Freetrade Review: A UK Alternative to Robinhood?

Investing isn’t just reserved for experienced stockbrokers any more. You don’t have to be the Wolf of Wall Street, or any other kind of animal, to make money from stocks and shares.  We looked previously at more passive investing options where we compared Wealthsimple vs Wealthify. What about options for getting involved in building your own investment portfolio?

Freetrade is a UK service which has emerged in recent years as a new way for UK investors to grow ISAs and stock portfolios.  Not only is the service available via app, which means ease of use for most people in this day and age, it is also free from commission.  This means that, while you would normally have to pay fees elsewhere depending on what and how much you choose to invest, Freetrade has set itself up as something of a trailblazer.

However, they’re actually not the first to offer this service.  While they may be the first UK brand to ban commission outright, a popular US company and app called Robinhood has been dropping fees for much longer.  However, for the longest time, Robinhood has only been available to US investors.  This has, rightfully so, left many would be UK investors feeling a bit left out.

That’s why there has been so much buzz around Freetrade.  But how exactly does it compare to Robinhood?  With news emerging that the US staple may finally be reaching UK shores, does Freetrade have a fight on its hands?

Freetrade Review: A Quick Summary

• Freetrade has been seen as a Robinhood UK alternative for some time.
• Freetrade allows you to trade without any fees on withdrawals or trades. It’s that simple!
• The service will let you buy stock either at the best current price or at the best price at 4pm (close of trading).
• You can search for hundreds of stock options through a simple mobile interface.
• However, services such as Robinhood in the US let you trade in more options, and give you greater analytics.
• There is also the matter of Freetrade offering limited learning and training after its initial guides.  Many other services offer more in the way of growth support.
• You will be charged £3 per month for ISA management, from late 2019 onwards.
• You can’t pay in or withdraw via card through Freetrade.
• Ultimately, Freetrade offers free services on what appears to be a somewhat limited basis.  Robinhood, on the surface, seems to offer a more comprehensive service.

What is Freetrade?

Freetrade is an app which has emerged in the UK as a leading name in fee free investing.  This means that, to open a basic stock and/or ETF (exchange-traded fund) account, you won’t be charged a penny on their basic model.  Many investment services, via app or elsewhere, will charge you fees based on portfolio inactivity or withdrawals, for example.

At Freetrade, there are none of these charges.  You are free to set up a basic account with the service from a minimum of £0 – though I’d generally advise you put at least £1 forward if you’re serious about giving the service a try.

Freetrade is available for both iOS and Android, has been featured in Forbes Magazine, and continues to pick up fairly healthy TrustPilot reviews.  To that end, it seems like most investors – beginners or otherwise – can expect a pretty good deal.  Who doesn’t want something for nothing?

However, the fee-less feature is only the icing on the cake.  There is a fair bit more to Freetrade than this, and that is of course what I am about to explore.  For example – there are some fees involved, which may surprise some adopters – though these will never apply to basic account management. Let’s take a look.

How Does the Freetrade App Work?

Opening an account with Freetrade is fast and, as you’d expect, free.  Download the app and set up with any necessary details.  You will have a choice of a basic, free stocks account, or an investment ISA service, which is available for £3 per month.  Freetrade will check your identity through the details you provide.  If you stumble at this hurdle, you’ll be asked to provide more details digitally.  This shouldn’t be likely, but it’s not too much hassle if you have to.

You can then start by depositing into your account and start trading.  It is completely mobile, meaning that unlike some bigger platforms, you won’t have access to desktop analytics.  However, you’ll likely find the interface and usability pretty straightforward.  You can search for assets by name, which is easy, however, there are limited markets and options.

Where Freetrade starts to fall down is in terms of flexibility and of scope.  You can easily trade in ETFs and stocks through the service, but when it comes to anything more advanced, such as cryptocurrency or bonds, you are likely going to be out of luck.

Investment experts using the Freetrade app are also keen to point out that there isn’t much here in the way of a helping hand beyond a solid tutorial.  There are advisors available to help, but the in-depth guides and training centres you’d find elsewhere are sadly absent.

Is Freetrade Easy to Use?

Yes.  Stock trading with the Freetrade app is nice and simple.  This is actually the leading benefit of using Freetrade – beyond the obvious.  A lot of investors will love the fact that they can build portfolios and ISAs using their smartphones and tablets.  There is a definite shift towards mobile investing, and while it’s been on the grow for some time, very few investment platforms have taken the leap to leave their desktop models behind.

However, this is where things start to break down.  While Freetrade is very easy to get into and use, it doesn’t offer you that much in the way of analytics.  Some experts are keen to point out that there are absolutely no indicators.  This means that more advanced investors, and those more experienced in stocks, may find the process a little stunted.

Freetrade is simple to use, but once the opening guides are over and done with, you are on your own.  That is unless you ask for help from one of the Freetrade advisors. That’s a nice touch, but, as mentioned, many other investment services let you learn as you grow your portfolio.  There should be a nice balance of education as well as investment tools here.  Sadly, there aren’t.

Is Freetrade Completely Free for Stock Trading?

