I have to admit that I wasn’t sure about the gamification of CFDs when BUX X first launched in 2014. I’ve always felt that CFD trading is a sophisticated product that caters to experienced investors.
As much as every CFD broker would like it to be, leveraged trading is a niche market not appropriate for most people.
If you want to play at being a trader, you should probably just use the best trading game of all time and keep your money well off the table.
But as I said before when the FCA were planning on banning crypto CFDs, “Playa’s gon’ play, traders gon’ trade”.
Enter BUX, so far (according to Crunchbase) they have raised a whopping $35m to bring trading and investing to the masses. They started life as an ayondo white label (which they just acquired), with a very slick app (BUX X) and some excellent marketing tactics offering a gamified version of CFD trading to beginner investors who wanted to dip their toe in the wonderful world of investing.
Now their second app BUX Zero looks to help the next generation of investors take control of their investments and invest for longer-term capital grown by offering free stockbroking on real shares.
Yesterday I spoke to Nick Bortot the CEO and founder of BUX on the investment lifestyle neobroker he is hoping BUX Zero will become.
What was the incentive for setting up BUX ?
I worked for a traditional broker for 12 and a half years, a company called BinckBank, comparable to Hargreaves Lansdown in the UK. And what I discovered is that there are many, many people who would like to invest and who would like to trade, but when it comes down to people that actually do open an account and start to invest or trade, that’s only a handful of people.
The reason being that it’s complex, it scares people off, starting from the account opening process to the interface, costs are still high, and another thing I discovered is that the brands of traditional brokers and banks don’t really appeal to young people, especially after the crisis, the reputations of many banks and brokers were hurt.
So I was always fascinated by how can we tap into this much larger market, how can we allow these people to start investing.
Firstly, what we did is we said let’s take out all the complexity. Five years ago, we launched an app, which was and still is super, super simple, super straightforward. I didn’t hire a bunch of ex-bankers and brokers when I started BUX, we have people with a very different background, we have people with a games background, people with a social background in the company, so we were able to kind of reinvent brokerage.
Secondly, like I said, young people still find it very expensive. In Mainland Europe, you pay nowadays between three to seven euros per transaction. I don’t think it’s much different in the UK. So instead of offering real stocks, we decided to use CFDs. It’s not like we’re huge fans of CFDs as a financial instrument. We merely saw CFDs as a replacement for stocks. So when we started with BUX, we didn’t offer extremely high leverage, for example. So ESMA didn’t have an impact on what we did. But we started offering CFDs as a replacement for stocks.
And thirdly, we tried and managed to build a lifestyle brand around it. If you look at industries like fashion or cars, there are great brands like BMW and H&M, but in the financial industry, there are hardly any loved brands, and I truly believe in a brand with fans.
So we created a totally different brand. If you go to our website, GetBux.com, you will see that we communicate in a very different way in comparison to other companies. Much more human, light-hearted, not so much small print.
Going back to the CFD aspect of it, it’s a notoriously different product to trade. Of course, you know, from your partnership with Ayondo, which you’ve recently taken over. One of the nice things about Ayondo was that you could trade CFDs at 100% margin. So essentially, you didn’t have any leverage risk. But trading for beginners and most private clients, it’s difficult. Most of them don’t do well in the market, and especially with social media, there’s a lot of people flogging luxury lifestyles, from trading on social media. So people have this inclination to run before they walk nowadays. Where they’re trying to make money in the short-term, rather than the long-term. So how’s BUX addressing that in not making the high-risk part of the market too easily accessible for people who probably should be looking at long-term growth, rather than short-term speculation?
Just to be clear, BUX Zero is a stocks app, not a CFD app, so it’s our second app. BUX X was the CFD app, which turned five years old today.
Our first app, the CFD app, which is a bit of a gamified app, is called BUX X, and our new app, which we previously called BUX Stocks before we launched it, is called BUX Zero, and this app offers zero-commission stock trading. If you go to GetBux.com, you will see both apps and you will clearly see the difference.
How does that compare to other free apps? You’ve obviously got Robinhood in the States, which is moving over to Europe now, and then there’s Freetrade in the UK, which is growing quickly. How does it compare in terms of how many stocks you can buy, ETFs and SIPPs and ISAs and so on?
If you look at banking, you see the rise of neobanks like Revolut, like N26, etc. I’m sure you’re aware of it. And it’s my vision that over the next years, you will also see two, maximum three, neobrokers in Europe. There will be two or three brokers that will take over the European brokerage space, and it’s our ambition to be the leading neobroker. And Robinhood and Freetrade are neobrokers as well. Robinhood is obviously doing very well in the States. Freetrade is doing well in the UK.
Here comes the importance of our previous app, of our first app. We rolled out our first app in nine countries in Europe, so we know very well how to localise the app and not just localise it from a language point of view, but also from a text point of view, from an onboarding point of view.
We have a base of two million users. So are leveraging on that experience and on that user base, and our already existing brand.
To give you an example, in the Netherlands, one out of three Millennials have BUX on their mobile; by leveraging on those things, we have a very good foundation for becoming the number one broker.
What’s market access like as well? How far down the spectrum of share do you go? Do you go all the way down to the smaller market cap stocks? Can you buy a £10 million stock or are you still main market liquid stocks?
So we very much believe in simplicity and if you go to a restaurant where there are hundreds of things on the menu, it’s hard to choose. From my experience with this traditional broker, where I work for, I saw that 95% of the trades were done at 5% of the stock that we offer. So in order to keep our app nice and clean, we offer all main stocks, and obviously, we will start with a smaller spectrum and will increase that spectrum, but I don’t believe that as a broker, you need to offer tens of thousands of different stocks.
And in terms of offering stockbroking for free, is that through physical shares, or is that still through CFD?
It’s physical shares.
So then how does the app make money? Obviously, Robinhood, they have their order flow and then Freetrade and dabbl look at subscription models. How is it sustainable as a business if you’re providing stockbroking for free?
Actually, our model is very comparable to the Freetrade model. So we offer a basic order for free, and if you want the order to be executed instantly, you pay a fee of one euro, and on top of that, next year, we will introduce a subscription.
Going back to your community, you’ve got about two million people signed up to use the various versions of the app, are you looking to create a social community of investors of traders, where people can share ideas and insights and sentiment?
Do you think social trading can ever become a standalone investment class, like ETFs or funds? Do you think it’s more of a way for investors to discuss ideas or do you think it’s a potential way for client bases to make money?
So I would like to make a clear difference between a community and between social trading.
Social trading I see as copy trading, so copying someone else, whereas a community is a place where people can meet each other, create groups, follow each other, without copying someone else’s trade. We very much believe in offering a community, especially as we’re targeting young people who are inexperienced, who might feel insecure.
What we also experience is that young people value the opinion of their peers much more than they value the opinion of a traditional investment expert, investment advisor. So we think that the community has taken over the role of the traditional advisor.
I find it hard to say if copy trading is going to be a separate asset class. Probably copy investing, but I mean as we all know, it’s hard to make money with trading; even very experienced investors find it hard.
I don’t know if that will be something sustainable. I actually think that it will stay a niche. I believe in copy investing. So copying someone who is investing for the long-term.
What’s your ultimate goal for BUX to be for investors?
If you look in Europe, and I think it’s the same in the UK, interest rates are super low at the moment and they will stay low for a while. The way our pensions are organised is not sustainable because of the aging population, so the young can’t pay for the old anymore. Houses have become unaffordable.
Basically, investing is one of the only viable ways to create some wealth for later. Now in the US, around 40% of the population has an investment account, whereas it’s just 11% in Europe. And we think that in Europe, we will go much more to the US kind of society where you have complete care of your own wealth, your own pension, etc.
We want to be the single hub for people who want to do more with their money basically. We want to offer long-term investing, short-term trading, probably crowdfunding, crypto. We want to offer everything around investing and stock exchanges.
And that is BUX umbrella, all under our lifestyle brand.
What would you say has been the best bit of running BUX or the thing you’re most proud of?
It sounds a bit like a cliché but I’m super proud that we’re doing this together with a small team, and it gives a great feeling to see people using your app or to see the brand that I created is covered by media, like Good Money Guide, or like TechCrunch; that obviously makes me proud.
But it especially makes me proud to see all the people who are happy, who are having fun, and having a great time together. And ultimately, we’re improving people’s financial future, and I think that’s really great to help people to get a better financial future.
What about the worst? What’s been the hardest part?
In Amsterdam, the competition for good people is really harsh, so I spend a lot of time finding great, talented people, and sometimes, that’s quite a challenge.
There are companies like Uber and Booking.com and Facebook, based in Amsterdam, and you have to compete with them, and that’s not always easy.
It feels really good if someone who has an offer from Uber and from Facebook chooses to work for BUX.
And finally. What would be your top three resources, other than BUX, of course, that you’ve used or that you know of, that you think can help make people better at trading and investing their money?
So I would start, not with the regular known investing and trading books, but I very much believe in the connection or the relation between investing and psychology. Basically, investing is all about psychology, it’s all about greed and about fear, and it’s about discipline, and not letting your emotions take over. So my advice would be to invest in a book about psychology, to make sure that you can control your emotions. That’s one thing.
Secondly, I always advise people to demo accounts, so to train with. I mean you can read a lot of books where at the end, the proof of the pudding is in the eating. It really helps to train.
And thirdly, at BUX, we use Investopedia a lot. That’s a website we really like.
Richard founded the Good Money Guide (previously 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.