UK’s Neobrokers: Which One Is The Best For You?
Definitive guide to choosing a UK stock broker - PART 5
This is part 5 of Bankeronwheels.com’s Definitive Guide to choosing a Stock Broker in the UK.
Apple released the first iPhone in 2007. 17 years and 16 iPhone generations later, the generation born around the turn of the century now have jobs and money of their own. They haven’t known a world without handheld, app-based tech products. A new wave of brokers has emerged to meet the needs of this market.
This generation of investors are not particularly bothered about well-known names. They may never have set foot in a physical bank and are unlikely to care about or know much about the brokers their parents have their pensions with. What little they know about the world of finance is colored by the experience of growing up in the aftermath of the financial crisis of 2008 – no name is trustworthy, and nobody is too big to fail.
Today, let’s focus on Tier 2 Brokers – those neobrokers that target the new generation of investors in the UK.
KEY TAKEAWAYS
- Tier 2 brokers like Trading 212, Freetrade, InvestEngine, Dodl, and DEGIRO are products of the digital age, emerging to meet the demand for low-cost, mobile-first investing. Minimal fees and user-friendly platforms are key strenghts. Their untested business models may limit the customer base to small to medium-sized portfolios with the FCSC £85k protection.
- Business Models: All firms rely on interest on cash, cross-subsidization to attract users with free core services while monetizing through complementary products—T212 profits from CFD trading spreads, others from fees on managed portfolios or subscription plans.
- Fees: Trading 212 and InvestEngine dominate for free ISAs, with Trading 212 slightly better for single stocks and cash, while InvestEngine excels for ETFs; Freetrade offers a cost-effective SIPP option but requires a subscription; Dodl is the least competitive option across all products.
- Platform Features: Trading 212 offers multi-currency, cash interest, payable share lending, or customizable “pies” portfolios. Freetrade gives you access to UK bonds and user-friendly recurring investments. InvestEngine excels for ETF-only portfolios and auto-rebalancing, while DEGIRO offers margin trading and derivatives.
- Tax Wrappers – When it comes to tax efficiency, Dodl offers the most – LISA, SIPP, and ISA alongside GIA; Freetrade and InvestEngine offer SIPPs and ISAs; Trading 212 has a ISA-only approach; while DEGIRO lags behind, offering no UK-specific tax wrappers.
Here is the full analysis
⚠️ Banker On Wheels Broker Classification System: Unsure whether a Neobroker is for right you? Check this guide to UK Broker Tribes first.
UK's leading neobrokers
in this guide We focus on digital-first platforms
🔎 We look at Trading 212, freetrade, Investengine, DODL & DEGIRO.
Focus of this guide
To categorise brokers we use two dimensions:
- Pure Players vs. Banking Group Brokers – Pure players (right side of graph) are independent from a Systemically Important Banking Group. They specialise in brokerage business. This article will focus on a subset of this wider group. While some pure players may have a banking licence, these activities are non-core to the business, and not systemically important. Then, there are Brokers that are part of a Systemically Important Banking Group (left side of the graph).
- Sophistication and Product-Suite – Within the pure players we make distinction between Tier 1, Tier 2 and Tier 3 players based on considerations like price, sophistication or size of client portfolio. Today, we will focus on the Tier 2 players. Tier 2 brokers typically cater investors with small to medium-sized portfolios.
common characteristics
What have TIER 2 Brokers in common?
Low-cost and Slick platforms
The Tier 2 Brokers we’ve reviewed are all recent arrivals on the investing scene. The international Tier 2 brokers (Trading 212 and Degiro) emerged in the mid 2000s, and the UK-based platforms arrived around a decade later. The driving factor in the rise of these brokers is the generational move away from physical banking services to online services to mobile based ones. This decreased friction is a massive change from the brokers dominant in the past. Tier 2 brokers distinguish themselves from bank brokers and Tier 1 brokers by minimal or zero custody and trading costs, elegant tools to manage and analyze your portfolio and slick, straightforward platforms.
but Some business models may be untested
This approach to broker business comes with more uncertainty than we’re used to with banks and Tier 1 brokers. We don’t yet know if it’s possible to run small broker platforms at zero or near zero fees sustainably – without trying to promote CFDs and other speculative products aggressively – on the decades long time scale that younger investors will be putting money into the market.
