Stake and Robinhood
Freetrade was founded in 2015 by Adam Dodds and has regular crowd-funding rounds on Crowdcube.
- Freetrade has an FCA licence and joined the London Stock Exchange so as to be able to process its own orders in bulk.
I signed up to the waitlist a long time ago and persuaded enough of my friends and colleagues to do the same (using my referral code) that I made it almost to the front of the queue.
- So I was looking forward to the beta test until I discovered that there was no desktop site, no Android app and the iOS app needed a recent version to work.
When I inherited an Android phone with a recent OS, and was gifted a similar tablet as part of the same phone upgrade, I joined up.
Trades on the main UK platforms run from £12 at Hargreaves Lansdown, down to £5 at iWeb and £6 at X-O.
- DeGiro offers most trades for less than £2, but their European insurance scheme meant that I never put more than £20K into the account.
Freetrade’s basic offer is a free trade as part of a 4pm bulk trade.
- If you want your own instant trade, that costs £1.
They also charge £3 per month for an ISA.
- Foreign trades (currently just US stocks plus some Asian companies listed as ADRs in New York) have an FX surcharge of 0.45% over the spot rate.
The “Freetrade securities universe” – which you can find here – has around 450 securities:
- most are UK stocks, including a few dozen investment trusts
- more than 100 are US stocks
- 50 or so are UK ETFs
- and a few are 10 of these are ADRs of non-US stocks listed in the US.
So this won’t work as the main account for a UK stock investor.
- You can use it for a simple ETF (and/or IT) portfolio.
- Or for a small side portfolio of US stocks.
The obvious omissions are European stocks and AIM stocks.
The ISA costs £36 a year, so assuming you go for the £1 trades, you would be ahead of iWeb (the cheapest ISA) after 10 trades.
- But the limited UK stocklist means that it’s not really suitable for a trading ISA.
And if you buy and hold, you need a large portfolio in order to be able to shrug off the extra £36 a year going forward.
- ISA transfers are not currently supported, it would take you 18 years to get to £360K (ignoring any growth in the value of your investments).
I ended up using Freedtrade for a global ETF portfolio – to test the service out.
- If the fabled market “melt-up” occurs in 2020, I will probably switch to us tech stocks.
Stake
We can dispense with Stake pretty quickly:
- The free tier only includes two free trades per month.
After that it’s $5 (£4) per trade, so Freetrade is cheaper at just three trades per month.
There’s no ISA, and the investment universe is limited to US stocks only.
The Unlimited tier costs $108 pa (£82.50 as I write).
- You would need to make 83 trades a year (7 a month) for Freetrade to cost more.
So this offer is clearly aimed at those who want to punt small amounts at the US market.
Robinhood
I had high hopes for Robinhood, which is very popular in the US.
- But they’ve ended up porting a sub-set of their US product to the UK, rather than building a UK specific offer.
- It’s possible that this is because EU rules (Mifid) make it more difficult for them to sell their order flow (allegedly a key part of their business model).
The bits they have left out (options and ETFs) are the ones that were the most interesting to me.
- So in the end, their product is very similar to Stake’s – albeit cheaper.
The waitlist opened at the end of 2018, and I’m fairly high up on it.
- A couple of weeks ago, Robinhood held a series of launch parties, which I skipped because of dry January.
But they were written up on Reddit, which I why I now know more about the product:
- Completely free trades, which are instant rather than batched at 4pm
- US stocks only (plus ADRs listed in the US) – no ETFs, options, crypto or UK stocks
- There’s no ISA
- All transactions in dollars – converted at the mid-market rate with no commissions
- Insured under the US scheme rather than the UK one – but with cover up to $500K
- They are FCA approved, however.
- There’s a premium level (called Gold)
- In the US this costs $5 a month and gives you margin trading, Level 2 data and research reports.
Robinhood does beat Freetrade for an actively-traded US stock portfolio, if you can put up with the money being held in the US, in dollars.
- Since there’s no ISA, the CGT allowance of £12K pa in gains would be used up in a good year (like 2019) by a portfolio of just £50K.
This is a niche product, but I’ll give it a try when it launches.
Until next time.
Article credit to: https://the7circles.uk/stake-and-robinhood/