Freetrade Competitors

[albanr (Alban Roger)]

…and 0.15% is still cheap, not as good as having multi-currency accounts, but still very good compared with 0.45%.

[dinrivas]

Any comment on competitors BUX and WeBull on the future of Freetrade?

[karltgreen (Karl)]

Bux raises $80M led by Prosus Ventures and Tencent

Bux, a European Robinhood, raises $80M to expand its neobroker platform –...

[SebReitz]

First time I heard of Vivid Money. But they seem to be agressively pushing neobank + brokerage in one app.

German fintech scaleup Vivid Money bags €60M to help you manage and grow your...

[hookedinvesting (@hooked_investing(IG))]

Competition heating up in Europe.

Freetrade really need to get a move on and launch this Q.

[AJHY]

@adam @Viktor you have done a great job so far but now the real work starts! Please please roll out Freetrade in Europe before the competition becomes established. Freetrade really could be the biggest European broker if you can get in ahead of the competition! You have a huge, potentially life changing opportunity if you can get this out to the market soon.

Keep fighting!

[ralf]

@Eden

In reality the 85k protection isn’t really used for your investments themselves, they aren’t disappearing. The only case where this were to likely happen is if an investment company wasn’t buying the investments at all. But that’s such an out there idea im not going to specifically address it.

You say this is an “out there” idea, but if you consider GME, it’s clear that even if the brokers have been buying something, it’s not necessarily a sure thing that they’ve actually bought real shares.

And even though I’ve invested quite a lot into e.g. Amazon and Google, I still don’t own a full share of them.

@Eden

The reality is your investments are held in a separate nominee company or other third party custodian, not by Freetrade. If they were to go bust, your shares don’t just disappear with them.

That just pushes the problem further down the line. OK, so if FT goes bust the protection will cover the assets they are directly looking after. But if for example all our shares are in one ETF, then we will still only have a maximum of £85k protection if that broker or ETF company goes bust.

I don’t understand why people don’t think of this as a big deal. To me it’s telling that SIPPs are explicitly called out as max £85k protection but legacy pension funds have unlimited protection. If shares were that safe in the event a company went bust, why wouldn’t SIPPs also get unlimited protection in line with pensions (which are generally also just managed stock market investments)?

[Cameron]

@ralf

But if for example all our shares are in one ETF, then we will still only have a maximum of £85k protection if that broker or ETF company goes bust.

But you also own the assets within the ETF, it’s the exact same thing again. If Blackrock goes bust you still own the (for example) FTSE100 stocks.

[ralf]

Except, as per my GME example, where there’s a good chance you actually own borrowed stocks.

Until this situation happens and people successfully recover all their shares, I don’t think it’s reasonable to just assume we’d be safe. I think it’s reasonable to take the FSCS wording literally.

[Mike7]

People don’t think it is a big deal as you are misinterpreting what the FSCS protection is covering.

You own the shares irregardless of what happens to the nominee/custodian and whether that is a broker and/or a fund owner. So if the broker/fund owner goes bust it is irrelevant to your holding.

The FSCS protection is largely (not quite exclusively) about any cash you hold.

[Wulfy]

Whether the shares are “borrowed” or not is irrelevant if you’re buying on the open market. The shares you buy are yours.

The term “borrowed” here is confusing in so far as the shorter has a contract to actually sell someone else’s shares, that they then agree to give back (they won’t be the same shares as when they first sold, just an equivalent amount) at a later time.

[ralf]

I love all of your confidence in this, but none of this marries with what the FSCS information pages themselves say about this:

Investments

Furthermore, if you google there are multiple pages on other websites specifically talking about stocks and shares ISAs that specifically call out the £85000 limit.

This in fact is more dire:

How are my savings and investments protected?

So if your money is held in cash you are normally covered by the £85,000 limit, while any stock market funds or other investment vehicles qualify for protection up to £50,000.

I haven’t been able to find any stories of investment brokers going bust to find out if people have managed to get all their money or not. This article alludes to one, and says people had problems, but doesn’t say if it was resolved.

What to do when your broker goes bust

Do you guys actually have anything to back up your claims, because it sounds like wishful thinking. Even if our shares are ringfenced, it seems we could still have to pay substantial admin fees to get them back.

[Eden]

You’re not really taking about a broker going bust. You’re taking about a broker commuting extensive and widespread fraud. If you don’t trust your broker then you absolutely shouldn’t be using them.

It’s interesting because the questions that often come up about FSCS protection are usually always from people with little money when compared to long time investors. You never hear about millionaires worrying over splitting their assets over 500 different brokers to make sure it’s all protected by FSCS?

Beaufort Securities Is an example of a failed broker. The FSCS protection was used to cover crash, administration fees and any discrepancies in assets. They were done in the US for securities fraud.

If your considering an 85k limit per broker then your already off to a bad start because your essentially believing that the broker you’ve chosen is committing complete fraud over your entire set of assets, in that case you should stop and not use that broker. Even if you continued you cannot have 85k of assets, you need to consider an unknown cost in fees, cash coverage, and any potential appreciation in asset value that would significantly reduce the amount you can have in a broker.

@ralf

Except, as per my GME example, where there’s a good chance you actually own borrowed stocks.

It is not your responsibility to return a set value of stocks to a lender. That’s on the borrower. You legally own the stocks, the borrower cannot take them back unless you choose to sell them.

[ralf]

@Eden

It is not your responsibility to return a set value of stocks to a lender. That’s on the borrower. You legally own the stocks, the borrower cannot take them back unless you choose to sell them.

My point is that I don’t legally own the stocks if those stocks never existed.

As can be seen from the GME, it’s entirely possible for one share to be borrowed multiple times for for several people to “own” that one stock. They can’t all have an easy path to recovery of that share, because all but one never owned it.

Sure, somebody is in breach of contract somewhere, but as for the situation I’d be in, I’d have a broker who’d gone bust who had a contract with someone else that had been broken. There would be no ringfenced physical share for me, because it didn’t exist in the first place, and I’d thus be an unsecured creditor and so last in line to receive anything resulting from the bankruptcy proceedings.

The route I’d go down to try to recover that money explicitly states the maximum compensation is £85k. Are they suddenly going to change their policy because you think they will?

And I totally get the point that smaller investors are more concerned about protections. Multi-millionaires probably have a whole load of other assets, e.g. property, that even if they lost all their shares they’d still survive, plus they’d have enough to hire good lawyers. Small investors are in a different boat. If they lose their fund, probably no matter the size whether above £85k or not, it probably represents the majority of their investments other than their residence.

[Eden]

@ralf

They can’t all have an easy path to recovery of that share, because all but one never owned it.

You don’t need to recover anything because your shares haven’t gone anywhere (unless fraud was involved). A broker going bust doesn’t mean all the shares disappear.

As mentioned as well for lending it’s also on the borrower to return those shares, not the lender or the current holder. Even if the broker was lending shares (freetrade doesn’t), it would be on the borrower to return them and they’d have to pay the cost of the in demand asset, not you. If you held shares that were sold by a borrower you’re under no obligation to give those back, you own them regardless of their previous owner.

As for contracts, I’d read the agreements you’ve agreed to in that case and contact your broker for more information.

It’s still not a good reason to stay within the FSCS limit as you’ve no idea what your assets would be valued at. Your example is a rare situation that would have to occur and if it were to happen as you suggest you’d have to have almost no assets in each broker to protect from the unlikely event of a squeeze in a stock (which you can’t predict) so it doesn’t go over the FSCS limit. Not to mention you’ve no idea of the timeline, future events, administrative fees and costs, or changes to law.

You’re trying to combat a risk that you do not hold the variables for or fully understanding, with a control that isn’t designed to combat that type of risk in the first place.

@ralf

And I totally get the point that smaller investors are more concerned about protections. Multi-millionaires probably have a whole load of other assets, e.g. property, that even if they lost all their shares they’d still survive, plus they’d have enough to hire good lawyers. Small investors are in a different boat. If they lose their fund, probably no matter the size whether above £85k or not, it probably represents the majority of their investments other than their residence.

Or I’d argue they have a must better understanding of risk and how to apply appropriate controls.

[ralf]

@ralf

My point is that I don’t legally own the stocks if those stocks never existed .

I still don’t think you’ve addressed this point, and you didn’t quote it in your reply.

I still don’t think you can claim ownership over a share if multiple other people also have claims to that share. Under UK law for other kinds of property, the owner would be the person who owned it originally, not someone who bought a “borrowed” copy of it, especially if that was borrowed without the owner’s permission.

[Eden]

@ralf

To me it’s telling that SIPPs are explicitly called out as max £85k protection but legacy pension funds have unlimited protection

Just to mention. These aren’t legacy pension funds. Pensions funds that have 100% coverage are a specific type of product distinct from SIPPs. Pensions with 100% coverage are an insurance based scheme, you’ll often find these only offer funds limited to the provider. SIPPs aren’t based on the same structure and are far more flexible but as they’re aren’t an insurance product they don’t fall under the same coverage.

[Eden]

You should look into the FCA rules and handbook which would cover the rules and regulations around this

[Dave (Dave Smith)]

The stock does exist though, even if it’s been lent and borrowed multiple times it’s still a real share, and it still has a current holder on the shareholders register.

[ralf]

Exactly. One single current owner.

And yet, multiple people could have “bought” it and believe they are the owner.

I don’t think any amount of ringfencing will magically give you ownership of this share if you aren’t the actual legal owner.