Currency pots like competitors! Wicked. Seconded by me.
Someone already requested this a long time ago:
I agree with the above. I’ve resorted to using eToro for all USD shares because of this issue. It is not competitive for Freetrade to be making 0.45% on every transaction this way.
These ideas are great but always seem to mean reducing the £ made by FreeTrade I would like this option but it would be a huge loss to the economic plan of the business. If FT did this then they would need to move costs elsewhere and we would be outraged at costs like Etoro
eToro makes money in 3 ways. First, they are a market maker broker with an STP- NDD hybrid model. They make money from losing trades though they balance it to ensure no conflict and are also routinely audited to ensure fairness. Secondly, through commissions and fees when you trade CFDs. Finally, they can also earn from non-trading fees like a $5 withdrawal fee and inactivity fees.
At the end of the day the simplicity of FT is what is attractive to many and why would they invent a whole new financial pool and the associated costs which actually reduced their earnings? Wouldn’t be a very clever business plan
No point being called “freetrade” if its not FREE to TRADE. They could take a % fee of USD holdings as an account admin fee instead of % per transaction.
As a newbi I’ve just started with an isa using my full allowance. I don’t fully understand this Fx fee relative to my investing. For arguments sake if I invested all my allowance in American stock what would be the fee? Is that a fee on buying and selling? How would currency exchange rates effect this?
As far as I understand it, lets say you place an order for £20K of Tesla (just an example, definitely not advice!)
0.45% of that is £90 going to Freetrade.
The remaining £19910 goes into dollars, currently around $1.39/£ so $27674.9
This then buys you 37.5 shares (currently $738 each).
As the exchange rate varies so will the £ value of your investment.
You would need to be up by £180 to cover the fx fee and break even.
Ah OK so besides the fee the cost of stock is very sensitive to currency exchange rates!
Just tying to get my head around this at the moment.
Thanks for a good explanation @Jubatus
HMRC only allows Pound Sterling in ISAs if memory serves.
If I understand correctly, this could be done on GIAs only.
Not sure on SIPPs.
You would not be able to hold foreign currency inside a uk isa. If the trade is not a stock listed in gbp inside the isa, then the fx trade would have to be done instantly on purchase or sale.
For what you are suggesting by holding foreign currency, you would possibly need to trade using a general investment account and this would open you up to capital gains taxes and other accounting needs.
There are hedged etf’s in gbp.
It sounds like you may have to get financial advice from a professional regarding investing through a limited company.
All currencies are allowed in SIPP (cf. Interactive Investor multi-currency SIPP).
This is their No1 source of topline result and is mentioned in nearly all Freetrade pitch decks.
She didn’t mention a ltd company, did she? Nor did she mention an ISA. I’m confused.
I think a comment has been deleted. I too am confused as to why you are confused.
Now I am more confused. Luckily it’s Friday and the weekend is here
Let’s see how many trust them and think they are sustainable:
"Lightyear combines multi-currency accounts with unlimited access to global markets so customers can invest without hidden fees. With its platform, Lightyear seeks to eradicate the ambiguity and unjustifiable fees levied at retail investors.
Lightyear is on a mission to flip this pricing model by giving customers the tools to add, hold and invest money in multiple currencies, removing the need for conversions."
Enjoy your multi currency account when you’re trying to work out your tax because they have no ISA.
If you take the average assets per FreeTrade account, you see that CGT is not a concern for most FreeTrade users. Moreover, Lightyear will probably have very quickly an ISA and by then I doubt multi-currency accounts will be in sight here.
Freetrade have never shared this information to my knowledge.
You can’t have a multi currency ISA though. It’s against the rules
I do need an ISA, If I sold everything in my ISA in the same year I’d be over the CGT limit (based on current gain). also I’m over the annual dividend allowance. I suspect my portfolio is a bit bigger than average, but It’s definitely not the biggest