Storing currency in dollars


#1

I was just investigating a strange issue i’d had with the last few US stocks i’d traded, where my actual profit was almost £10 less than the profit that my portfolio told me I was going to make.

I eventually found out that this is because every time I convert my GBP to USD, and then back again, i’m paying an additional 0.45% exchange fee. So that’s 0.9% per trade after you’ve bought and then sold the stock!

Given that a lot of people on here, myself included, intend to only trade US stocks, allowing us to leave our currency on the app in dollars would save us a whopping $9 per buy/sell, meaning we only need to convert them once when we first convert them to dollars, and once more when we’re ready to deposit!


Stated as zero-fee investing but actually £8 more expensive on £1000 then my current Broker!
(Alex Sherwood) #2

Just to jump in here, 2 x a 0.45% conversion rate (so a buy & a sell) means you pay 0.9% for the fx conversion, not 9%.

To be really clear - each time you buy or sell your pounds are converted to dollars & vice versa, at the spot rate + 0.45%.

0.9% of £100 is 90p.


#3

Haha thank you. Fixed it. 9% would be ludicrous! 0.9% is still significant!


(Emma) #4

Interested where this stat has come from, Do you have a link to that, please?

0.45% for buying now but as a long term investment platform the future increase in value should cover that and the eventual selling conversion when you sell in a few years.


#5

I don’t have a stat, but i’m using the platform for day trading rather than long term investing. You have to pay a 0.5% stamp duty on UK stocks, so US stocks could be the cheaper more profitable alternative, but because of the 0.9% i’m paying with every trade (almost daily)


#6

I get what you are saying but that doesn’t quite fit in with Freetrade’s ideology. For traditional brokers the “future increase in value should cover costs” mantra is standard. Freetrade wants to be different.

Having said that, I think the FX conversion fee could be a key revenue stream for FT as the US market attracts much more investment, in general, than the UK one.


(Alex Sherwood) #7

Exactly, we do have to make money somehow & this is one of the ways that we’ve chosen to do so.

If you’re someone who’s investing for the long term (which is what we’re designing the service for), then hopefully you’ll consider this a relatively insignificant cost.


#8

Also Freetrade’s FX margin rate is a lot lower than many of the “traditional brokers”.


(Jim) #9

HL charge 1% on the first 5k, Halifax 1.25%.


#10

Okay I do understand the need to make money, but what I do not understand is why dollars need to be converted back to pounds when I sell a stock, only for me to immediately convert them back to dollars again as I buy the next one. It seems so unnecessary that it’s diffiult To justify.

I’m simply going to stop trading us stocks now, unfortunately, or maybe go back to UK ones where I only have to pay the 0.5% stamp duty on the buy, and nothing on the sell.

I would have thought there’s as much if not more benefit in allowing people like me to leave our currency in dollars, as we’ll be trading very regularly and paying the £1 for the instant buy and another for the instant sell consistently.

But that’s just one mans opinion. If day trading is not what the platform is meant for, or is frowned upon or anything, I may have to just look elsewhere.


(Chris) #11

Wouldn’t Freetrade need some form of US regulation to offer holding money in $?


(Yogesh) #12

I think it would be difficult to have one size fits all. For transparency it may be good idea to offer paid services like multi currency account (assuming reg permitting as some others provide same). For some users this would be more beneficial.


#13

A paid service offering this feature isn’t the worst idea. I’d rather pay a fee once or once per month than pay the 0.9% several times per day (which is how often i’d trade if not for the fee)


#14

Not when people will be mostly investing in ISAs, or do people actually day trade in ISAs?

And with the possibility of SIPPs too at some point, it all points to Freetrade marketing itself for longterm investors, rather than day-traders.


(Dave Smith) #15

I trade a bit in my ISA, not really day trade, but I will buy and sell stocks if I can make a decent medium term profit rather than just hold everything forever. This will be easier with freetrade, as with HL the profit has to be big enough to justify both buy and sell commission


(Rob N) #16

When Freetrade Alpha launches it will have cheaper transaction costs, free ISA and other benefits for around a tenner a month. I don’t think any details are sorted, but that’s the general idea and it’s planned for later this year.

I believe ISA’s have to be in pounds, which is a limitation. Not sure if you’re using an ISA?


(Alex Sherwood) #17

You can see what’ll be included in the Alpha subscriptions here -

https://freetrade.io/pricing/

(the fx rate will be the same)


#18

During the next round of crowdfunding what will the threshold be to unlock that ‘free Alpha for life’ perk. Will it be set to £5k again like in R3? Not sure if you can answer it at this stage but just thought I’d ask.


(Alex Sherwood) #19

We haven’t decided that yet I’m afraid.


#20

Well please don’t set the bar any higher :rofl: