Does Freetrade still adhere to its mission?

[aventus]

Before I start,I would like to say that this is not supposed to be some unjustified criticism/rant, and I think that introduction of Freetrade still has done some good to the industry. However, I would like to tackle the issue from an opinionated, moral standpoint.

I think that the investing industry in general is still not fair towards a regular folk trying to invest their humbly earned pennies in order to improve their long term financial situation. Majority of brokerages have crazy high transaction fees (excluding investing in ETFs) relative to the amount such a person can afford to invest.

Let’s say that such a person did their due diligence, educated themselves in the world of investing, picked their basket of great stocks, prepared DCA plan to manage the risk and emotions better, and… it turns out that the fees would eat a big slice of their investment cake.

Freetrade stands out from many traditional brokers with its free, Basic plan that includes commission-free trading on a limited number of stocks and fractional shares. This is great. However, as we read in Freetrade’s mission:

We’re a technology company that brings simple, commission-free investing to everyone through a beautifully designed, intuitive mobile app.

We make it simple to put your money to work in the companies you believe in.

This is great in theory. However, due to the limit of the available stocks, the average folk with their carefully prepared basket of stocks may not be able to invest in some or majority of them. Of course the next possible step is to upgrade to the Plus plan. However, the plan costs £4.99, and if someone is DCAing -for example- £100 a month, that’s 4.99% cost. Or looking at it other way around- that’s an instant -4.99% (negative) return on investment.

Now, I’m not suggesting that Freetrade should become the charity of the investing world or that the basic account should have all of the sticks available. Of course the company has to make somehow, and it has to somehow “encourage” users to upgrade. What I am suggesting however, is that the current fees structure combined with limited number of stocks in the Basic account doesn’t really make investing that much more accessible to an average folk as it might seem as the first glance. Perhaps a good middle ground would be to consider a different pricing plan, charging a certain percentage point (and certainly lower than 4.99%!) of the overall portfolio value, up to a certain amount (perhaps becoming a higher amount than £4.99 for the Standard account)?

Personally I can say that the aforementioned limit of available stocks (especially the US-traded stocks) combined with the £4.99 charge for the Standard account put me off from continuing investing via Freetrade for time being, while I’ve been investing in my desired stocks through an alternative platform which I’m not going to name because that’s not the point of this post.

[Pedro1]

I think you hit the nail on the head. Freetrade isn’t a charity, the fees are good value for those who wish to pay. For those who don’t , its a strong free offering. Not sure what the point in your post is…

[aventus]

However, the plan costs £4.99, and if someone is DCAing -for example- £100 a month, that’s 4.99% cost. Or looking at it other way around- that’s an instant -4.99% (negative) return on investment.
(…)
What I am suggesting however, is that the current fees structure combined with limited number of stocks in the Basic account doesn’t really make investing that much more accessible to an average folk as it might seem as the first glance. Perhaps a good middle ground would be to consider a different pricing plan, charging a certain percentage point (and certainly lower than 4.99%!) of the overall portfolio value, up to a certain amount (perhaps becoming a higher amount than £4.99 for the Standard account)?

I’m not sure if I can distil it anymore for you.

@Pedro1

For those who don’t , its a strong free offering

That’s all relative and subject to debate. If you did a DD and found the best value and prospect of returns in smaller-cap stocks, it turns out that you can’t invest in majority of them. You can only stick to the bigger whales, and thus “go with the flow” of the market.

Or from Freetrade’s economic perspective- I think that they could attract more users to the paid plan with a fairer pricing plan. You seem to suggest that the alternative to the priced plan is the free plan, while for someone dedicated to their basket of stocks the alternative is to seek a different brokerage which isn’t great from a business perspective.

[Ell (Elliott)]

A fairer pricing plan? Surely £4.99 is extremely fair and accessible?

[Pedro1]

This is just a lengthy and very wordy whinge about a product, bringing in the companies mission etc. Freetrade are a company yet to be profitable, not sure reducing fees to be more charitable towards your cause is going to help that.

