Freetrade

segued

Has anyone experience of buying shares on freetrade? Is it trust worthy?

bowlhead99

There haven't been any major publicised complaints of them not being trustworthy, so it would  be probably be unfair to say that they haven't been in business long enough to prove themselves.

Still, it would be perfectly fair to say they are setting up a business with a lofty goal to provide services for low cost (free to some customers, subsidised by other customers paying low cost for services) and that business model will presumably require a lot more customers then they currently have, to allow them to make their first reported profits and not be reliant on their owners continually giving them extra finance. 

If they don't make it profitable or get enough customers to be able to sell it on to someone with deeper pockets, it will eventually get closed down or taken over - the first of which would be a hassle for customers at the time and the second may be unwelcome if the current business model isn't preserved.

I invest in some relatively high risk investments which carry plenty of uncertainty in how they will perform, but I generally do it through established and proven providers rather than unprofitable 'disruptor' fintechs.

By contrast, other people are seduced by low costs and like the idea of an app-only solution being cheaper to use than a mainstream provider, so they will embrace the new offerings even though they are perhaps being more cautious on what investments they hold and would not consider themselves a significant 'risk taker'.

From my perspective I can rationalise investing in an investment offering higher yield or growth prospects for higher risks (e.g. hoping for a 6% a year return instead of 4%, you would expect higher risk of failure for that higher reward). Whereas saving 0.1-0.5%  on transaction fees for a long term investment in exchange for an unquantifiably higher level of potential disruption in the event of failure (e.g. broker goes under and it takes 6-12 months before you can access your portfolio), does not appeal so much.

This is not to say that all the more established brokerages and investment platforms have no risk of failure, just that at least the ones that have been around the block and made profits might be seen as more stable, especially if the newly acquired customers with relativity small amounts invested are turned off investing by a sustained market decline.

mwarby

I’ve used them, they are regulated in the UZ by the FCA and have raised quite a bit of funding, so I’d say they’re fairly trustworthy. Of course they are as far as I can tell reliant upon venture capital, if that ever dried up I’m not sure how long they’d last. For me for a bit of playing and speculation they’re fine, for investing all my wealth(if I was so lucky to be wealthy) I’d be a bit more careful, I don’t think you’d lose money, but if they ever went belly up you’d lose the ability to trade for a while 

takesyourchances

I have been using Freetrade for a couple months now, I have around 2k on the platform so far. I have using it for some UK and US company shares. My 6 figure portfolio is with HL, so this is just a small amount. I like the app, how it works and of course the low costs to buy smaller amounts etc which suits me for single shares along it has EFT's etc.

It is always in the back of my mind about the platform going under, but I feel they are a trustworthy company, I just hope they can sustain this and grow and for a small part of my overall investments etc I am giving them a go. So far they seem to be making the right moves. I will be keeping my main and larger sum investing on HL but I would like Freetrade to really work out for the type of buys I am dolng on it.

They are offering instant trades free now. I have been buying bits during this downturn also as my ISA on HL is filled for this tax year, I have put a few hundred in this past week or so.

Likes of Robinhood is popular in the states for this type of concept, there is an active board on the freetrade web site and some bloggers and youtubers have much larger sums on the platform than me. As I said, I will keep my larger and main investing on HL but will be adding here and there on Freetrade and hopefully they can grow as I feel there is a place for this type of platform in the UK. It is maybe also appealing to the younger generation (I am 40) I mean 20's and early 30's.

It is more quiet around these parts about Freetrade and you may find more out on their actual board too.

bowlhead99

takesyourchances said:

They are offering instant trades free now.  

It is always in the back of my mind about the platform going under, but I feel they are a trustworthy company, I just hope they can sustain this and grow 

The practical problem is that literally tens of thousands of businesses, run by trustworthy people, fail each year. It's not all about being ambitious, hard working and good enough at marketing to get some venture capital money flowing. It's good to support nice people, but only with a little of your money

There's seemingly no limit to what people will give away for free if it helps to grow their customer base until they can monetise the customers properly somehow. And I'm sure the 20-somethings love it because they feel that they are getting one over on the foolish 'boomers' who are stuck in their old ways. Why should providing a trading platform, executing and settling deals on a stock exchange and delivering a competent nominee service be something that costs the customer any money?