Pros & Cons of Tier 2 Brokers
- Low-Cost: best for compounding
- Easy To Use Platform
- Mobile-Friendly
- May lack tax wrappers
- May have untested business model
- May Not Be Profitable
- May Not Be Sophisticated
Suitability
Suitable
CHeap & intuitive
Suitable
Cheap, but needs diversification for medium & large portfolios
Potentially Suitable
may Lack certain market access, products & sophistication
Is a tier 2 broker suitable for you?
Are you young, with some savings & looking for ease of use?
don't want to pay £10 to trade an ETF? These brokers are for you.
- Age: Typically 20s-40s but can be above
- Portfolio Size: Low to Moderate, often below £85k FSCS ceiling
- Sophistication: moderate to Advanced
- Counterparty Risk Aversion: Low
- Investment Horizon: Long
What these investors are interested in is ease of use and cost. They don’t like fees, and they don’t like paperwork. They are used to having products (think Facebook, X, Instagram) without paying up front for them and apply this mindset to their investment providers. £10 to trade an ETF? No thanks!
If you’re investing £1,000 from your first job, every basis point of commission weighs on your mind.
Their portfolios are generally small, under the £85,000 FSCS compensation ceiling. This is common among Tier 2 Brokers that typically have an average customer balance of £10-20k. Their investment horizon is generally long – 30 to 50 years wouldn’t be unusual. Sleepless nights worrying about the business strategy of their broker do not feature heavily in their schedule. If you’re investing £1,000 from your first real job with every basis point of custody charges and every GBP of commission weighs on your mind.
OUR CRITERIA: three differentiating factors
1. Safety - Portfolios are typically within £85k FSCS limits
Some Tier 2 brokers May have untested business models
Investing is an unfamiliar activity to most UK adults. Only 8% of them have a Stocks and Shares ISA. 97% percent of workplace pension account holders leave the money in the default option. A low growth, gloomy economic environment with significant inflation in recent years has not exactly encouraged financial optimism. Narratives like ‘cash is safe’ or ‘investing is gambling’ are very widespread. Trust in financial institutions and those who run them has not been high since the 2008 crisis. So, it may be tempting to trust the new wave of neobrokers instead of the traditional banks and brokers. Unfortunately, most Tier 2 have untested business models.
Any broker that is listed, has a banking licence and is regulated by a reputable regulator will score higher
Tier 2 are typically backed by VC or PE money and investors should predominately rely on government guarantees. As long-term investors we want the firms we work with to be around for the long haul, and we want to work with firms which treat their customers well. We look at public listings, ratings from credit ratings agencies, profitability and history as a guide to the direction and strength of the firm. This can’t give us certainty, only more or less confidence. Because this may allow investors to get more comfortable once the portfolio exceeds the £85k limit. Any broker that is listed, has a banking licence and is regulated by a reputable regulator will score higher. For the UK this last part is straightforward – all the brokers below are regulated by the FCA.
2. FEEs - Most Neobrokers offer competitive commissions
Any broker with recurrent fees may get penalised
Investing is about wealth preservation and growth. High fees for either custody or trading hinder us in achieving these goals, and investors prioritising Tier 2 Brokers want low-cost investing.
3. Platform Features - Portfolio transfer feature is a must-have
ETF availability is also a key consideration in our scoring
We want to be able to navigate platforms quickly, locate investments and see performance data in a straightforward way. Poor platform design is an obstacle to the clarity we need as long-term investors. We want a good range of funds available to build our portfolio. Also, if it turns out the broker has an unsustainable business model in the future, an investor may want to upgrade to a Tier 1 Broker – a portfolio transfer in a non-negotiable feature.
