Freetrade is launching a platform for trading stocks and shares which brings commission-free trading technology and fractional share dealing to the UK for the first time.
Most people, especially millennials, are priced out of investing on the stock exchange. Costly broker fees, typically around GBP12 per transaction, prohibit smaller investors, who often need to see their investment grow considerably before returning a profit.
In addition, receiving the correct advice is difficult because it tends to require an investor meeting with an IFA in person to receive support, which is both expensive and time-consuming.
A recent survey showed that 46 per cent of Britons would love to invest in stocks and shares but don’t know how. Even when an investor is knowledgeable, traditional channels are outdated and difficult to use.
In the US, companies such as Robinhood and Loyal3 are addressing this issue by providing intuitive platforms with zero commissions. They have shown they can still be successful by providing additional services and investing client money held on account in overnight markets.
Freetrade has recently been formed in the UK, and has designed a mobile app that is designed to make stock market investing more accessible for European investors, by having a user-friendly interface that makes it easy to search for companies that are trading on an exchange, removes restrictions around portfolio sizes and operates on a zero-commission model so low value traders are not excluded.
Freetrade will also be introducing fractional share dealing to the UK market; for example, if Apple is trading at USD100, users will be able to invest USD25 in shares. Fractional share dealing is available in the US through the likes of DriveWealth and Stash Invest, but Freetrade will be bringing this proven model to Europe for the first time.
Freetrade’s app will offer access to a network of IFAs using a model similar to Uber and Airbnb, where independent advisers can provide advice directly through the app. This will provide people new to trading with access to the same professional advice as more seasoned investors, allowing them to make informed decisions over the shares they purchase.
Freetrade has been accepted onto the FCA Innovation Hub programme and is in the process of applying to the FCA for regulatory permission to be an execution-only broker. The company is on course to start officially trading within the GBP288 billion UK share dealing market by early 2017.
To aid its development, Freetrade is running an equity crowdfunding campaign on Crowdcube, where it has raised 40 per cent of its GBP100,000 target within four days of being live to the public. Its plan upon launch is to target the 14.8 million millennials in the UK.
Freetrade is currently accepting early registrations via its website – www.freetrade.io
Adam Dodds, one of the key figures behind Freetrade, says: “We came across the model they have in the US, and not being satisfied with simply bringing the same concept to the UK, we looked at how we could raise the bar. These US companies have shown zero commission trading models can work, but they were only solving half the problem. Professional advice is an intrinsic part of making a good investment decision, and no one, as far as we can see, is offering low-cost, flexible access to IFAs and other advisers. We are creating a world-first – an Uber or Airbnb model for IFAs, alongside a zero commission trading model. With all these elements combined, we’re unlocking the stock market for millions of people, and creating an investment platform that will massively disrupt a huge market.”