Likes of Robinhood is popular in the states for this type of concept,

Yes, Robinhood got a million dollar fine from FINRA in December over concerns that they didn't give their customers the best deals on trades executed for them while pocketing the commissions. Analysts have noted that their method of getting half their revenues from high frequency trading and their strategy of getting payment for order flow - by routing trades to certain market makers who will send them rebates and commissions which in theory can be advantageous for both the broker and the customers if the pricing is better - is something that could dry up and put them out of business.

Robinhood also caught a hell of a lot of flack today as their systems went down at the opening of trading:

The company said it began investigating a "system-wide outage" shortly after 9:30 a.m. ET. By 11:30 a.m., Robinhood said that it had identified the problem and that "a fix is being implemented," but all its trading services were still experiencing major outages as of 2 p.m.

While Robinhood was offline, the market was rebounding from one of the worst weeks since the 2008 financial crisis. The Dow Jones industrial average was up as much as 815 points on Monday morning after falling by more than 3,500 points last week as fears about the coronavirus outbreak swirled

Ouch.

Robinhood makes their money from the aforementioned payments for order flow, high frequency trading volume, rebates from market makers,  interest charges on margin lending, keeping the interest earned on uninvested cash etc, which is presumably what Freetrade hope to do, to get enough money to keep them afloat so that at some point their backers will not need to keep throwing money into a bottomless pit because the company will finally break even.

there is an active board on the freetrade web site and some bloggers and youtubers have much larger sums on the platform than me. 

Yes, some will have a lot of money, like with Robinhood. There are certainly some millennials with £500k balances from trading Bitcoin that they'll throw at a free service, and some astute and cost-conscious traditional traders who like the concept.

 Most of Robinhood's customer base has a typical balance of $1000 to $5000, way below all the big brokers like Fidelity or Schwab who charge real money for their more traditional services through which people are willing to properly invest their retirement funds. I expect Freetrade is the same. It's easy to see the appeal of being able to put £200 into the account and buy a few stocks for nothing. 

But from the business's point of view, there's no money to be earned from a customer who puts £200 in an account and wants three international trades and all the customer service for free. And the customers with £200,000 are not going to use them, because they think "what's the catch?" and "these guys can't be making money, what happens if they go under or have a major outage while I'm trying to adjust my portfolio"...

So, the longevity of the business model is yet to be proven. If everyone who puts in £200 is willing to have it geared up to £1000 to make a margin trade on which the business can earn interest, trading commission etc then they might have something when interest rates increase, although only if the customers turn out to be good to cover the margin call rather than running off and not being worth pursuing. 

But as the FCA has sought to limit margin trading for unsophisticated consumers, that would be difficult to get the critical mass to replicate Robinhood which has 5 million customers but in a much bigger and more capitalist, lightly regulated country.

So the way I see it, Freetrade are stuck trying to sell more traditional services, albeit via an app rather than full service, at low cost or zero cost. Going back to the 'plenty of trustworthy people with good intentions start businesses that fall' comment, I fear a poor outcome, even though from a consumer point of view it's great to see that people are trying to shake things up.

For many of us, the way to save money by Freetrade existing is not by using Freetrade, but that we will continue to use the legacy providers -while those legacy providers will cut charges to stave off competition from the likes of Freetrade. After Freetrade wither and die on the vine, some other pretender will have a crack. They may fail too. But meanwhile those of us with more traditional services will get cheaper services because our providers will be cutting their margins razor-thin to compete with the new kids on the block. Thus the new kids are truly 'disruptors' even though they may fail and be terrible homes for your money.

It is more quiet around these parts about Freetrade and you may find more out on their actual board too

Yes, this site isn't always the best place to find out about what's up with new specialist service providers that don't have instant traction here. 

For example P2P independent forum is way more detailed than MSE forums for P2P. Lemonfool (formerly Motley Fool forums) is more in depth in other areas. For the specifics of how Freetrade works, there's a Freetrade user forum. 