Additional Consideration: tax efficiency - Wrappers differenTiate brokers
Brokers that lack wrappers may score lower
We can successfully invest our money but see our gains eaten away by tax if we stray outside of the network of UK tax efficient accounts. See article 1 in this series for the impact capital gains, dividend and interest taxes make on investment returns! Limited account availability means complicating our financial life by using multiple platforms to cover our bases. Of course, not every investor needs every type of account, but availability is a strength.
1. safety considerations
- Gold: DEGIRO
- Silver: DODL
- Bronze: TRADING 212
- Also Raced: INVESTENGINE & FREETRADE
T212, InvestEngine & Freetrade Business Model: Growth at all cost
If you’re looking at a product which claims to be free of charge, the question immediately arises as to how money is actually being made. These are not charitable organizations. So, who pays to keep the lights on? Interest on your cash to start with. Then, the answer varies depending on the product but usually involves cross-subsidy. The long-term path to sustainable profitability for these firms is high assets under management, measured in billions or tens of billions of GBP assets under administration, at least some of which do incur custody fees or arrive alongside subscription to services:
- Trading 212’s (CFDs are core to the business): charges no custody fees and no commissions. But Trading 212 is a comfortably profitable firm. T212 began and remains at heart a CFD trading platform. They make their money via spreads on CFD trades and FX fees on CFD trades. This speculative activity is popular enough to keep the business very profitable and the ISA, GIA and cash savings products they offer are a bet that some customers will be tempted to move from sensible long-term investing towards some CFD activity on the side. It’s the equivalent of a bar selling ridiculously cheap beer alongside crazily overpriced salted peanuts. Eventually, some people are going to buy both, cancelling out the losses on one product.
- InvestEngine (earns fees from SIPPs): again charges no custody or commission on its stock and shares ISA but customer numbers and AUM steadily climb. The cross subsidy to the ISA comes from its SIPP, which has a fee of 0.15%, capped at £200 per year. The subsidy also comes from its LifePlan ETF portfolio range which charges 0.25% to actively manage a portfolio of funds for you according to your risk preferences. Without uptake of these products in the long term, InvestEngine will not be able to offer such a good deal on its ISA.
- Freetrade (has subscription plans): charges nothing to use its general investment account but still broke into profitability in 2024. Freetrade’s free GIA account is enough to get a sense of the power of the platform and tools it offers investors, which again may be enough to encourage some to move over towards the Basic and Plus subscription plans, generating predictable monthly income for the firm.
DEGIRO & Dodl: Side Hustle of bigger group
The exceptions to this model of subsidy are Dodl and Degiro:
- Dodl (part of AJ Bell) – is the side hustle for Tier 1 broker AJBell. During the years of the covid pandemic there was a huge expansion of app-based trading and investing amongst young people. This kicked AJBell into action. As the firm’s founder explained to the Financial Times: “We don’t want to wake up in 10 years’ time and find that these customers have gone somewhere else, and we’ve missed the boat.” Dodl has no commissions on trading but plays a part in the profitability of the AJBell family with high FX and custody fees.
- Degiro (part of FlatexDegiro) is wholly owned by Flatexdegiro and sustains the business by charging commission on trades (some 350 billion EUR of transactions were made through the Flatexdegiro in the past year). It’s the largest Tier 2 broker that is not relying heavily on CFDs/speculative products. However, you agree by default to share lending, unlike other competitions listed here.
T212 & Degiro have longest track record in business
In terms of confidence in the future of these firms and their competence to administer your assets on their platform, the largest, least exciting firms rank more highly than the new kids on the block:
- Dodl (founded in 2022) & Degiro (2008) – are smaller parts of huge, long established and stock exchanged listed corporations, and they jointly take the top two places in our ranking.
- Trading 212 (2004) – may earn its profits from CFD trading activity, but it has a 20-year track record in playing that game well. It can afford to offer your free ISA product without relying on hopes of rapid scaling and customer growth to stay afloat. It takes third place.
- Freetrade (2015) & InvestEngine (2016) – are exciting companies with a some path to long term profitability: they must grow subscriptions (Freetrade) and assets under administration (InvestEngine’s SIPP and LifePlan portfolios) fast to generate cash flow into the firm, before losses become too great to attract further crowd and venture capital funding.
