Freetrade review

Freetrade is one of the new batch of stock dealing apps that have revolutionized the industry in the last few years. The company was founded in 2016 and launched an iOS app in October 2018 with an Android version dropping in April the following year. Targeting the Millennial market, Freetrade is only available in app form at the moment.

Customers can trade shares and EFTs for free, hence the name Freetrade. The app runs on a ‘freemium’ model, so there is a basic free version and a paid for version, Freepay Plus, with added functionality.

As Freetrade is a relative newcomer (admittedly in a pretty new market), it is somewhat unproved. However, it has weathered the 2020 stock market crash, so it must be doing something right. The app is constantly updated, so keep an eye out for new and improved functionality.

Freepay is currently available in the UK, Ireland, Sweden, Germany, the Netherlands, and France. 

Fairtrade fees and charges

As mentioned in the introduction, Fairtrade operates using a freemium pricing model, with the basic package being free and more extensive version available for a monthly charge. However, you may be liable for a few small charges even with the free app. 

Freetrade offers three investment packages: a general investment account, a stocks and shares ISA (a tax-free Individual Savings Account), and a SIPP (Self-Invested Personal Pension).

The general investment account allows you to make trades for free and does not have a share-dealing account fee. Currently, GBP is the only base currency available with Freetrade, so if you want to trade US dollar denominated stocks you will be charged the FX spot rate +/- 0.45% to convert your currency.

To take out a Stocks and Shares ISA you will pay £3 per month, but again you can make trades for free. If you want to trade US dollar denominated stocks, you will be charged the FX spot rate +/- 0.45% to convert your currency. 

SIPP fees are set at £9.99 a month, or £7.00 a month if you are already have a premium Freetrade Plus account. You will not be charged a trading fee, and it is also free to transfer in and out of your account.

Opening a Freetrade account

Opening a Freetrade account is easy. As you would expect with a Fintech startup, the whole process is fast and fully digital. 

There are really only four simple steps to follow:

1. Download and install the app (available for both Apple and Android)
2. Enter your email address and respond to the verification email
3. Add personal details (name, address, DoB, NI number etc)
4. Choose account type (General, ISA, SIPP, Plus)

Freetrade will then verify your identity and you will be good to go. In case your identity is not verified, you will be asked to upload copies of proof of identity documents (e.g. driving license, passport or ID card) and/or proof of address documents (a bank statement, council tax or utility bill, correspondence from HMRC or the DWP). 

Plus, if you refer a friend to open an account with Freetrade, you will be given a free share worth anything from £3 to £300.

Depositing and withdrawing funds from Freetrade

Getting your funds into and out of Freetrade is easy enough, but there are a few snag points of which you should be aware.

You can deposit money into your Freetrade account through Google Pay or Apple Pay, a debit (but not credit) card, or a simple bank transfer. The bank account must be in your name.

If you have a personal bank account that is not in GBP, then you will be charged a fee for converting it. Alternatively, you could open an account with a digital bank (such as Starling Bank or Monzo), which allows you to choose the currency you want to hold your money in. Some trading apps don’t charge for foreign exchange, such as Fineco and Stake.

Freetrade offers two options for withdrawing money: a) non-same day, which is free and usually takes a couple of days b) same day, for which there is a £5 fee. You can use digital wallets (such as Google Pay and Apple Pay) or bank transfer to withdraw your money.

To withdraw money you click on Account in the app, and then click Withdraw and enter the amount and choose the destination you’d like the money to go to.

Trading software

If you’re thinking of stockbrokers facing banks of blinking screens, Freetrade is not that. As it is designed with Millennials in mind, Freetrade is only available as a mobile app. However, this does not mean they do not offer some powerful functionality.

Freetrade have built their own entirely proprietary trading platform. The company says that this allows them to allows them to keep costs down and be much more responsive. For you, the consumer, this means that Freetrade can afford to offer trades for free and can also make updates far faster than they would otherwise be able to do.

The app is easy to navigate, with a good search function to help you find what you’re looking for, either by asset name or asset class.

The Apple app has a rating of 4.7 (with 10.4k ratings) and the Android app has a rating of 4.4 (with 1,904 ratings), which is very respectable.

Freetrade has a very engaged community. In fact, it was 140 members of this community that put in the original money to get the company off the ground. Wind forward to the present day and the community still helps shape the direction of the Freetrade software. This means that if you think there is something that would really improve the app, you visit the community noticeboard and start building your case.

