Money: Live the American dream
Sunday 12 September 1999
Not many stockbrokers in the UK offer execution-only dealing services in US shares. At the moment you are limited to the stockbroking arms of the high-street banks and the execution-only giant Charles Schwab Europe.
But another online service is launching next month - DLJ Direct, an offshoot of the Wall Street firm Donaldson, Lufkin and Jenrette. This will be an "added-value" service offering market news and dealing services. DLJ is at www.dljdirect.co.uk or on 0800 358 4477.
Dealing services are also on offer from the advisory broker Killik & Co and firms such as Stocktrade, the telephone dealing branch of Brewin Dolphin Securities.
In addition, there are around 100 US-based internet stockbrokers. Signing up with one of these is the best choice if you are serious about dealing in American shares. Big names include Charles Schwab (www.schwab.com) and E*trade (www.etrade.com). But both of these also have UK sites: E*trade in the UK will be launching an internet share dealing service for US shares by the end of the year (www.etrade.co.uk).
If you go the US route you generally have to open a dollar-based cash account of at least $1,000. The broker is regulated in the US by the Securities and Exchange Commission (SEC).
Some UK brokers state a different commission scale for overseas equities, while others use the same scale as for UK equities, but slap on a charge. These all take into account the brokers' extra cost of dealing through the London agent of a US stockbroker, who will take a cut on the deal.
Justin Urquhart Stewart, business planning director at Barclays Stockbrokers, says: "If you can open a US dollar account then charges are likely to be cheaper in the US. For instance, we charge a minimum of pounds 45 plus a charge for "custody" (the US equivalent to a nominee account). But a US firm is more likely to incorporate that into the minimum."
Charles Schwab Europe allows investors to trade on the main US stock markets through its automated trading service. The minimum investment is $10,000 and rates are cheaper for dealing online. There may be a charge for shares held in a nominee account ("custody"): NatWest charges pounds 20 per line of stock per quarter.
If you deal in the UK, the 0.5 per cent stamp duty that applies to UK- listed share purchases does not apply to US-listed stocks. This isn't widely understood, so anyone who has been charged stamp duty on an overseas share should contact the broker and demand a refund.
Then there is the matter of dividends and tax. Dividends have never played as great a role in investment for Americans as they have for the British. Americans buy shares for growth, which they cash in near retirement to buy income, usually through bonds. You will receive the dividend on a US share net of 15 per cent withholding tax. Any further liability on this income will only become apparent when it is declared on your annual self-assessment form.
You also have to pay for the currency conversion. At NatWest, for instance, dividends are sent to the bank and processed with the conversion rate applied. It costs pounds 5 for the first pounds 100 received. Some brokers, such as Lloyds TSB and HSBC, will factor the cost of dividend collection into their nominee or handling charges.
The UK stockbrokers mentioned in the table (left) say that they can trade in the big US exchanges such as the New York Stock Exchange and Amex-Nasdaq. But it is worth checking first to see if the shares you want to buy are available through the broker's service.
Really keen overseas investors - in particular those in adventurous investment clubs where costs could be shared - might be interested in getting real- time share prices through Updata Software's Trader service. This can provide data from 30 exchanges, including the NYSE and Amex-Nasdaq.
Trader costs pounds 990 plus VAT; the real-time data feed lines for the US and UK markets cost pounds 990 plus VAT a year. This may not be for everyone's pocket, but the company is offering free membership (normally pounds 100 a year) of its investor club, Club Updata, to Independent on Sunday readers who purchase the system in September. Members get user evenings, free updates on the software, data backup on CD and the web, a full telephone support service for a year, discounts on selected related products and a quarterly newsletter.
Updata is on 0181-874 4747 or on www.updata.co.uk.
UK BROKERS DEALING IN US SHARES
Stockbroker Commission Custody
Barclays Stockbrokers 1.75% for first pounds 10,000. 0.3% a year
(registered client) Minimum pounds 45
Tel: 0141-352 3000
NatWest Stockbrokers (In branch) 1.75% on pounds 15 per quarter
(walk into a branch first pounds 5,000. Min pounds 65 per line of
and deal) plus agent's cost at stock
Edward Jones Standard rates of pounds 40 Local custody
(registered client) min to pounds 600. pounds 600.01 charges apply
Tel: 0171-886 8500 to pounds 6,000=pounds 40+1.50%.
Plus pounds 30
Killik & Co 2.5% for first pounds 10,000. pounds 20 per stock
(registered client) Min pounds 75 per annum
Tel: 0171-761 4400
HSBC Bank 1.5% to pounds 7,000, min pounds 70 a year per
(account pounds 20. Plus pounds 50 line of stock holders only) held
Lloyds TSB 1.5% to pounds 29,999. Min Annual holding
(nominee account pounds 60. Plus pounds 25 fee on sliding
with bank brokers) scale
Charles Schwab Online: $29.95 for up $15 for each
www.schwab.com to 1,000 shares. Min security
or 0171-786 7102 initial investment registered
$10,000 and shipped
Stocktrade 0.75%. Min pounds 15, pounds 50 per line of
(registered client) max pounds 60. stock to be held Tel: 0131-529 0101 overseas
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