Buying and selling shares in Europe is an expensive, time-consuming, painful experience, which is why most people don’t bother.
According to the U.K.’s Office of National Statistics, by value, individuals own just 11.9% of shares listed on the London Stock Exchange, and that number is falling.
Compare that to the U.S. where a growing 40% of households own individual shares, some 50 million homes, according to the Securities Industry Association.
But Europe’s apathy towards buying and selling shares could be about to change.
Founded back in 2015 by CEO Adam Dodds and funded largely through crowdfunding, Freetrade this week launched its colorful stock trading smartphone app in Britain to let anyone buy and sell stocks and ETFs.
“We want to make investing something that everyone does,” Dodds explained to Forbes.
“When we look ahead five or ten years, success for us will be helping millions of people build investments they wouldn’t have had without Freetrade.”
The way Freetrade plans to do this is by slashing the price of entry.
While a traditional online stockbroker like Hargreaves Lansdown charges £11.95 ($15.49) for a one-off trade, Freetrade boasts zero-fee investing and takes no commission on “basic” buy and sell orders, or charges just £1 ($1.29) per trade for “instant” orders.
In order to offer fee-free trading, Freetrade got an FCA licence and joined the London Stock Exchange in order to processes its own “basic” orders in bulk each day at 4pm.
The model is similar to Robinhood in the U.S., a zero-fee stock trading app that’s been around since 2013 and is now worth over $5.6 billion.
After three years in development and with 60,000+ people on its waiting list, this week Forbes skipped the queue for an exclusive first look at what the future of share trading might look like.
A Freetrade hands-on
If you’ve got a Monzo account or use Instagram, you’ll be right at home with Freetrade.
Think bright colors, minimalistic design, and a dry sense of humor—BT’s stock description is “Slow internet”, while Supergroup is “Sorta Japanese clothing”.
All a far cry from the very serious-looking stock trading apps of Freetrade’s traditional rivals.
To get an account you first need to join the waiting list through Freetrade’s iOS app (Android is “coming soon”). The team say they’re only onboarding 200/400 users every Tuesday for now, but expect that number to accelerate quickly.
Once you reach the front, sign-up is painless. Freetrade asks for an address, date of birth, National Insurance number and a connected bank account to top-up your account.
Today Freetrade’s “universe” of securities on offer only includes around 123 stocks and ETFs—presented in a rather unwieldy list format—but that number is growing every day.
If you were hoping to buy shares in Apple, Tesla and Google, you’ll be disappointed. Right now only U.K. equities are listed, along with a few U.S. ETFs including an S&P 500 Vanguard Tracker fund.
It’ll be disappointing to some, especially as U.S. equities featured prominently in the advertising for Freetrade’s latest crowdfunding round. Freetrade chief marketing officer Viktor Nebehaj told Forbes that U.S. equities are “No.2” on Freetrade’s internal roadmap and should be coming “soon”.
Once you pick a stock or ETF—I chose BT—you chose how much money you want to invest, say £2.30, and Freetrade will calculate how many shares that’ll get you.
Note that Freetrade lists its securities in Pounds rather than Pence—so BT comes up as £2.27 rather than 227p—a break with tradition that might confuse some more experienced traders.
But before you hit “Buy”, it’s important to know that Freetrade’s zero-fee trades come with some caveats.
In a “basic” trade, any price movement between the time you place the order and 4pm when the trade is executed will be your problem.
If BT’s shares rise for instance, one of three things could happen: you’ll automatically pay the higher share price at 4pm, you’ll get fewer shares than expected at that higher price or, if the price rises beyond the overall buy order you’ve placed (say £2.30), you won’t get anything at all and the trade will be canceled.
Of course, if you don’t want to take that risk Freetrade will gladly sell you an “instant” order for £1.
Everything that happens up to the point you press “Buy” is polished and delightful.
Everything that happens afterwards is not.
When it comes to portfolio management, Freetrade has a lot of work to do.
Its charts are essentially worthless as their axes are unlabelled, there’s little financial data to research the securities you’re looking at, no newswire of any kind, and it’s almost impossible to discern past share price performance.
Right now you’re better off using Apple’s default Stocks app to track your investments.
Nebehaj admitted to me that improving the portfolio management experience is firmly No.1 on Freetrade’s to-do list.
Complaints aside, this is all mostly window dressing. Freetrade’s core functionality of buying and selling securities works and works well, it’s now up to Dodds on his team to build their minimum viable product into something more full-featured.
But they better build quickly.
The Elephants In The Room
Freetrade may have been the first zero-fee challenger stockbroker out of the gate, but it won’t be the last.
The next will likely come from Revolut.
As CEO Nikolay Storonsky told Forbes last month, stock trading is coming to Revolut, and soon.
The $1.7 billion-valued challenger has 2.5 million users across Europe, and has already broken into crypto trading and insurance industries at a breakneck pace.
The second challenge will likely come from Robinhood itself.
The U.S. startup has long spoken about international expansion, but while it’s recently been distracted by crypto trading and gearing up for a rumored IPO, its global ambitions are said to remain.
For the time being Freetrade has cornered the market for zero-fee stock trading. It’s the best challenger stockbroker there is in the U.K., because right now it’s the only one.
It’s up to Dodds and his team to press their advantage, while it lasts.