How to choose a broker: what to look for when selecting an account for DIY investing

Choosing a broker is the first practical decision a self-directed investor makes, and one of the most consequential. The broker holds your assets, executes your trades, and determines what instruments you can access. A poor choice—based on advertising rather than analysis—can cost hundreds of basis points a year in fees, restrict access to the instruments your strategy requires, or expose your assets to counterparty risk that a regulated alternative would avoid. This article sets out the criteria that matter and the questions to ask before opening an account.

What makes a broker suitable for self-directed investors

Not all brokers serve the same clients. Retail brokerage platforms optimise for simplicity and low-friction onboarding; professional or semi-professional platforms optimise for instrument breadth and cost structure. The criteria below apply to investors who manage their own portfolios across multiple asset classes—equities, ETFs, bonds, and potentially futures and options.

1. Regulatory status and investor protection

The first criterion is non-negotiable. Your broker must be regulated by a recognised financial regulator in a jurisdiction with meaningful investor protection.

Key regulators and their investor compensation schemes:

• FCA (UK): brokers must hold client assets separately from firm assets; the Financial Services Compensation Scheme covers eligible clients up to £85,000 in the event of broker insolvency
• SEC / FINRA (US): SIPC insurance covers up to $500,000 (including $250,000 cash) if a member broker fails
• FINMA (Switzerland): Swiss banks and securities firms; deposits covered by esisuisse up to CHF 100,000
• BaFin (Germany): investment firms regulated under MiFID II; investor compensation up to €20,000

Verify authorisation on the regulator's own public register—not the broker's website. Confirm that client assets are held in segregated accounts and identify which compensation scheme applies to your specific account type.

2. Fee structure

Brokerage fees compound over time and can materially affect long-run returns. The cost components to evaluate:

• Trading commissions: per-trade fees for equities, ETFs, and bonds. Some brokers charge zero commission but recover cost through wider bid-ask spreads or payment for order flow.
• FX conversion fee: if you trade instruments denominated in a foreign currency, the broker charges a spread on the currency conversion. This ranges from approximately 0.1% (institutional brokers) to 1.5% (some retail platforms) per conversion and is charged every time dividends are reinvested or positions are opened in foreign currencies. For a globally diversified ETF portfolio, this fee is often larger than the trading commission.
• Custody fee: ongoing charge for holding assets, expressed as an annual percentage of assets under custody or a flat fee per period. Some brokers charge no custody fee; others charge 0.1–0.25% annually.
• Inactivity fee: charged if the account does not trade for a specified period—material for long-term buy-and-hold investors who rebalance infrequently.

3. Product range and market access

Confirm that the broker provides access to the instruments your strategy requires before opening an account. Key questions:

• Does the broker provide access to global ETFs—specifically UCITS ETFs listed on European exchanges (XETRA, Euronext, SIX) or US-listed ETFs (NYSE Arca)?
• Can you access exchange-traded futures and options, if relevant to your strategy?
• Are ETFs from multiple issuers (iShares, Vanguard, Xtrackers, Amundi) available, or is the range restricted to a proprietary product range?
• Are both accumulating and distributing share classes of the same ETF available?

4. Platform capabilities

For investors who actively monitor and rebalance multi-asset portfolios, the platform's capabilities matter:

• Does the platform show consolidated portfolio performance across all positions and asset classes?
• Can you download transaction history and portfolio data in a format compatible with third-party analytics tools?
• Is tax reporting available—withholding tax certificates, annual gain and loss statements?
• Does the platform support limit orders and stop orders for rebalancing?

5. Account types and tax wrappers

Depending on jurisdiction, certain account types provide tax advantages that can significantly improve after-tax returns:

• UK: Stocks and Shares ISA (no capital gains tax or income tax on returns within the annual allowance); SIPP for pension contributions
• US: IRA, Roth IRA, 401(k) rollover accounts
• Switzerland: Pillar 3a accounts for retirement savings with tax-deductible contributions

Confirm whether the broker offers the account type most advantageous for your situation before choosing on cost grounds alone.

How to compare brokers

A structured comparison approach reduces the risk of being swayed by marketing:

• List the specific instruments you need (specific ETFs, futures, or bond markets)
• Verify regulatory status for each candidate broker on the regulator's own register
• Calculate the full annual cost under your expected trading pattern, including commissions, FX conversion, and custody fees—not just the advertised headline rate
• Check access to required instruments (some brokers restrict ETF availability by jurisdiction)
• Review independent assessments of platform stability and customer service quality

Choosing a broker alongside pfolio

pfolio is a portfolio management and analytics platform—it is not a broker and does not hold client assets. pfolio integrates with brokers via data connection, allowing users to import positions and transactions for analysis and optimisation. The broker you choose determines which instruments you can trade; pfolio's analytics apply to whatever the broker allows you to hold. Users who maintain accounts at multiple brokers can consolidate positions into a single pfolio portfolio view. Details on connecting your broker account are in the help centre under account setup.

Related articles

• ETF investing: how exchange-traded funds work and why they suit most portfolios
• Total expense ratio: how ETF costs affect long-term portfolio returns
• Accumulating vs distributing ETFs: dividend treatment and its tax implications
• Lump sum investing vs dollar-cost averaging: what the evidence says about timing