@freetrade_team hope you’ve had some time to wind down after what must have been a pretty mad week, congratulations again!
I thought i’d start up a thread following on from the Crowdcube discussions as per Adam’s request to continue the conversation over here. [One for the community leaders: does it make sense to have a Crowdcube category so we can find questions and answers more easily, rather than very long thread?]
@adam, I just wanted to pick up this thread started by mikecc over on Crowdcube. He raises an interesting point re: churn vs. hold given the emphasis that’s placed on longer term investing. Elementary question perhaps, but does crypto fall under treasury income or dealing commission in Appendix A 3Y projections? Your input and commentary is most appreciated.
Finally, further to mikecc’s point, I am also curious as to what underpins the following assumptions:
- Trades per month per customer
- Average value of customer trades
- Customer rentention
Love the pitch, product, aspiration etc.
I have a question on the components of Treasury Income, which for 2018 you model as £675k.
As I understand it this is the income received by not paying interest on customer cash balances. Is there anything else in it? If so, what is it and what is the breakdown / driver for 2018 and 2019
If not, how does the £675k figure reconcile with the following all from Appendix A?
1: £174m AuM at end-2018
2: Average customer portfolio cash balance = 10%
3: £174m x 10% = 17.4m held in cash
4: £17.4m x 1% interest rates on cash (say) = £174k
5: You have hockey-sticked AuM growth & we’re already 5 months into 2018
I recognise that the jump between 2 and 3 is more complex than presented above, but this presentation won’t be wrong by an order of magnitude.
Hi Mike, thanks!
‘Treasury income’ includes various things, but the majority is income derived from FX conversion when clients buy foreign securities. The second largest comes from interest on client cash balances (which we keep).
Ok - very helpful Adam.
£174m yr-end AuM x 4% of customer portfolios in foreign stock = c.£7m
x 0.5% spread taken on the FX = £35k
Now - clearly you take that 0.5% spread on both buying and selling, so churn of holdings is actually the relevant - can you help me build this up a bit? What drives your trades per month assumptions?
Am interested because treasury income remains c.50% of your revenue going forward (and probably the more resilient half), and because you’re pushing foreign stock ownership assumption to 50% in yr2 (makes sense given the highly branded US stocks that UK retail customers might aspire to own and trade, rather than index ETFs that they might buy and hold into the long-term, and which don’t generate you revenue).