Freetrade stakes claim on Europe's free-of-charge stock markets

... Credit :
Shadrach   in Stocks & Shares

Last updated: 23 January 2020, 03:53 GMT

In the new shake-up of the investment market by app-based brokerages, Freetrade, the British commission-free stock exchange site, is spreading into other European countries.

The Netherlands and Ireland are Freetrade's first chosen countries for a larger European expansion of its low-cost trading platform, following its arrival in the UK in 2018.

App-based services like Freetrade, Revolut and the US-based Robinhood also challenged the traditional investment sector, which pays consumer payments for buying and selling securities. Platforms for investment such as Hargreaves Lansdown, AJ Bell and Interactive Investor may charge more than £ 10 per trade.

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Adam Dodds, chief executive and co-founderof Freetrade, said the growth in a rapidly shifting market was a German "land grab" "We want to be the first to deliver a personalized, localised form of investment."

From Thursday Freetrade will take on a small number of customers to test the service in both countries, initially offering access only to its UK investment portfolio. In the coming months, the company plans to roll out investment products tailored to local European markets, which it said will include Irish listed companies in Ireland, as well as the Amsterdam Stock Exchange in the Netherlands.

It is one of the UK's biggest commission-free trading companies, with a customer base of just over 90,000, which tends to millennial consumers, with an average age of 30 among its clients.

Freetrade has refused to disclose amounts of activity on its website. According to the company, an initial investment by a customer to the platform averages £ 100.

Despite the name it is not cost-free trading. Clients can choose a fee-free general investment account where their transactions are executed in bulk at 4 pm each day with all other clients, or pay £ 1 for an immediate contract. For those wanting to keep their savings in a tax-friendly Individual Savings Account (Isa), the company charges £ 3 a month.

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Freetrade has a relatively limited investment field at its customers ' disposal, with 620 investment options available to UK customers, from US and UK stocks to exchange traded funds and real estate investment trusts. It contrasts to the thousands of products listed on existing trading sites like Hargreaves Lansdown.

The low-fee approach embraced by robo advisors as well as online brokerage sites for financial services companies has also drawn criticism in recent months. Moola, a British robo therapy firm that in the past year turned over less than £ 900 as it invested £ 1.3 m, said it was shutting at the end of February last week.

Investment sites with low fees need to expand exponentially and acquire new users to stay viable, increasing their marketing costs. Graham Bentley, gbi2 investment marketing consultancy managing director, said:

You need a large volume of users to make any dent in the market at all.

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Freetrade views opening up new European markets as key to market share growth. "Europe is important to our growth plan," freetrade co-founder Viktor Nebehaj said.

Anthony Morrow, Chief Executive of OpenMoney, a Financial Advisory Company, said:

Coming to Europe carries with it not only a far wider target market but also a sector that will attract more current and seasoned buyers.

Freetrade said it picked the Netherlands and Ireland due to the high proportion of English speakers on the markets and their accessibility to new products. It plans launches in Germany and France at a later date.

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Further consolidation in Freetrade's home market is anticipated. Robinhood, Silicon Valley's cryptocurrency trading firm that has earned more than $912 million since its inception in 2013, revealed plans to enter the UK market in early 2020. The broker's UK website this week indicated 54,000 people had currently signed up on its waiting list.

Experts said that Freetrade needs to be careful about its new target markets. Mr Bentley said: 

The investor population in Europe is different than in the UK. It has less of a propensity for equities. The margins for Freetrade could be different than what they’re used to in the UK.

It's going to be a battle in the next few years over the whole of Europe.

said Nick Bartot, founder of Bux, a Netherlands-based commission-free investment platform.

But to be successful in Europe you need a system that allows you to adapt to new countries very quickly. It's a matter of whether it's realized by UK and US businesses.