There seems to be a bit of a free-for-all in stockbroking at the moment. It looks like the fintech rebels have decided that investing is the next stomping ground for disruption.
As fewer and fewer of the younger generation put aside money in savings and investments, a new breed of mobile first stockbroking platforms are stepping in to try and tempt millennials into the joys of investing in the stock market.
Fresh from raising nearly £3m to expand their stock brokering platform on Crowdcube we talk to Adam Dodds CEO about why he set up Freetrade and who it’s for…
First of all, what is Freetrade, why did you set it up and what makes Freetrade different?
Freetrade brings free, frictionless stock investing to the UK and Europe for the first time ever.
I started Freetrade after being frustrated with the investment options available in the UK for someone with a modest amount to invest. The products are clunky with high fees. I knew the market was ripe for a challenger stockbroker to enter the space.
Where would you say Freetrade sits in comparison to established platforms like Hargreaves Lansdown and AJ Bell.
At Freetrade, our mission is to build a totally new culture around investing: friendly, innovative, customer-first and universally accessible.
Compared to other legacy services we’ve tailored the Freetrade business to focus on building a new generation of financial-savvy customers by providing a service that helps users grow their savings through long-term investments.
How do you manage to make a profit if you offer zero commission stockbroking? Do Basic customers still have to pay stamp duty when they buy and SDRT when they sell?
We offer zero-free trades by optimizing costs. What this means is that we collect the orders and execute them in bulk at 4 pm each day. In addition to bulk orders, we offer a £1 charge for instant trades during market hours. We’ve just launched ISAs – they’re currently free and we will charge what we consider a very low £3 / month when the new tax year starts in April.
In the coming months, we’re planning to launch Freetrade Alpha, an ever-improving premium investment account similar to the idea of Amazon Prime or Spotify Premium. For a fixed monthly subscription of £10, it will launch with unlimited instant trades for US stocks, free ISA, free same day withdrawal, etc. A full pricing breakdown can be found on our pricing page.
Stamp Duty is a government tax that our customers pay on the relevant UK shares, and we are not in the business of using bait-and-switch tactics such as paying it for them as a promotion that you see in the market. We are building our business model to be honest, transparent and sustainable – as well as aligned with our customers.
Any plans to offer coverage of the AIM market for smaller shares with greater growth potential or even equity crowdfunding?
My growth team has just done a very interesting product-market fit survey among our customers (the results were impressive)! One feature request we identified was even more stocks in our universe. The team are actively working on enhancing the list of stocks we offer, and our customers will see more and more stocks and ETFs pop up in the Freetrade app.
And finally, what would be your top three resources for new investors to learn about the stock market online?
If you’re looking to jump into investing, I’ve found Investopedia to be fine for new users wanting to learn about the ins and outs of investing. It’s quite US-orientated, but a good starting point.
Secondly, we see great discussions in our community forum about the various companies and ETFs – it’s a resource that probably not many have heard of and we saw interesting analyses of Netflix, Facebook, and Tesla in there, all written by the users of our app.
If you’re looking to create a personalised list of stocks you can track, a lot of our community members use the Yahoo Finance mobile app for its simplicity.
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Richard started the Good Broker Guide in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.