Halifax hopes to open up the share dealing market to the less wealthy and financially unaware through its low cost service. But while Sharebuilder will undercut its closest rivals, the current poor performance of equities could be a deterrent. The lack of advice could also be a problem, given its target investors’ limited stock market knowledge.
Halifax has launched its online share trading service, Sharebuilder.
Halifax has launched a new share-dealing service that will compete in the low-cost online share-trading market. ‘Sharebuilder’ seeks to open up the equity market to more low-income individuals through a competitive pricing structure.
It will allow investors to buy shares for GBP1.50 per trade, plus a stamp duty of 0.5%. Savers can invest as little as GBP20 per month into a range of individual shares chosen by the investor. It allows savers to investors in the majority of UK-listed equities, including investment trusts.
Prices for selling shares start at GBP5 for deals up to GBP250, increasing to GBP22.50 for trades above GBP2,500. Halifax is able to charge such a low fee for trades by bundling together small trades and executing them through a single deal on a nominated day.
However, there are limitations to Halifax’s ability to acquire 300,000 active share dealers. UK equities have performed poorly over the past two years – so many low-income earners will understandably be wary of investing in a falling market.
Also, many of Halifax’s target audience will not be particularly savvy in stock market investment. Using the bank’s advice-free service, they could stand the chance of losing their money through poor investing. At a time when the government is trying to encourage individuals on lower incomes to save for retirement through the new stakeholder pension, many should be focusing on retirement saving and not speculating on the UK stock market.
Nonetheless, Halifax’s service is considerably less expensive that some of its online rivals in the form of Egg, Charles Schwab and TD Waterhouse. It does offer individuals who have a limited amount of money to invest in the equity market a cheap way to access share dealing, which has the perception of being the realm of the wealthy and financially sophisticated.
Related research: Datamonitor, 2002: Direct Distribution in UK Life, Pensions and Investments 2002
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