But anything hosted or endorsed by Freetrade themselves, you do need to recognise that anyone saying they are happily investing £100k with no concerns and great customer service, may just be the CEO's secretary or family telling you what you want to hear.

For me, my nod to the non-mainstream is a couple of grand in eToro. Fine if it's just a bit of fun. If it was a six figure pension fund, they wouldn't get a look in.

takesyourchances

bowlhead99 said:

takesyourchances said:

They are offering instant trades free now.  

It is always in the back of my mind about the platform going under, but I feel they are a trustworthy company, I just hope they can sustain this and grow 

The practical problem is that literally tens of thousands of businesses, run by trustworthy people, fail each year. It's not all about being ambitious, hard working and good enough at marketing to get some venture capital money flowing. It's good to support nice people, but only with a little of your money

There's seemingly no limit to what people will give away for free if it helps to grow their customer base until they can monetise the customers properly somehow. And I'm sure the 20-somethings love it because they feel that they are getting one over on the foolish 'boomers' who are stuck in their old ways. Why should providing a trading platform, executing and settling deals on a stock exchange and delivering a competent nominee service be something that costs the customer any money?

Likes of Robinhood is popular in the states for this type of concept,

Yes, Robinhood got a million dollar fine from FINRA in December over concerns that they didn't give their customers the best deals on trades executed for them while pocketing the commissions. Analysts have noted that their method of getting half their revenues from high frequency trading and their strategy of getting payment for order flow - by routing trades to certain market makers who will send them rebates and commissions which in theory can be advantageous for both the broker and the customers if the pricing is better - is something that could dry up and put them out of business.

Robinhood also caught a hell of a lot of flack today as their systems went down at the opening of trading:

The company said it began investigating a "system-wide outage" shortly after 9:30 a.m. ET. By 11:30 a.m., Robinhood said that it had identified the problem and that "a fix is being implemented," but all its trading services were still experiencing major outages as of 2 p.m.

While Robinhood was offline, the market was rebounding from one of the worst weeks since the 2008 financial crisis. The Dow Jones industrial average was up as much as 815 points on Monday morning after falling by more than 3,500 points last week as fears about the coronavirus outbreak swirled

Ouch.

Robinhood makes their money from the aforementioned payments for order flow, high frequency trading volume, rebates from market makers,  interest charges on margin lending, keeping the interest earned on uninvested cash etc, which is presumably what Freetrade hope to do, to get enough money to keep them afloat so that at some point their backers will not need to keep throwing money into a bottomless pit because the company will finally break even.

there is an active board on the freetrade web site and some bloggers and youtubers have much larger sums on the platform than me. 

Yes, some will have a lot of money, like with Robinhood. There are certainly some millennials with £500k balances from trading Bitcoin that they'll throw at a free service, and some astute and cost-conscious traditional traders who like the concept.

 Most of Robinhood's customer base has a typical balance of $1000 to $5000, way below all the big brokers like Fidelity or Schwab who charge real money for their more traditional services through which people are willing to properly invest their retirement funds. I expect Freetrade is the same. It's easy to see the appeal of being able to put £200 into the account and buy a few stocks for nothing. 

But from the business's point of view, there's no money to be earned from a customer who puts £200 in an account and wants three international trades and all the customer service for free. And the customers with £200,000 are not going to use them, because they think "what's the catch?" and "these guys can't be making money, what happens if they go under or have a major outage while I'm trying to adjust my portfolio"...

So, the longevity of the business model is yet to be proven. If everyone who puts in £200 is willing to have it geared up to £1000 to make a margin trade on which the business can earn interest, trading commission etc then they might have something when interest rates increase, although only if the customers turn out to be good to cover the margin call rather than running off and not being worth pursuing. 

But as the FCA has sought to limit margin trading for unsophisticated consumers, that would be difficult to get the critical mass to replicate Robinhood which has 5 million customers but in a much bigger and more capitalist, lightly regulated country.

So the way I see it, Freetrade are stuck trying to sell more traditional services, albeit via an app rather than full service, at low cost or zero cost. Going back to the 'plenty of trustworthy people with good intentions start businesses that fall' comment, I fear a poor outcome, even though from a consumer point of view it's great to see that people are trying to shake things up.

