How can I stop my friends?

Few months ago, I started to introduce my friends to stock investing and naturally Freetrade. Today, most of them are leaving for Trade121 as it’s cheaper and have a better functionality :disappointed: What do you say to your buds to stop them moving their funds in this case? I can’t argue with their argument :man_shrugging: Let me know!

Cheaper than free?

Limits/stop losses and ISA is free it seems on Trade121 - do t use them therefore I do t know the details :man_shrugging: Plus a lot of cool data is aviaiable too! I guess Freetrade is better as they hold our shares under our name where I assume Trade121 holds them in their name and account for our shares on our behalve?

Free ISA? I didn’t know that :face_with_raised_eyebrow:

The only reasons are UI/UX and Ethos. Feature and cost-wise T212 outperforms all. But they are a loss-leader, just ruining the market to dominate and cross-sell. :man_shrugging:

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Personally I would strongly recommend anyone to stay away from any provider that offers these types of products.

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

Yes, their stocks/ISA is a different product, but they will cross sell and most retail investors are not knowledgeable enough to understand the implications. Hence 76% of investors LOSE money…

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For me it is a matter of trust and transparency.

I trust Freetrade to hold my biggest and main portfolio. I don’t trust the other “free” brokers.

FYI, I have accounts in Freetrade, Trading212 and Stake

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Hi

Just wondering what do you mean by Cross Selling in Trading 212 BTW?

I’ll have to reread my notes from a while ago but I understand trading 212 gain revenue from a wider spread on the share price. Basically they sell to you for a higher price than they buy the share for and they buy off you for less than what they can sell them on for.

I don’t have any evidence on freetrades spread in terms of what they actually achieve but we know they don’t make a margin on the spread at all.

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I will see you back in a year or 2? :joy:

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Frankly I love freetrade plus and have moved a lot of funds over to FT because of it.

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For small amounts it might be understandable but for long term investment it seems unreasonable to keep your money with a broker with so many question marks

Type the name of the article in Google to bypass the paywall

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I didn’t know that so I searched, from this article it seems they do make money on the spread, so their trades aren’t actually free…

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They are not a charity - they make money somehow.

Difference with Freetrade is that they are not transparent about it. And lack of transparency is a no go when it comes to money

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I hadn’t known T212 make money on the spread, thanks for that. I value the transparency of FT more, though like today that may not matter so much when the actual proceeds differ so much against the estimated proceeds because the price is stale.

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That link is great thanks. Saves me searching my notes.

I remember it being a little difficult to actually find clear info on the spread that they charge above the true spread on the market given how prominent (and how many times its repeated) the claim of “zero commission investing” is which to me gives a misleading impression of the costs to the user.

For that reason alone, I haven’t wanted any part of trading 212 but that’s a personal preference and probably haven’t got a large enough pot to justify moving around multiple apps anyway.

Plus, their fx conversion is fractionally higher than the one freetrade takes too so for me it’s still a no brainer to stick with freetrade.

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I went through the same tough decisions as OP’s friends so did a fair bit of research on this: That article is incorrect, T212 do not make money on Spreads, nor do Freetrade, or any UK broker for that matter - It’s illegal to do so. I don’t know where this misconception comes from (RobinHood and order flow payments?) but it’s probably good to be thinking “what’s the catch?” before you park your money somewhere. The best article i’ve seen on prices between platforms is this one, where the authors basically did identical trades simultaneously on the different platforms and compared the outcomes (price, execution, etc).

T212 make money from share lending(loaning out your shares to short sellers, etc and receive interest payments for it), which entails its own risks. It’s what Vanguard, Degiro, etc do and part of what makes them so cheap. In T212’s case, it’s US-based “Interactive Brokers” who are facilitating the share lending.

To all that say “T212 is cheaper”, imo that’s quite a myopic way to think about it. The key is what will T212 eventually charge? (I’d wager share lending alone isn’t sustainable for profits, else Vanguard/Degiro wouldn’t charge fees at all) They’re strategically loss making to draw in clients, then will monetise when/if they have market share, hoping clients will be too apathetic to swicth. It’s a well known playbook. T212 may well end up the more expensive platform in the long term.

As for features, yes T212 have more at the moment (no FX fees, Fractional EU/UK shares, AutoInvest, Web platform, etc) but FT are fast closing the gap (++ stocks, SIPP, etc). I’m sure this time next year/year after, there’ll be relatively little to choose between them (like, say, Starling and Monzo) - better to just go with the one you trust/enjoy using most.

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I stand corrected. Thanks for pointing that out. Is it only allowed on their cfd side then because I’ve definitely seen comments on their own forum about spread markup?

I checked at the time because thought that was odd (didn’t specifically give me the impression it was only cfd’s) and probably came across a similar article to the one linked here that stated spread mark up and probably didn’t go much further than that. Tbf I didn’t need to, wasn’t going to use them anyway :wink:

Edit: editing here to say I’ve delved a little deeper and the spread revenue indeed does come via cfd’s as stated by one of their own employees on the forum. Took a nice little swipe in the response at freetrade at thd time too without naming them :grin:

I know very little about CFDs, but I vaguely recall that’s how they make their money.

You’ve reminded me about something else to mention though: If anyone’s concerned about being tempted into CFDs I would strongly recommend against using T212. CFDs are a high risk, leveraged product. ~76% of retail investors lose money when using CFDs with T212.

I use both FT and T212, whilst I have not been ‘force/cross-sold’ T212’s CFD product, both their equity and CFD products are in the same app and I could easily see new investors being drawn to it without being privy to the risks ("buy 10 shares for the price of 1? No brainer surely…(!)) and i’d say it’s very sensible to avoid T212 if you worry about falling into this category.

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The average person isn’t worried about ethics of CFD’s they just want the most value for money along with functionality.

For me the reason why I stick with FT over T212 despite the cost and feature differences is as of right now the UX, but also the potential future of FT going beyond what T212 offers. FT is still early in development and will continue adding features as time goes on and I think this will surpass T212. But I also just would not enjoy the T212 UX, FT is miles ahead in their app design and experience, but this is a personal thing that others might not place as high value in.

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