The proprietary software is known as Invest by Freetrade. The General Investment Account (the basic account) allows you to place basic orders and instant (a.k.a. market) orders, both without a fee. You can also buy fractional US shares, this is a piece of one share, and allows you to invest in companies that might otherwise be out of your price range.

Freetrade Plus allows you to make Limit Orders and Stop Loss orders in addition.

With Freetrade Plus , you can also make a Triggered Order and a Triggered Stop Loss for US stocks.

Although we said at the beginning of this section that Freetrade does not currently offer a browser-based platform or a desktop app, they are working on bringing these out in the near future.

Stocks and ETFs: The Fairtrade product portfolio

You can currently trade UK and US stocks and ETFs (exchange-traded fund) on the London Stock Exchange (LSE), the New York Stock Exchange (NYSE) and NASDAQ only with Fairtrade. 

This means that you cannot trade Bonds, CFD (contract for difference), Crypto, Forex, Funds, Futures, or Options with Fairtrade. As far as we know, these assets are not on their short-term expansion plans either.

The app currently offers 3,700 stocks to buy and sell (you can access the list in full here), and one of the biggest advantages of Freetrade is that community members can have a say on which new stocks should be added to the portfolio first.

Customer service

You can contact the company through a chat functionality in the app or email them at hello@freetrade.io. They are fast to respond, but do not work 24/7 and you cannot call them as they do not run a call center yet.

The Freetrade community includes members of the customer service team and you will be able to find answers to most of your questions there. They also have a terrific Help section.

Trading education and advice

Before you invest, research is key. According to Charlie Munger, the legendary business partner of the even more the legendary Warren Buffett: “If you take Warren Buffett and watch him with a time clock, I would say half of all the time he spends is sitting on his ass and reading.” He’s not reading James Patterson novels; he’s hovering up company reports and other financial information.

So, how does Freetrade stack up on education and advice?

They offer a number of emails filled with useful information for customers:

• Honey comes out daily and gives you a snapshot of relevant markets
• Weekend Read includes in-depth articles on investing, as well as Freetrade special offers
• The Freetrade newsletter has news about the company and app

The Freetrade Invest Hub blog is regularly updated with articles by finance bloggers on market trends, how to start out as an investor, and how to build your portfolio.

And you can use the Freetrade community to learn share trading and investing skills.

As well as learning about how to trade, many trading applications allow you to do your own research into stocks and visualize how your own stock is performing. This brings us to possibly Freetrade’s biggest weakness: they offer very limited interactive charting and no fundamental data. 

You do have access to an interactive graph scrubber, one-day graph fill functionality and the ability to check performance over time, but there is no trendline editor or any other charting tools.

Regulation and security

Based in London and being a member of the London Stock Exchange (LSE), Freetrade is regulated by the UK’s Financial Conduct Authority (FCA). 

In practical terms this means that Freetrade has to abide by strict rules on financial propriety. In some ways, the most important facet of being based in the UK is that all customers are covered by the Financial Services Compensation Scheme (FSCS), which will pay you if the company is unable to. This will protect your assets up to the value of £85,000 (this amounts to more than USD 122,600).

Being founded in 2016, Freetrade is to some extent untested, but it does have some strengths to bear in mind. Both the CEO and the Head of Finance (Adam Dodds and Rob Sexton) worked as auditors at Big Four accounting firms, so they arguably have a better understanding of controls and processes than many entrepreneurs. And while Freetrade may be young, it has already weathered the fastest financial fall since 1929, the financial crash of 2020.

All assets are held according the FCA’s CASS rules (the Client Assets Sourcebook), that are designed to ensure that companies can retrieve all clients’ money in the event of an insolvency.

PwC, one of the Big Four, carry out Freetrade’s yearly audit. This in itself is unusual for a start-up, which normally use smaller auditing companies.

Conclusions

Freetrade is an easy-to-use mobile-based share trading app that is perfect for beginners and, because it offers so much for free, will probably catch the eye of a good number of more experienced traders.

The app is a good way to start trading as the basic package is free, then you can step up to Freetrade Plus as your experience grows. The app is constantly being improved, with customers’ help, so any feature that isn’t there yet might be soon.

The Freetrade refer-a-friend scheme could be a nice little earner.

You can join their yearly Crowdfund initiatives (on Crowdcube). Your investment could see you earning if the company is finally bought out or there is an IPO.

The Freetrade community is vigorous and you can learn a lot about trading from them.

On the minus side: you can only trade shares and EFTs, and at present there is very little in the way of interactive charting.