For many of us, the way to save money by Freetrade existing is not by using Freetrade, but that we will continue to use the legacy providers -while those legacy providers will cut rates to stave off competition from the likes of Freetrade. After Freetrade wither and die on the vine, some other pretender will have a crack. They may fail too. But meanwhile those of us with more traditional services will get cheaper services because our providers will be cutting their margins razor-thin to compete with the new kids on the block. Thus the new kids are truly 'disruptors' even they may fail and be terrible homes for your money.

It is more quiet around these parts about Freetrade and you may find more out on their actual board too

Yes, this site isn't always the best place to find out about what's up with new specialist service providers that don't have instant traction here. 

For example P2P independent forum is way more detailed than MSE forums for P2P. Lemonfool (formerly Motley Fool forums) is more in depth in other areas. For the specifics of how Freetrade works, there's a Freetrade user forum. 

But anything hosted or endorsed by Freetrade themselves, you do need to recognise that anyone saying they are happily investing £100k with no concerns and great customer service, may just be the CEO's secretary or family telling you what you want to hear.

For me, my nod to the non-mainstream is a couple of grand in eToro. Fine if it's just a bit of fun. If it was a six figure pension fund, they wouldn't get a look in.

All very valid points bowlhead as always and I was not aware of the problems with Robinhood in the States so thanks for going over that. The sums I have on Freetrade at the moment is only a little of my money and I would not be so comfortable having all of my HL money invested on there. The 2K odd has been more play. I have to admit, I do like the Freetrade set up for certain investing, but everything you have pointed out is very valid. I don't worry as such about HL going down, but would I sleep well with my six figures in a Fintech platform like Freetrade, truthfully I would think not, I would most likely worry about the platform going under rather than the markets going down.

I don't have dangerous amounts on Freetrade at the moment, the new tax year is close and I will be gearing to my HL S&S ISA again. I always invest for the long term as in buy and hold and part of me has asked myself will Freetrade be there for the long term as my long term is for the decades ahead.

Thanks for the excellent breakdown, you have surely provoked a more indepth analysis of the early stages and set up of a trading company like this and more food for thought.

You are right, the longevity of the business model is yet to be proven.

I have been planning to divert the bulk of my cash from here on to building up to the first monthly HL payment in April for my S&S ISA so my freetrade account will most likely stay similar for now, but I won't be transferring ISA's or anything

Thanks again for taking the time for your break down.

Username999

Seems like only a couple of years ago the spread-betting company "WorldSpreads" reduced the Bid/Ask spread to ZERO.
I thought at the time they must be skewing the prices in some clever way like "DealForFree" did.
Maybe not, they went bust 3 months later.
I still didn't get my £34 back

segued

bowlhead99 said:

takesyourchances said:

They are offering instant trades free now.  

It is always in the back of my mind about the platform going under, but I feel they are a trustworthy company, I just hope they can sustain this and grow 

The practical problem is that literally tens of thousands of businesses, run by trustworthy people, fail each year. It's not all about being ambitious, hard working and good enough at marketing to get some venture capital money flowing. It's good to support nice people, but only with a little of your money

There's seemingly no limit to what people will give away for free if it helps to grow their customer base until they can monetise the customers properly somehow. And I'm sure the 20-somethings love it because they feel that they are getting one over on the foolish 'boomers' who are stuck in their old ways. Why should providing a trading platform, executing and settling deals on a stock exchange and delivering a competent nominee service be something that costs the customer any money?

Likes of Robinhood is popular in the states for this type of concept,

Yes, Robinhood got a million dollar fine from FINRA in December over concerns that they didn't give their customers the best deals on trades executed for them while pocketing the commissions. Analysts have noted that their method of getting half their revenues from high frequency trading and their strategy of getting payment for order flow - by routing trades to certain market makers who will send them rebates and commissions which in theory can be advantageous for both the broker and the customers if the pricing is better - is something that could dry up and put them out of business.

