Yes, and those are very pertinent arguments. Having more money and being bigger are extremely important, particularly as more and more established companies enter the market.
It’s not a question of competitors catching up - they’re already ahead of Freetrade and that’s the problem. From being in a position about a year ago of marketing themselves as the only transaction-free UK broker and the only one who will have fractional shares, Freetrade now doesn’t seem to have any USP in my eyes. They’ve been overtaken by others and when being fee-free and offering fractionals etc becomes the norm, it’s going to be much harder to compete when you haven’t got the marketing budget and large established brand and user base.
Having a USP is great and is a big advantage - but in any market it only ever lasts for a limited amount of time. There will always be competitors coming along and eventually your amazing USP which caused a lot of excitement eventually becomes industry-standard. In that short window where you have an advantage you’d better grow and improve massively or you’re in trouble when the big boys come around as they surely will.
From Ivan Ashminov on the Trading 212 community in response to a question as to how T212 make profit ( I wouldn’t normally cross paste but I think it’ll be of interest to this forum )
Trading 212 is making money from its CFD business where the main revenue comes from spread and interest swap. As our Invest service grows, we will be able to monetise some of its advanced features but monetisation is not our priority at the moment. Our top priority is to provide an insanely great service, completely free. Other platforms claiming to offer free trading either provide significantly inferior service (e.g. the free trades are not instant but executed at the end of the day) or are limiting the number of free trades. And all of them are burning VC money. We have been profitable for the last 15 years (if that is of concern for the long-term investor).
Yes, but if they do it all for free, what are their incentives? I mean, are they just running it as a loss leader in the hopes that it’s going to convert people to the CFD product sooner or later? If so, would you expect to be nagged, sorry, guided, every now and then to buy CFDs?
If not, and invest keeps scaling up, and its costs also keep increasing, what are they intending to do then?
Dividend reinvestment is very basic thing, I’m guessing it will be like create your own index kind of thing with your own weights and sipp it. Or something like choose a predefined portfolio with auto rebalacing.
I mentioned before that T212 seem to be very aware of FT. I believe I understated that.
I think they literally watch this forum . I’m sure the new T212 surprises will drop at around the same time as FT Invest.
Looking at the way T212 rapidly add fractional shares on request has lead me to think that it’s a very clever marketing stunt. They could probably flip all shares to fractional within minutes at this point, but instead they are soaking up good will from the community by doing them on demand.
Costs: Our charges may be incorporated as a mark-up or mark-down (the difference between the price at which we take a principal position and the transaction execution price with you). The Company’s price quote in many markets already includes our spread and there will be no additional fees or commissions due from you.
So, they are legally covered: they charge spread, they just don’t tell you.
The Company’s charges are not taken into account in determining the best execution prices.
So they detemine the best execution price and slap the spread on top of it.
Freetrade meanwhile confirmed many time they don’t make money on spread.
That’s because Trading 212 is just a white label of Interactive Brokers. Check their execution reports and you’ll see that 100% of their stock trading is done through IB’s US entity. You’ll also see that all of their CFD trading is b-booked - ie. they are the counterparty to all of your trades.
I cannot see why you would invest with a company that is based in Vanuatu / Bulgaria - with ‘offices’ in the UK that are effectively there for show.