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.