DEGIRO & DODL have listed parents
Only two firms have listed parents:
- AJ Bell (£2bn market cap) – is the parent of Dodl. This market cap is as of December 5th.
- DEGIRO’s (€1.6bn market cap) – is in similar category.
- Trading 212, Investengine & Freetrade (Privately-held) – The other firms are not transparent, as they are privately-held.
Tier 2 brokers are often privately held
| Broker | Established | Funding |
|---|---|---|
| Dodl | 2022 | Listed parent AJBell |
| Degiro | 2008 | Listed parent Flatexdegiro |
| Freetrade | 2015 | Venture Capital and crowdfunding |
| InvestEngine | 2016 | Venture Capital and crowdfunding |
| Trading 212 | 2004 | Profitable privately owned (founders hold ~ 50% of firm). |
2. fees
- Gold: TRADING 212 & INVESTENGINE
- Silver: FREETRADE
- Also Raced: DEGIRO & DODL
But Winners are different Depending on account type
Winners are different across account types:
- General Investment Accounts (Trading 212, Freetrade, InvestEngine) – As a European broker, Degiro’s account would be treated as a GIA under UK tax law and that’s the comparison we’ve used. If you really need those tools (like derivatives and margin) which only Degiro offers, it’s an option, but will cost you much more than its peers which run free of charge GIA accounts. Dodl is unfortunately just too expensive for us to recommend for all but the smallest portfolios. It needs to incorporate a stepped fee structure for larger account holdings like its parent broker AJ Bell does to be competitive.
- SIPP accounts (InvestEngine or Freetrade) – The administrative burden on brokers for administering SIPP’s makes them more expensive and some brokers avoid them for this reason. When we come to evaluating value for money, we need to keep an eye on which account matters most to us. Becoming attached to a platform which is cheap for one account type only to later lose our wallets to fees on another account type isn’t going to be a good way to maximize our wealth. Freetrade require their most advanced subscription plan to hold a joint SIPP and ISA on their platform. For InvestEngine, it’s free.
- ISA accounts (Trading 212 or InvestEngine) – are zero cost brokers for stocks and shares ISA accounts. Shared revenue from share lending and good interest on cash mean that T212 comes out slightly ahead on this measure if you hold positions in single stocks or have residual cash in your account. If you don’t need single stock trading, InvestEngine is a great place to hold ETFs at no cost.
Dodl is a clear loser across categories
| Broker | ISA | GIA | SIPP |
|---|---|---|---|
| Trading 212 | £0 | £0 | N/A |
| Degiro | N/A | £765 | N/A |
| Freetrade | £1,497 | £0 | £2,997 |
| InvestEngine | £0 | £0 | £0 |
| Dodl | £23,605 | £23,605 | £23,605 |
⚠️ Our Methodology: The medal for this category is based on the GIA cost account simulation only. It assumes a 20-year accumulation period. We did it to make fees comparable for all providers. It is also part of our European cost comparison methodology. But, special mentions for the ISA and SIPP best offers are given in the Tax Consideration section at the end of the article.
3. Platform
- Gold: TRADING 212
- Silver: FREETRADE
- Bronze: INVESTENGINE
- Also Raced: DEGIRO & DODL
but it Depends on your preferrences
All of the Tier 2 brokers we’ve reviewed emphasize their ease of use. They all have a range of features for smartphone-based investors, and most have web applications. But some stand out.
Trading 212 stands out most of all in terms of range of platform features, offering more than any other and great ease of use. Freetrade and InvestEngine are honorable second and third place contenders, both providing elegant platforms and a great range of investments to choose from. Dodl is a good place for beginner investors to start, but they may want to move on once they realize they are more constrained in what they can choose to invest in via the app. Degiro isn’t as good as our top three in terms of platform presentation but has an edge of its own: Active and Trader accounts on Degiro get you access to options and margin, uniquely in the Tier 2 tribe.
Trading 212 - Multiple portfolios, multiple currencies, high cash interest.
