This discussion got started after we shared our Snapshot of High Dividend Yields on the Freetrade App.
Iām 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 Freetradeās aimed at beginners.
Iād 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.
Thereās 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, itās not as overt but I think you could draw comparisons with the ānewsā articles posted by Hargreaves Lansdown, headlined ā36 dividend stocks you could retire onā and the like.
Marketing-wise, I hoped Freetrade would go in a different direction (YouTube ads etc).
As always, itās just my two penniesā worth!
8 Likes
I disagree. Itās not advising or pushing high dividend stock, or endorsing a high yield portfolio, merely showing what the yield is
4 Likes
I agree that thereās 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 youāre providing this sort of information, why not provide it for all companies where applicable? Itās the filtering on Freetradeās 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.
1 Like
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 Freetradeās 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.
Iām therefore not too worried about the profiles of stocks like Fever Tree on the blog - most users wonāt see it, and those that do hopefully would not construe it as advice to invest. Iād 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.
Thereās 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 itās unavoidable that Freetrade will offer guidance (whether wittingly or not) to new investors, and itās 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 Iād 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 Iām not familiar but which they judge useful for long term investment. Fees for ETFs are really important but typically buried - itād be nice to see freetrade invert that.
Examples of metrics I donāt want to see highlighted: Share Price, Daily gain/loss, random financial ānewsā based on meaningless fluctuations in prices
The metrics and filters the app presents to beginner investors will define the limits of their world, so itās really important the right metrics are foregrounded, and I donāt 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.
7 Likes
Some great points. I broadly agree. Itās 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 itās been published, general advice or having filters in the app for discovery feels much more balanced.
1 Like
Regarding the topic question, Iād 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, Iād 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; theyāre an interesting read. But I also know to ignore everything written in such articles. New investors likely do not.
3 Likes
Sendu, recency bias is a rather clever argument that stock take articles would be less advicey/advertisingy if they werenāt about specific stocks but insteadā¦ maybeā¦ global index trackers 
1 Like
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?
Itās all interesting though, especially with Woodfordās and HLās 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 itās still possible that it is viewed as something more.
1 Like
This weekās news surrounding Woodfordās fund and Hargreaves Lansdown highlights some of the dangers of mixing marketing and securities.
It seems like an unnecessary risk for Freetrade to take, Iād rather see a laser-like focus on providing raw data and education within the app.
1 Like
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 donāt think itās right for a broker to be doing anything that could be read as being advice.
2 Likes
None of the companies featured in the stock take have appeared in the weekly top buy tweets (apart from the IPO stocks)
So theyāre creating very interesting content and managing to completely avoid anything that people could possibly think is a recommendation.
Iād hate to see it go just because of hypothetical scenarios
9 Likes
That doesnāt mean that someone wasnāt influenced to buy them. We donāt 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.
2 Likes
I get this, but itās really very common for brokers to publish opinion pieces etc. See Interactive Investor for example: Latest Stock Market News & Analysis
I think Freetrade does a very good job at making sure itās clear that the articles are not investment advice.
8 Likes
Thatās partly the point - other brokers do it and have done it in the past. Freetrade isnāt trying to emulate others, itās trying to do something new and improved. This just doesnāt gel with that ethos.
1 Like
Can you explain how/why? Surely providing information in an accessible way is exactly that ethos.
This isnāt 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.
2 Likes
I donāt think it matters how explicit the disclaimers are. Iām 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 thatās 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 donāt need to use the underhanded tactics of old. Which means stock takes donāt really have a place here, as interesting as they might be.
3 Likes
Thanks for explaining my position on this perfectly.