Robinhood also caught a hell of a lot of flack today as their systems went down at the opening of trading:

The company said it began investigating a "system-wide outage" shortly after 9:30 a.m. ET. By 11:30 a.m., Robinhood said that it had identified the problem and that "a fix is being implemented," but all its trading services were still experiencing major outages as of 2 p.m.

While Robinhood was offline, the market was rebounding from one of the worst weeks since the 2008 financial crisis. The Dow Jones industrial average was up as much as 815 points on Monday morning after falling by more than 3,500 points last week as fears about the coronavirus outbreak swirled

Ouch.

Robinhood makes their money from the aforementioned payments for order flow, high frequency trading volume, rebates from market makers,  interest charges on margin lending, keeping the interest earned on uninvested cash etc, which is presumably what Freetrade hope to do, to get enough money to keep them afloat so that at some point their backers will not need to keep throwing money into a bottomless pit because the company will finally break even.

there is an active board on the freetrade web site and some bloggers and youtubers have much larger sums on the platform than me. 

Yes, some will have a lot of money, like with Robinhood. There are certainly some millennials with £500k balances from trading Bitcoin that they'll throw at a free service, and some astute and cost-conscious traditional traders who like the concept.

 Most of Robinhood's customer base has a typical balance of $1000 to $5000, way below all the big brokers like Fidelity or Schwab who charge real money for their more traditional services through which people are willing to properly invest their retirement funds. I expect Freetrade is the same. It's easy to see the appeal of being able to put £200 into the account and buy a few stocks for nothing. 

But from the business's point of view, there's no money to be earned from a customer who puts £200 in an account and wants three international trades and all the customer service for free. And the customers with £200,000 are not going to use them, because they think "what's the catch?" and "these guys can't be making money, what happens if they go under or have a major outage while I'm trying to adjust my portfolio"...

So, the longevity of the business model is yet to be proven. If everyone who puts in £200 is willing to have it geared up to £1000 to make a margin trade on which the business can earn interest, trading commission etc then they might have something when interest rates increase, although only if the customers turn out to be good to cover the margin call rather than running off and not being worth pursuing. 

But as the FCA has sought to limit margin trading for unsophisticated consumers, that would be difficult to get the critical mass to replicate Robinhood which has 5 million customers but in a much bigger and more capitalist, lightly regulated country.

So the way I see it, Freetrade are stuck trying to sell more traditional services, albeit via an app rather than full service, at low cost or zero cost. Going back to the 'plenty of trustworthy people with good intentions start businesses that fall' comment, I fear a poor outcome, even though from a consumer point of view it's great to see that people are trying to shake things up.

For many of us, the way to save money by Freetrade existing is not by using Freetrade, but that we will continue to use the legacy providers -while those legacy providers will cut charges to stave off competition from the likes of Freetrade. After Freetrade wither and die on the vine, some other pretender will have a crack. They may fail too. But meanwhile those of us with more traditional services will get cheaper services because our providers will be cutting their margins razor-thin to compete with the new kids on the block. Thus the new kids are truly 'disruptors' even though they may fail and be terrible homes for your money.

It is more quiet around these parts about Freetrade and you may find more out on their actual board too

Yes, this site isn't always the best place to find out about what's up with new specialist service providers that don't have instant traction here. 

For example P2P independent forum is way more detailed than MSE forums for P2P. Lemonfool (formerly Motley Fool forums) is more in depth in other areas. For the specifics of how Freetrade works, there's a Freetrade user forum. 

But anything hosted or endorsed by Freetrade themselves, you do need to recognise that anyone saying they are happily investing £100k with no concerns and great customer service, may just be the CEO's secretary or family telling you what you want to hear.

For me, my nod to the non-mainstream is a couple of grand in eToro. Fine if it's just a bit of fun. If it was a six figure pension fund, they wouldn't get a look in.

Thanks for the post. Makes a lot of sense.
Ultimately my 'main' fund portfolio is with HL (only a couple of thousand but growing monthly through regular investment), but I've started freetrade as a little bit of fun. I put £500 to invest small amounts in companies I like the look of, but dont want to buy enough to warrant a share dealing fee. Not really for any interest in making a huge profit, just for some speculation and enjoyment.