T212 gives you the most substantial toolkit for personal portfolio management:
- The ‘pies’ function allows you to run multiple named portfolios under the same account. For example, you could have a few thousand pounds in a more aggressive portfolio you expect not to touch for decades, but a more conservative one for a big holiday with your family a few years in the future. These pies can be matched to an auto investment plan where funds are deposited and invested in the portfolio on a daily, weekly or monthly basis.
- Multiple currencies – You can fund your account in multiple currencies and trade on most major stock exchanges globally.
- Cash Interest & Share Lending Revenue – Competitive cash interest is paid on uninvested cash in multiple currencies. Share lending, with revenue split between yourself and platform is the default setting although you can opt out should you wish to. T212 allows fractional share investing to establish a position in a firm without needing the cash on hand to own whole shares. The investable universe is 13,000 + stocks and ETFs. The platform is straightforward to navigate with good visualizations of your holdings.
Freetrade - Access to UK Bonds, Recuring Investments, cash interest.
Freestrade is a stock-focused investing platform. It aims to be a user-friendly portal to access a very wide range of shares and ETFs listed on major exchanges around the world. Uniquely, it facilitates holding UK government treasury bills directly from the Debt Management Office. Fractional shares can be traded, removing the barrier to retail investors usually presented by very expensive single stocks. Interest is paid on uninvested cash. The interface is clean and modern, and the portfolio analysis tools are helpful. Recurring investment orders allow you to build up a portfolio on autopilot.
InvestEngine - ETF-only broker, multiple portfolios, auto-rebalancing.
InvestEngine is an ETF-only broker. Over 700 are available and more are added frequently, covering basically the whole universe of geographies, themes and factors. If you like funds or single stocks, this is going to be irritating, but the platform on both mobile and desktop is unmatched for ease of use and clear portfolio data. You can create multiple portfolios within your account, similarly to T212’s pies concept. Contributions start from £100 per payment – these payments can be either left as cash or divided automatically into the portfolios as you’ve set them up. The platform has an auto rebalancing tool, which saves you the time and fuss of calculating what to buy and sell to keep your portfolio within the parameters you originally set. The app and browser version are free of visual clutter and advertising, and you are not bombarded with ‘research’ findings or other stimulus to unnecessary activity. No interest is paid on uninvested cash. Features like margin loans, share lending or cash interest are not provided and the account can only be funded in GBP. Of all the platforms we looked at, InvestEngine has done the best job visually. It’s a pleasure to use.
DEGIRO - margin trading & derivatives. Dodl - simplicity.
Even Degiro & Dodl have some of their own advantages:
- Degiro has different account levels aimed at users with different levels of sophistication. All major global exchanges and a significant range of ETFs, funds and shares are available for trading. The Basic account type facilitates straightforward buy and hold investing, Active and Trader accounts unlock access to more complex securities like derivatives and margin. Unlike the other platforms we’ve looked at here, Degiro does not facilitate regular, scheduled investing. You’ll need to log in to place your trades rather than set and forget.
- Dodl’s features are limited to buying from a small range of ETFs, funds and shares. You can set up a regular investing plan to direct money into your chosen securities each month. International trading is limited to US stock exchanges. The platform is simple, but only available via android or iOS mobile app. This simplification might be attractive to those investing for the first time but feels limiting if you’re approaching it with a bit more knowledge. Dodl also foregrounds thematic funds tracking particular sectors (Ai, robotics, energy and so on) which are unlikely to be helpful for long term investors, which detracts from an otherwise beginner friendly environment.
Conclusion
🏆 Best UK Tier 2 Broker: Trading 212
🥈 Silver: INVESTENGINE 🥉 Bronze: FREETRADE
UK NEO-BROKER PODIUM
| Broker | Company | Fees | Platform | Overall |
|---|---|---|---|---|
| Dodl | 4.0 | 1.0 | 2.0 | 1.8/5 |
| Trading 212 | 2.5 | 5.0 | 4.0 | 4.3/5 |
| Freetrade | 3.0 | 4.0 | 4.0 | 3.9/5 |
| InvestEngine | 2.0 | 5.0 | 3.0 | 3.9/5 |
| Degiro | 4.0 | 4.0 | 3.5 | 3.8/5 |
Trading 212 clinches the race with a Yellow Jersey. It has a versatile, user friendly and highly cost-effective platform. With a greater range of investment choices than InvestEngine and lower ISA fees than Freetrade, its main weakness is the lack of a SIPP account. In the long term we’d hope to see T212 move away from reliance on CFD trading profits, which heavily subsidies the ISA product, although this might mean introduction of fees on the more sensible investment accounts.
