Freetrade, a British company founded this February, announced it is planning to launch the first in Europe mobile application for commission-free stock and shares trading. It would allow the ordinary people to invest on the stock markets without the hassle, the need for financial advisors and the sometimes exorbitant share dealing commissions.
The aim of the app creators is to respond to the willingness of 46% of the Brits to invest in stocks and shares, but don’t know how.
Freetrade notes that there is a £288 billion share dealing market in the UK, of which £122bn is in 3.7m execution-only accounts. Furthermore, there are 16 million people, for which the Financial Conduct Authority (FCA) says are people who have investable assets, but are not willing to pay the high cost for professional advice.
Another main target for which Freetrade wants to make investment more accessible and affordable, are the 13.8 million millennials (roughly those born between early 1980’s and the end of XX century).
To tackle the advisor problem, Freetrade is planning to offer access to professional advice from independent financial advisors. Another innovation the company will offer in Europe, is the elimination of minimum portfolio size requirement and the introduction of fractional share dealing. This means that if Apple stock is trading at $100, an individual investor can invest just $20 in shares, if s/he so wishes.
The application will be based on the freemium model, i.e. users will pay only for premium services and is intended to generate revenue with full product launch within 12 months. Furthermore, Freetrade is in the process of applying with the FCA for an execution-only broker and is member of FCA Innovation Hub program.
According to Freetrade, they already have the core product, but need additional funding to develop and complete it. For the purpose, they have launched an equity crowdfunding campaign on the site Crowdcube, which allows members of the general public to invest alongside the Europe’s leading venture capital firms, seasoned professional investors and the UK government.
The target sum to be raised is £100 000. Exactly a week since the campaign started on July 18, Freetrade has already raised 47% of the sum, from 52 investors.
Freetrade’s concept is by far not a huge novelty, but is definitely a first in Europe. The pioneer is the US stock brokerage Robinhood, which allows customers to buy and sell listed stocks and ETFs with zero commission.
It was founded in 2013 in California by two Standford University math graduates and launched towards the end of 2014.
Between the December 2014 launch and May 2015, Robinhood attracted hundreds of thousands of users, 25% of them being first-time investors, and generated transactions for over $500 million on its platform.
In May 2015 Robinhood announced a $50 million round of funding led by New Enterprise Associates (NEA). Existing investors Index Ventures, Ribbit Capital and Social Leverage joined the round, along with new investor Vaizra Investments and brought the total funding of Robinhood to $66 million. Also in May 2015, Robinhood expanded to Australia and it is so far its first and only international market.