Big announcement from us today - we unveiled our pricing model!
Check it out on the blog: Freetrade Invest Hub
Please share your feedback here, weād love to know what you think.
Adam
If someoneās portfolio is underperforming their benchmark we could help them understand why, or help them in building a diversified portfolio, or let them put their portfolio on Autopilot and make our algorithms do the heavy lifting.
I really like this paragraph, looking forward to learning more about the full Alpha package, one thing that is a bit disappointing to see is that as an Alpha instant UK trades still require a fee, as opposed to no fee for US, could you tell us a bit more about why that is?
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This pricing is pretty much exactly what I was hoping to see 
Iām curious to know why thereās a 0.5% markup on FX though?
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The simple answer is that there are structural differences in how equity capital markets operate in different countries, which includes costs. The US is the worldās largest market, with the greatest efficiency and most competition. This generally translates in to lower costs for all participants.
Youāll notice that other low-cost stockbrokers, like Interactive Brokers or DeGiro, also have variable pricing depending on the market being traded. There is a reason for this and it comes down to the fact that we all have to connect to the same market plumbing. As I mentioned in the blog, we are looking at how we can eliminate the UK charge for our Alpha members, but arenāt quite ready to promise this yet. But at 50p, we are still the cheapest way to buy a UK stock out there.
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Weāre not a bank, so like everyone else it does cost us to convert funds and move money across borders. We want to be transparent about this and pass on a very good rate. Our 0.5% charge compares well to the 1%+ you would receive from other brokers (eg HL starts at 1.5%), plus many other brokers do not provide visibility on what the base rate is that the markup is charged on. We use the interbank/wholesale rate from Barclays as our baseline.
Weāve also benchmarked against other UK fintechs. Revolut charges 0.5% once youāve used up your āfreeā monthly allowance and TransferWise charges 0.4% + 80p on USD/GBP transfers, for example.
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Great to see more updates coming from the team, I hope it is a sign of a soon-to-come roll-out!
The pricing model is very transparent and fair, truly reflects technological advancement as opposed to a need to cover manual-entry overheads (hello HL).
Apparently, the team has SIPPs on the roadmap, maybe other markets potentially (Japan/Hong Kong) so I believe it would be interesting to consider how they will tap into the pricing model. Would you inflate the Alpha cost slightly or implement an additional, more premium subscription? If the latter, it would be interesting to see all Alpha features + free SIPPs + other marketās free transactions and how those will be different to Alpha.
I am not sure what cost you as a broker would incur to administer SIPPs but all the other archaic brokers tend to charge 0.5-1% of the capital annually, hence if it must be %-based, it could be a benchmark to consider when modelling revenue forecasting with various pricing mechanisms (and indeed interesting to see what pricing structure Freetrade will come up with!).
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Admire the freemium modelā¦ gamechanger 
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Whilst scrolling through Twitter, I noticed this response:
Have you considered delineating this into a mid-tier Freetrade Omega thatās a halfway house between Basic & Alpha? -
Psychological pricingā¦ did you deliberately not price your subscriptions at Ā£9.99/month or Ā£99.99/year? If so, why?
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Hey thanks Diversify
Interesting suggestion 
Personally I think Freetrade Basic with an ISA add-on (or expansion pack) makes sense, especially if you want a General Investment Account to trade over or alongside your ISA allowance
Plus two tier is just simpler for customers (and us)!
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Re psychological pricing, I canāt speak to the original rationale, but again personally not a fan of price rhetoric. Down with pennies!
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It never occurred to us to price as Ā£9.99. @adam can talk to the rationale, but I personally find that type of pricing insincere.
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The verbatim rationale from Adam on our team Slack: āno BSā. 
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Fair enough. I imagined it would come down to keeping things simple.
Personally, I think the ISA wrapper is something distinct & of importance enough to customers for it to be more than just a bolt-on/add-on/opt-in. Therefore, it maybe clearer, to differentiate a mid-tier option so as to not conflate Basic with anything else. Just a suggestion for your revenue model.
Example: For Ā£5 per month, or Ā£50 per year, Omega customers will get X amount of Instant Trades, trading/execution, tax-wrapped accounts (eg ISAs), custody and administration of their investments all included.
