Speaking in regards to the topic - if only margin trading was to be available - Freetrade could make money on lending cash that sits in other people’s accounts. I guess the market rate is 15-20% interest PA for the margin trading.
And, of course, reserve the right to sell if shares fall close to the breakeven, i.e. with 80% margin, 20% loss could trigger an immediate sell - as a minor prize, even non-Alpha customers could get that transaction free of charge hence £1 saving at least
Edit: or some sort of relevant advertisement for Basic users
Of course, optimising costs is only a part of how we can provide free trades. We have a freemium model, i.e. users will have the option to subscribe to premium services. Similar to how Amazon Prime offers unlimited fast delivery or how Spotify gives extra features like download, we’ll provide value-add premium services. It’s the global standard in tech.
When SIPPs are to be released, would you not agree that £10 is too low for all of its features + SIPPs? Are there any thoughts on inflating the price or coming up with the 3rd tier premium that would incorporate more than Alpha?
We won’t be offering margin trading or other forms of leverage - these are toxic products in our view (and the FCA’s) that only serve to magnify losses for most customers. Consider that if you paid the interest rate you quote, 15-20% pa, you would need to massively outperform the average market return just to break even, let alone achieve the same expected return from a passive strategy.
I know other brokers make a lot of money off these types of things, including Robinhood in the US, but we never will as we care about our customers and their investment outcomes.
It’s good to evaluate Freetrade to gain comfort! I think it’s important not to under estimate the massive cost benefits a digital broker has vs a legacy broker using old expensive systems requiring large teams and paper-based operations.
Starting fresh leads to huge efficiencies as well as the ability to innovate and adapt to what customers actually want and will pay for! If people like it they’ll share it with friends, so no marketing spending needed.
P.s. it looks like it’s only £8.33 per month if you pay £100 in one go!
This is a shame, as I was hoping you would offer trading stocks on margin as a product. The FCA is right on so many levels, but there are nuances.
Trading with margin has been a game-changer for so many of us… and many of the world’s most successful traders that started with balances in the thousands. I won’t be opening an account with FreeTrade given the above and hope you’ll consider your position in time.
Margin is a mainstay of my trading, though I am one of many that would love to see improved fees / rates / transparency of product vs the incumbents.
I agree complex spread betting products have no place in a service like Freetrade, why not consider offering margin on basic stock trades to experienced investors?
Regarding experience, how about a qualification process for more experienced traders?
If you see exploitative interest rates and fees applied, why not offer a better product than your competitors?
There’s a clear opportunity for you guys here imho… and an opportunity for a better, fairer, simpler product that is a win-win for all involved.
I think Freetrade is for people like myself, people who want to get into investing but without having expert knowledge and without being stung by fees from complex products/services we don’t understand - which is what is probably keeping these types of people away from investing in the first place. Their mission is to make investing accessible to people like myself and I think it’s right they retain that focus and make a difference in this ‘mainstream’ space first before considering anything else
That’s the other thing, there’s plenty of companies that offer margin trading already in the UK so it’d be difficult to offer anything truly unique here.
We think we have a bigger opportunity to do that by providing a service for long term investors, which is much more ethical because it’s aligned with our user’s interests. Whereas most day traders lose money.