Brokerage account: what is it?

To invest in the financial markets, you must have a brokerage account, which is a tool that allows you to manage your investments efficiently and independently. In these cases, you must always rely on an authorised brokerage company and choose the right account carefully depending on your needs.

A brokerage account is an account used only for investments. It is used to deposit money to invest in various financial instruments and to receive any profits. With this account you have access to a series of financial solutions, depending on the type of service made available by the intermediary.

A particular type of brokerage accounts are, for example, ISAs that allow you to invest your savings or to have a certain amount without paying taxes. For the 2022-2023 cash year, the limit for ISAs is £20,000 and you can choose to deposit your money in a cash ISA, stocks and shares ISA, innovative finance ISA and/or lifetime ISA.

Conversely, profits from traditional brokerage accounts are taxed by the government. Obviously, investors that make long-term capital gains can take advantage of certain tax benefits; indeed, those who keep their investments for over a year can benefit from certain concessions, such as better tax rates.

With a conventional brokerage account, you can invest in many financial instruments, such as stocks, bonds, ETFs and joint investment funds. Unlike traditional bank accounts, brokerage accounts typically don’t offer everyday products such as credit cards, loans and mortgages, but just investments-related services.

Today you can open a brokerage account in the UK completely online. You just need a form of identification, an email address and a small starting sum with which to pay the initial deposit. Opening an investment account is simple and quick: in a matter of minutes, you can verify your ID online and activate your brokerage account with an authorised intermediary.

Then, you just need to transfer a small amount from your current account in order to activate your brokerage account and start investing. The intermediary is responsible for the account and is the middleman between the transactions you want to carry out and the market. For example, if you wish to purchase some stocks, you just need to place an order with their intermediary, and they will take care of purchasing shares on the market and inserting them in your shares portfolio.

In order to keep a brokerage account open, some fixed yearly fees may be required; typically, this is without spreads or additional costs on transactions. You must take into consideration the cost of investment operations, as there are commissions for every order type. Every intermediary has a table of charges and informs clients about all costs applied to each type of investment.

The intermediary can also offer solutions for short-term investments, such as specific tools for trading CFDs, futures and other derivative financial products. Brokerage accounts can also come with tools for long-term investments, such as regular investment plans for funds and ETFs, which are useful for diversifying your capital and reducing risk.

When choosing the best brokerage account, there are some important aspects to consider. Firstly, you must rely on an authorised, reliable intermediary to be certain that you’re investing in a serious company and entrusting your money to a solid and respected company. Furthermore, the intermediary must offer competitive costs, with an affordable yearly fee for the platform that is suitable to the portfolio’s value.

The brokerage account must also provide modern and intuitive technologies to facilitate managing your investments, so that you can invest independently in a simple and optimal way. You must opt for solutions that offer a wide range of investment tools so that you can manage long and short-term investments and savings-based investments through just one intermediary. 

A more beneficial solution is brokerage accounts that are fully online, as they allow you to open your account and manage it digitally, securely and efficiently. Lastly, you mustn’t overlook the fees applied to investments so that you can choose an attractive brokerage account based on which type of investments you wish to make.

With FinecoBank, you can open a modern, attractive and fully digital brokerage account with lots of innovative tools for investing online. In this way, you can access a multi-brand platform with diversified investment solutions and you can start to invest from just £100, with a yearly fee of up to 0.25%.