Freetrade has announced today that it will be launching its disruptive new platform for trading stocks and shares, which brings proven 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 £12 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% of Britons would love to invest in stocks and shares but don’t know how.[i] Even when an investor is knowledgeable, traditional channels are out-dated and difficult to use. In the USA 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 already designed a mobile app that’s 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 aren’t excluded. Freetrade will also be introducing fractional share dealing to the UK market; for example, if Apple is trading at $100, users will be able to invest $25 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 most innovative feature is a world-first – their app will offer access to a network of IFAs using a model similar to Uber and Airbnb, where independent advisors can provide advice directly through the app, reducing the impact of one of the major barriers to entry in stock market investing. 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 – a crucial element missing from many of the US-based solutions.
Freetrade has been accepted onto the FCA Innovation Hub program 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 £288bn UK share dealing market by early 2017.
To aid their development, Freetrade is running an equity crowdfunding campaign on market-leading platform, Crowdcube, where they have raised 40% of their £100,000 target within just four days of being live to the public. Their plan upon launch is to target the 14.8 million Millenials in the UK.