Is Freetrade recommending stocks in Stock Take etc?

This discussion got started after we shared our Snapshot of High Dividend Yields on the Freetrade App.

I’m sorry to yet again be the resident naysayer, but this sort of thing makes me a little uncomfortable as undeniably useful as it is.

I do recognise the need to educate investors, but I think it can be done without marketing specific companies, as effectively happened with Fever Tree.

Despite the disclaimer buried at the bottom of the page, I think it could be construed by some as advice especially as Freetrade’s aimed at beginners.

I’d worry that a novice might use such information to build a portfolio consisting of highly volatile shares, such as EVR, simply because they have the highest yield.

There’s more to building a high-yield portfolio: yet the post makes next-to no mention of other important factors such as size of company, dividend cover, dividend growth record, debt levels and sector diversification.

Clearly, it’s not as overt but I think you could draw comparisons with the “news” articles posted by Hargreaves Lansdown, headlined “36 dividend stocks you could retire on” and the like.

Marketing-wise, I hoped Freetrade would go in a different direction (YouTube ads etc).

As always, it’s just my two pennies’ worth!

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I disagree. It’s not advising or pushing high dividend stock, or endorsing a high yield portfolio, merely showing what the yield is

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I agree that there’s a difference between providing advice and information. I just worry about how this sort of thing could be construed despite all the disclaimers and good will in the world.

If you’re providing this sort of information, why not provide it for all companies where applicable? It’s the filtering on Freetrade’s end that makes me a bit uncomfortable, there may be 3.9% dividend payers that are far better long-term bets than EVR, for example.

Anyway, with that comment, I was referring more to the Fever Tree article, which is precisely the sort of headline that you do see on Hargreaves Lansdown.

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Anyway, with that comment, I was referring more to the Fever Tree article, which is precisely the sort of headline that you do see on Hargreaves Lansdown.

I agree the headline is not the best, but feel reassured by Freetrade’s business model that they will not fall into the trap of having a monetary interest in the investments they offer - something HL and most asset managers definitely do, and which often incites them to act against the interests of their clients. Freetrade have been very clear this is not a model they want to emulate.

I’m therefore not too worried about the profiles of stocks like Fever Tree on the blog - most users won’t see it, and those that do hopefully would not construe it as advice to invest. I’d be worried if that sort of stock profile made it into the app, because it would cross the line into advice for me then, but as content marketing it seems fine to me.

There’s more to building a high-yield portfolio: yet the post makes next-to no mention of other important factors such as size of company, dividend cover, dividend growth record, debt levels and sector diversification.

I do think it’s unavoidable that Freetrade will offer guidance (whether wittingly or not) to new investors, and it’s crucial that they acknowledge this, and build tools which are as impartial and informative as they can while still attempting to educate new investors about what criteria they should use to invest for the long term. Freetrade (guided by their community and users as well) will need to choose metrics on investments which encourage users to pick the right investments for the long term.

Examples of metrics I’d really like to see in the freetrade app: Market cap, PE, CAPE, Dividend Yield, Dividend Cover, Fees for ETFs and probably a few stats with which I’m not familiar but which they judge useful for long term investment. Fees for ETFs are really important but typically buried - it’d be nice to see freetrade invert that.

Examples of metrics I don’t want to see highlighted: Share Price, Daily gain/loss, random financial ‘news’ based on meaningless fluctuations in prices

The metrics and filters the app presents to beginner investors will define the limits of their world, so it’s really important the right metrics are foregrounded, and I don’t think Freetrade can abdicate this responsibility - they should offer filters they think are useful, and metrics they think are useful, and they need to be really carefully chosen to influence users in the right way.

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Some great points. I broadly agree. It’s such a fine line for Freetrade to tread!

Agree with you on this. Particularly given that this is static information and out of date the minute it’s been published, general advice or having filters in the app for discovery feels much more balanced.

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Regarding the topic question, I’d be interested if Freetrade have stats that indicate an uptick in buys of a stock covered by Stock Take in the period immediately after publication.

The take being good or bad, I’d expect an uptick purely due to the mental bias people have toward liking things they remember. (They assume they remember it because they are familiar with it and it is good.) That is, no matter how harmless Stock Takes are, they could have the same effect as advertising.

I like the Stock Takes; they’re an interesting read. But I also know to ignore everything written in such articles. New investors likely do not.

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Sendu, recency bias is a rather clever argument that stock take articles would be less advicey/advertisingy if they weren’t about specific stocks but instead… maybe… global index trackers :slight_smile:

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It would be cool to know but perhaps not enough information in itself to explain anything unless you then also try to gauge investor experience, or combine it with something else. Maybe new investors are more likely to invest following a stock take? Or perhaps even experienced investor jumped in because fear of missing out?

It’s all interesting though, especially with Woodford’s and HL’s Wealth 50 list, where people have taken the list as advice(?) and then invested a fair amount. Sure Woodford is a one off and the other entries on the list will probably fare better but still it’s still possible that it is viewed as something more.

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This week’s news surrounding Woodford’s fund and Hargreaves Lansdown highlights some of the dangers of mixing marketing and securities.

It seems like an unnecessary risk for Freetrade to take, I’d rather see a laser-like focus on providing raw data and education within the app.

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This is why I believe Freetrade should avoid anything publishing anything related to specific stocks/shares/funds etc. It is very easy to inadvertently influence investors and I don’t think it’s right for a broker to be doing anything that could be read as being advice.

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None of the companies featured in the stock take have appeared in the weekly top buy tweets (apart from the IPO stocks)

So they’re creating very interesting content and managing to completely avoid anything that people could possibly think is a recommendation.

I’d hate to see it go just because of hypothetical scenarios

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That doesn’t mean that someone wasn’t influenced to buy them. We don’t have the information we would need to make that call but I hope Freetrade do take it into account. Either by being much more explicit throughout any posts or articles that people should not take any of their posts as investment advice or preferably by avoiding specifics.

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I get this, but it’s really very common for brokers to publish opinion pieces etc. See Interactive Investor for example: https://www.ii.co.uk/stock-market-news

I think Freetrade does a very good job at making sure it’s clear that the articles are not investment advice.

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That’s partly the point - other brokers do it and have done it in the past. Freetrade isn’t trying to emulate others, it’s trying to do something new and improved. This just doesn’t gel with that ethos.

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Can you explain how/why? Surely providing information in an accessible way is exactly that ethos.

This isn’t explicit enough for you?

Freetrade does not provide investment advice and individual investors should make their own decisions or seek independent advice. The value of investments can go up as well as down and you may receive back less than your original investment. Tax laws are subject to change and may vary in how they apply depending on the circumstances.

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I don’t think it matters how explicit the disclaimers are. I’m sure HL also have equivalent disclaimers for their wealth 50 list and other published articles etc.

The purpose of brokers publishing market news and research has always been to encourage trading, because that’s how they make money.

But trading is deleterious to the returns of long term investors.

Freetrade have a different ethos. Free trades mean they can align with the best interests of long term investors. Which means they don’t need to use the underhanded tactics of old. Which means stock takes don’t really have a place here, as interesting as they might be.

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Thanks for explaining my position on this perfectly.