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I agree with Diversify, while keeping the model simple is great, somewhere in the middle would be good that offers the benefit of an ISA account for someone that say wants to get a few free trades a month for example.
Are there any plans to expand the pricing model after roll out?
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From my own point of view pricing is spot on for clarity, and fairness in particular if you grow your portfolio to your ISA limit.
Also with Freetrade in ditching the penny. Again, personally speaking those .99s seem disingenuous, and to a degree it suggests ācheapnessā, which is distinct from affordable.
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I disagree somewhat. Yes, if youāre investing/trading a minimum of Ā£10,000 through Freetrade, then Ā£100/year for Alpha is cost effective as that works out at ~1% annual fee. This compares well with Robo-Advisors such as Wealthify, Moneyfarm etc.
However, as @Gaz92 alluded to, there is an area below Ā£10k for those who want the peace of mind of the ISA tax wrapper (without having to worry about what the capital gains tax free allowance etc is) & who foresee making fewer trades. Ā£100/year on anything substantially less than Ā£10k - which given 3trade is democratising stockbroking is likely to many customers - maybe out of reach. Therefore, a clear mid-tier offering would be nice perhaps. This is just an idea for clarity as basic is very good anyhow.
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@Gaz92 @Diversify Fair points raised, but letās look at the actual figures too. Even with 10-15k capital, Alpha would not be as perfect because 0.67-1% are still relatively pricey fees comparing to the Basic option.
If an individual is having minor capital (0-15k), there is no point in either Alpha nor ISA for Ā£36 a year. You would simply not reach your allowance in a few years. Can you imagine how long will it take to get to Ā£11700 gain? Few years of lucky, 5-7 years if the market is favourable, by that time an individual would have accumulated a larger capital by monthly savings anyway, hence Aplha would be more or less justifiable. In my subjective opinion, 25k is a great start for annual Alpha for traders or normal ISA for those who donāt enjoy the fun and prefer 100% mutuals/ETFs
Oh, and dividends are also tax free up to 5k, therefore, you do not expect taxes on those with a capital below 100k.
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Thereās a lot in your post.
But as far as Iām aware, an all in one sub-1% fee to passively invest is the opposite of pricey.
We must remember FreeTrade is effectively under the bracket of active investing - albeit self-selecting - but their fees are massively disrupting to this entire sector.
ISA-wiseā¦ itās just a smart thing to do if youāre here for the long-term. Ā£36 per year for a Stocks&Shares ISA beats what youāll get from your high street bank all day long (unsure about elsewhere though).
Also, itās worth noting Alpha has a lot more on offer that may justify the priceā¦ which Freetrade say theyāre aiming to make it so good that it only makes sense to upgrade. As you say, whatever plan is suitable depends on the individual and their circumstances, but a mid-tier option would be viable imho.
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@Diversify Totally support the point, particularly the mid tier option.
But speaking strict maths, Ā£36 a year is still less cost effective than Ā£0, donāt you agree? In a bigger scheme of things, of course the entire business model of Freetrade is unique (for Europe) and extremely appealing for the customer, especially the newcomers.
But if you simply want to test the idea of investing without incurring a penny of expense, purely for the sake of understanding whether it is right for you - Basic account is for you. Little capital. Fractional shares. No capital gains and dividend tax due to allowance. Only the end-of-the-day trades.
And I believe that would be the best starting experience for those who never invested/traded before.
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I definitely agree & for now Basic would be my option.
However, Iām sure it gets more complicated when your capital is invested across several platforms. The ISA allowance can be split across all the ISAs that exist of which you can open 1 of each per year (cash, S&S, Peer2Peer, etc)
But Iāll just cross that bridge of what plan makes sense when I get to it I suppose. Definitely good food for thought 
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@Vlad I see your point, but Iāve always read that Freetrade wants to help millennials start investing, and thatās what I hope the focus will be on. I donāt know about you, but I donāt know many millennials people have Ā£10-15k or more ready to invest? Also, even if Iām under the 10k CGT allowance, Iād rather have it in an ISA so I donāt have to worry about any self assessment tax stuff.
Right now Iām nearly 100% certain that Iāll have a free account and pay Ā£36 a year for an ISA, plus maybe Ā£12 for 1 investment per month.
Now, if there was something that would cost maybe Ā£50-60 per year that included a few extra free trades or features, Iād be all over it.
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