InvestEngine gets the green Jersey. It does exactly what it claims to – an ISA and SIPP hub for ETF investing at low cost. It’s straightforward and uncluttered. It takes second place on our podium.
Freetrade is the polka dot climber – an excellent, cost-effective choice for those running SIPP and ISA portfolios simultaneously and elegant web and mobile applications make it enjoyable to navigate. Its recent turn to profitability & potential acquistion by IG Group gives us reason to think it will be with us for the long haul. It takes the third place, but could be upgraded once acquisition is finalised.
What matters most in tier 2 category?
Fees (50%) and Platform (35%) drive the overall ranking
We apply the following weights to our subscores:
- Company (15%) – Company is not important in this relative ranking. Why? Because most Neobroker clients invest their first salaries and are below the £85k threshold, where company survival may have impact on their recoveries in case of bankruptcy & fraud. In essence – given that most brokers have untested business models and the average portfolio size of around £20k for these brokers, the FSCS is the key protection.
- Fees (50%) – Neobroker clients want investing to be basically free. They are very price-sensitive. It will matter for the compounding of wealth.
- Platform (35%) – Great digital platform and mobile apps are key.
tax Consideration
Best Suite: Dodl
- Cheapest ISA: TRADING 212 & InvestEngine
- Cheapest SIPP: InvestEngine
only three provide both an ISA and SIPP
Tier 2 Brokers offer a limited range of tax accounts compared to their bank and Tier 1 cousins. This reflects the demography of their customers. Relatively few university students investing a few hundred pounds a year over from their summer job are also in desperate need of accounts for their children, who do not yet exist.
ISAs are more widely offered than SIPP accounts. Lifetime ISAs are in short supply and junior accounts unavailable. As these platforms continue to grow in coming years and as the 25-year-olds who set up accounts turn into 35-year-olds with family life on the horizon, we can expect more to be offered.
- Dodl (LISA, SIPP & ISA) – is the most versatile offering Lifetime ISA, SIPP and Stocks and Shares ISA accounts alongside the GIA.
- Freetrade and InvestEngine (SIPP & ISA) – take a second on our tax podium, providing SIPP and ISA accounts plus the GIA.
- Trading 212 (ISA) – falls short of the competition by only providing an ISA. T212 staff say SIPP provision is on the way, but it has been many years since discussion started on this front and it has not yet been rolled out as of Q4 2024. If you need a pension, you’ll need another platform.
- Degiro (No wrappers) – doesn’t take tax wrappers seriously. Serving the entirety of Europe, does not provide UK specific tax advantaged accounts. If you need long term shelter from tax for your money, it won’t be a wise choice if you’re based in the UK.
New Accounts: Current bonuses
What are the sign-up bonuses?
🎁 Trading 212 and FREETRADE offer Free Shares up to £100
By signing up through our links below, you can receive FREE shares worth up to £100 :
- Trading 212: Open an account here and claim free shares worth up to £100!
- InvestEngine: Create your account here (check the page for any bonuses).
- Freetrade: Join here and receive free shares worth up to £100!
Take advantage of these offers and kick off your investment portfolio with a little extra boost.
🏆 UK's Best Neobroker
TRADING 212
CATEGORY RANKING: GOOD
4.1
/5
Key Pros:
- Cheap and great choice of ETFs
- Security Lending is Optional
- Cash Remuneration is Very competitive
What other categories are available in the UK?
Tier 2 brokers are great for beginners. However, if you have a substantial portfolio other criteria start matter more than being a digital-friendly low-cost broker. Look at Bank and Tier 1 Brokers in the UK below.
Good Luck and Keep’em* Rolling!
(* Wheels & Dividends)
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