Making Money - In the News

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The article points out that HL makes most of its money from the horrendous and unjustified ongoing fees they charge customers on funds.

This is bad for freetrade if you only compare trading feed as I think HL can and will at some point cut their trading fees in order to compete.

However in the long term I think freetrade will be able to say to customers that they don’t guide you into terrible products in order to make money - I’d almost start emphasising this now in marketing, because it will become far more relevant in the coming recession, and it is their long term advantage over fund brokers (and also over revolut IMO due to products like cryptocurrencies, and over other free brokers who trade in CFDs). I hope freetrade never offer active funds or cryptocurrencies so they avoid this minefield of misaligned incentives.

What it does mean is that freetrade needs to reach significant scale in usercount in order to make significant money from its flat fee structure - so number of users (and number of Alpha above all) is what counts for freetrade, whereas assets under management in funds specifically is what matters to HL. In the long term I think that is encouraging though - Freetrade’s interests are aligned with customers, whereas HL needs those fat fees to survive, so it will inevitably have more woodfords (a fund it pushed really heavily for years).

So probably freetrade needs to start adding a few more standout features to alpha, perhaps it can have free sipps for example, or more sophisticated tools like limit orders for free (still the most voted for idea by customers), and they also need to introduce many beginners to investing.

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I think it’s worth noting though with HL they have significant overheads, and being a PLC won’t be able to cut fees as much as you think, as they need to show consistent growth else the share price will drop.

Freetrade appear to be one of the disruptors who are setup with minimal overheads (like Aldi/lidl) and we know how that’s gone. Supermarkets took absolutely forever to lower prices to compete after they’d already lost a substantial market share.

In a recession, or, even with possible negative interest rates (imagine for the standard high street bank?) Shares will surely be the way to go, and freetrade will be one of the top picks in that regard

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Well I was a HL customer for years and now I’m with Freetrade. I’m sure I won’t be the only one.
I will certainly sign up to Alpha.

I keep an eye on HL’s own funds and I can see the funds are shrinking significantly in size. One was 5 billion and now sits under 3.

My real optimism for Freetrade is 1st time investors for whom Freetrade will turn on the lightbulb.

I also agree with many people who say there is room for multiple providers and many people will like to have ISA’s with more than 1 provider (in different tax years of course :blush:).

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After Woodford U-turn Hargreaves admits it was wrong to back Burford

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If you’re including SIPPs in Alpha - Freetrade will never become profitable… certain products which will include large sums of money need to charge larger fees. If you pay nothing on trades and £7 a month for your entire pension… there is no way that Freetrade could operate profitably with that. Undercutting HL etc is a good strategy but you still need sensible pricing.

On the other hand it gets more people on Alpha who might only have paid say £5 for a sipp. There’s a few tradeoffs here and either option would be fine if they cost it out. I think Alpha should be £10, are they planning £7 now?

The actual cost to freetrade doesn’t really scale with AUM does it?

I think FT should add bond savings ,if tandem can we should add cash management savings and ft makes money also.

I disagree. That makes FT effectively a bank and comes with another massive overhead. It’s to no real benefit to investors or customers. Monzo offers almost everything tandem offers anyway.

Monzo also has incredibly bad press in regards to its plus offering and trying to milk customers for money at the minute

It’s not a bad time to jump into the market.

I don’t think this is true, could you please share the press articles saying Monzo is trying to milk the customers?

I’m aware of the storm happening in the Monzo forum about plus, I’m also there criticising Monzo choices on this regard, but haven’t seen any press covering this, and most of the press about Monzo is positive.

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Monzo was built on word of mouth and I believe that’s how this is spreading and will be fondly remembered from any Monzo Plus subscriber and anyone on the forums critiquing the decisions that they’ve made

I’m not referring to press articles as such when I say this - just that people will be pretty happy to explain why Monzo isn’t the best idea to bank with

As much as I trust some news sources I trust people telling me things more, and I think most are the same

For instance I’ve managed to stop 10+ people signing up to Monzo from casually mentioning that they’re actually more expensive

Ok, so you’re not talking about press per se.

Still I think saying they have “incredible bad press” is an exaggeration. The Plus offering has been poorly managed from the beginning, and I’m one of the Monzo customers voicing my disappointment, but I still think Monzo is one of the best choices (together with Starling) currently in the market, and I still think they are one of the most transparent banks.

What have you suggested instead of Monzo?

Depends on their needs

Most of my friends are students so I’ve been recommending Starling and a high street bank for their student account.

Also been recommending Revolut based on their multi-currency aspect.

Besides that I’ve been pretty keen in recommending a solid dedicated budgeting app (Like Yolt) or perhaps YNAB.

However I don’t really see where Monzo slots into anything.

Students want no fees and an easy way to see their money being used + an easy way to let their money work for them.

Monzo just nickel and dime you on any lending (50p a day for a 20.01 overdraft) and don’t really have any standout features besides Tabs.

I’ve lived in 4 western countries so far and Monzo is the best banking experience by miles. I am not a plus user, so cannot comment on that. But the basic model is amazingly done and genius. The original comparison to tandem is hence being made between Monzo savings pots from different banks and tandem. Roughly the same rates are offered, but Monzo offers much more around this service, which means it wins in a landslide.

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I would personally disagree

But I think we’re derailing now so we should kill it

As I’m sure you suspect, we align our commercial incentives with the best interest of our customers (we wrote about it at length in the pricing model announcement). :+1: We hate zero sum and information assymetry.

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some of us are shareholders, don’t forget about shareholders :shushing_face::rofl:

Fix savings is a benefit as ft would earn from some of the interest, hl offers this also and soon Robinhood and others in the states, it can be a benefit of having alpha accounts.