Chapman were motivated by revenge to make 'Bring me the Head of Franco Toselli! '
arts + ents Shapero Modern Gallery to show explicit Chapman Brothers film
Arts and Entertainment
Kurt Cobain performing for 'MTV Unplugged' in New York, shortly before his death
music Brett Morgen's 'Cobain: Montage of Heck' debunks many of the myths
Life and Style
life
Sport
Brendan Rodgers
football The Liverpool manager will be the first option after Pep Guardiola
News
Amazon misled consumers about subscription fees, the ASA has ruled
news
Arts and Entertainment
Myanna Buring, Julian Rhind-Tutt and Russell Tovey in 'Banished'
TV Jimmy McGovern tackles 18th-century crime and punishment
Arts and Entertainment
Paul Whitehouse as Herbert
arts + ents
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Executive - OTE £40,000

    £15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

    Austen Lloyd: Law Costs HOD - Southampton

    £50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

    SThree: Recruitment Resourcer

    £20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Day In a Page

    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot
    Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

    Poldark star Heida Reed

    'I don't think a single bodice gets ripped'
    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn