Freetrade ISA v Trading 212 ISA

I am sorry if this has been covered elsewhere, I could find a few 212 threads but not comparing ISA (and in particular fees).

I have invested in Freetrade and want it to succeed, however a friend has just challenged me on this and I’m losing that argument…

If an investor is only interested in long term ETF (VUSA and VUK) investments then using a Trading 212 ISA would appear to be cheaper than Freetrade. Vanguard charge 0.15% platform fee, Freetrade charge £3pm, Trading 212 appears to be free.

What am I missing? Or would it be better for that individual to use Trading 212?

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I don’t think you’re missing anything. If T212 offers the product you’d like to invest in, then as it stands going with T212 will get you the most money in the end, since the fees are £0.

Will this last? Is it a sustainable model for T212? Could they introduce fees later? Could they collapse? Who knows.

But as long as they’ve implemented ISA transfers out (I think it’s a requirement anyway) and you don’t invest more than the protected £85k through them, I think it’s safe enough.

I imagine they’re already profitable, so at least they already have a proven business model, unlike Freetrade.

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Trading 212 is as it stands a cheaper option. Their model is based on the idea that they can lure you into the CFD trading side of their offered services, where they make high margins.

As it stands T212 is a better offer for the strategy you have mentioned.

On Sendu’s point I would clarify that both VUSA and VUKE are Irish domiciled ETFs (as is common practice) and therefore I don’t believe they are covered by the FSCS. The £85k protection for T212 would only protect you fom T212 going bust.

There also use to be an inactivity fee for T212, no idea if that applies to the ISA, maybe someone else has more details on that?

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To add to what Sendu and Jack said, I believe Trading212 will always intend to direct its users towards profit-making CFD products, because otherwise is makes no commercial sense to offer completely free service, which even Freetrade, as much as they cut out the middlemen and save on costs, will never be able to do.

The issue here is that in the long term you save £36 per year on ISA costs, but if you get into the “get rich quick” trap of Trading212’s core business model, the CFDs, you may lose significantly more. The following is from their website:

76% of retail investor accounts lose money when trading CFDs with this provider.

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:hushed: blunt!

Give Freetrade a chance to bounce into realms of unquatifiable, gravity defying success.

Well written, Vlad. How so true!

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Yes, it’s only protection again them going bust. I’m not sure what you think them being (Irish) ETFs has to do with anything though. No kind of investment (even UK stocks) will get any further protection with any online broker, since they’re all of the “no advice” type.

That’s an interesting point. There is some extra (small) counterparty risk with an ETF because it’s run by another company. If it’s a UK ETF does FSCS cover that? does it depend if the ETF company has FSCS protection?

I don’t know of any UK domiciled ETFs so would be interesting to find out!

If the above ETFs go bust then there would be no protection offered from Trading 212.

FSCS protection does not apply to investment products! No ETF is eligible. No share of any company is eligible.
Protection essentially only kicks in if:

  • You were given negligent advice on a regulated product that fails, in which case you can make a claim against the advisor
  • Your stock broker fails and they use client money and investments to pay off their creditors, in which case you can make a claim to try and keep at least £85k
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You are not protected from an ETF going bust with any stock broker.

I was thinking of if the ETF company itself mismanged money or committed fraud, with an ETF you are involving another company

Yes, there’s a small risk that the ETF fails in some way, but the point I’m trying to make is that this has no relevance to the topic of Trading 212 or to the topic of stock broker’s going bust or to the topic of FSCS protection.

If you’re raising an unrelated topic of “what are the risks of my investment choice failing”, then the risk of an ETF failing is going to be much less than the risk of any of its constituents failing, or the risk of an individual stock pick you make failing.

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