[aventus]

Again, it’s all relative. If your total portfolio value is £10k then perhaps you can argue that it’s fair. If it’s £1k, then £4.99 a month is ~6% a year. That’s a 6% return you need to make in a year just to break even.

That’s why I think that a fairer pricing plan would be a % of the overall portfolio value, with a cap which could be increased. E.g. an annual fee of 0.25% capped at £60 (this is just an example, not a proposal of what a fair percentage and a cap would be).

[aventus]

We can agree that we disagree then.

[weenie]

The pricing needs to stay as is, to keep it all simple and not just copy other providers who have % annual fees.

[JimmyJ]

Before the pricing update, it was £9.99 a month for the stocks in the extended universe - that is a 50% drop in price.

[Coolsmp (Investor R7)]

We don’t need any more changes in pricing structure we’ve just had that.

[Leeawill20 (Lee)]

Yeah exactly only time i could see it changing is if we get an intraduction of a jisa

[Agnasa]

Pricing need not change. Right now up to certain protofolio value FT is expensive than cetain vendors who charge a % of protofolio. However those others charge high dealing fees so saving cancel out.

If FT is considered “fintec” then what is needed is for “tec” part to improve and to catch up or exceed its competitors.

[Orbitalinvestor]

I find the pricing structure fine for plus.

I am on a low income (non-tax paying at present) and so as long as I put £50 <edit : £39.97> or more into my SIPP every month, the government pays in enough to cover the cost of my plus account (up to a maximum of £2880 p/a) plus I have the ISA .

It is great value for me and I don’t think anyone else in the market can beat it for my circumstances.

[Big-g]

I think the FT mission and current pricing options is perfect. The mission was/is FTs strongest point and that element has only improved with the now cheaper options to get into the Plus world, not something I expected to go down when I was happy paying £17 a month.

Anyone can start with a very large free option list of shares and if they like can pay for extra options. For the casual investor the free option is more than enough and you wont need an ISA if very small anyhow. Once your portfolio grows you can add an ISA and transfer across.

[Roger]

I would say the isa you get for £4.99 should be a big draw for investors, the amount of dividends you can earn before paying tax is going down to £500 in a couple of years not a huge amount if you are investing for the long term.

[Leeawill20 (Lee)]

500 pound is a joke . Is that for isa or gia

[Roger]

Anything in an isa is tax free ( as things currently stand things could change in the future) for dividends in a gia the limit will be £500 from tax year 2024 2025 I believe.

From the government website on who will be affected this is outside an isa
Individuals with taxable dividend income above £1,000 in the tax year 2023 to 2024 and above £500 from the tax year 2024 to 2025.

[Mike7]

As I’ve said previously, just because the basic plan is free at point of use doesn’t mean that it isn’t monetised eg interest will accrue on any funds left uninvested, FT charges commission in USD (and any other future non- UK transactions) etc.

FT has also talked previously about white labelling their tech which is revenue not dependent on users.

Don’t get me wrong, FT just about adheres to its mission but that doesn’t make it the most compelling broker for users (IMHO).

[Jim_mcgrain (Jim)]

@aventus

Perhaps a good middle ground would be to consider a different pricing plan, charging a certain percentage point (and certainly lower than 4.99%!) of the overall portfolio value, up to a certain amount (perhaps becoming a higher amount than £4.99 for the Standard account)?

No. If the pricing plan doesn’t suit your personal needs other brokers are available. This sort of contrived complexity is the road to ruin.

[1anrs (Allan Scott)]

I’ll just chip in to say that I was paying £3 per month for my ISA and I’m very happy to pay £4.99. FreeTrade have to be sustainable, I don’t want to see the situation where FT become bankrupt and I have to search for a different provider that charge £12 per transaction or a % of my investments. FT is very good value as it is, you get the full universe if you are a standard user, a vast improvement on what was the case previously. If you want something for nothing, which effectively makes FT a charity when you don’t contribute anything towards their running costs, then frankly a lower level of service should go without saying in my opinion.