Yes – providing you stick to the simple ETF and stock investing model.  If you want to go beyond this and start investing through an ISA, you’ll be asked to pay £3 a month, or £36 a year. This is still a very competitive tariff, so it’s unlikely many people will be complaining.  By the time you read this, you could well be looking to pay out for ISA management. 

Freetrade actively compares other services on its main site, showing that some investment services expect you to pay for inactivity, or to withdraw.  However, more experienced investors will point out that you often pay for services such as these for a reason – greater account management.  I am not disapproving of Freetrade by any means – however, it makes sense to try and find the app’s place in the wider market.

Is Freetrade Safe?

Yes.  Your investments of up to £85,000 are protected by the Financial Conduct Authority, or FCA.  You can trust the brand is it is fully regulated.

More About Freetrade Investment

There are a few more things you should know about Freetrade before you get started.  For one thing, you will be able to deposit via bank transfer and e-wallets.  Once your account is flush with money, you can start exploring stocks by tapping ‘discover’, and then searching around.  There seem to be hundreds available for you to pick from at the time of writing, which is no bad thing.

You can then choose how many shares you want to buy, and you can choose whether or not you want to order instantly at the best price, or by close of play (4pm) at the best price.  These are two great order options to lead with, however, many other investment systems support you with much more flexibility.  Certainly, as a beginner option, this works.  However, more experienced pros are likely going to feel left out in the cold.

Do also be aware that withdrawal methods are somewhat limited.  There may not be any fees for you to take money away, but you’ll only be able to withdraw via bank.  This can be a slow process, which means you could be kept waiting for your money when you really, really need it. It’s worth bearing in mind, though if you can hang on a couple of days, you’ll have no issue.

If you’d like to claim a freebie, you can also refer a friend to Freetrade and get a free share.  This seems to be randomised, but the brand states you could end up claiming pretty valuable stock.  You can both benefit from this, too, so make sure you have a friend who’s invested in investments, so to speak.

What is Robinhood?

Robinhood is a leading name in US mobile investing, which has established itself since 2013 as the main player in fee-free investments online.  Unlike Freetrade, Robinhood offers investment services via mobile and via the web, meaning that there does seem to be some flexibility. 

The web-based version of Robinhood will give you wider access to the stock you buy and to monitor how it is performing.  Advanced analytics, and up to four different order types, also put it ahead of Freetrade in terms of functionality.  On analytics alone, the US counterpart seems to have the upper hand.  However, we do have more ground to cover.

There are no fees for withdrawing, trading in US stock or going silent.  However, some fees will apply elsewhere, and I will cover that shortly in due course.

How Does Robinhood Work?

Robinhood lets you set up an account with minimal information via its digital platform.  This is generally presented with no fuss, meaning that most people should find it pretty easy to get used to.  At the time of writing, only American and Australian users can invest, but this looks set to change.  Again, I’ll get into that in a little more detail shortly.

What’s great about Robinhood, too, is that there are no minimum deposits.  This puts it squarely on par with Freetrade.  The interfaces offered are also very easy to use and to search through, meaning that they should be ideal for beginner investors.

There are three main levels of account available at Robinhood at present, with a basic cash account being your entry-level service.  This gives you good access to trading during daytime hours, which surprisingly, the two upper levels of access fall down on.  However, it’ll take a few days for you to actually fund this type of account.

With a standard Robinhood account, which you start with, you can deposit instantly.  Pay in up to $1,000 to get started.  Want to extend that limit to $50,000?  Upgrade to Robinhood Gold.  However, to do this, you will need to deposit a minimum of $2,000.

Answer a few details and let the system know how long you’ve been trading to tailor your experience.  Verify your ID and start trading.  You can pay in only via bank transfer, and the same goes for withdrawing, too.  Use a range of funds to get started.

Is Robinhood Completely Free?

For basic stocks and cryptocurrency, as well as other options in the US, you won’t have to pay a thing on trading.  However, for anything outside of the US, you will need to pay a sizeable commission.  Whether this will change or not as and when the system branches out overseas remains to be seen.  For now, however, it is something worth keeping an eye out for.

Is Robinhood Coming to the UK?

This is the big question – and the answer is certainly yes!  Following regulation approval in August 2019, Robinhood has been given the green light to head to the UK, meaning that it could provide stiff competition against Freetrade. 

Be One of the First in the UK to use Robinhood!

*If you want to join the waiting list to be one of the first to use Robinhood in the UK you can sign up here with just your email address.

However, if Robinhood is going to make as big a splash here as it has in the US, it is going to need to open up its fees system even more.  By this, I mean that the bar on commission only applying to US stock and crypto is going to need to apply to the UK, too.  There is no real word on this as such right now, but I can imagine there is going to be a bit of flexibility if it’s going to go head-to-head against Freetrade.

Robinhood has a lot of financial backing behind it, which could spell bad news for Freetrade.  However, let’s take this opportunity to break Freetrade back down again, and to see whether or not it could hold its own against the American ambassador. Are you looking to trade in UK and US stocks? Let’s break this down further.

Freetrade – Pros and Cons

Freetrade seems great on the surface – and yes, it has plenty of great perks.  However, your experience may vary. Let’s break this down.

Pros

• Freetrade is completely free to use in terms of commission.  Based on stocks and ETFs, you won’t get charged anything for taking money away, or for going inactive.
• The user interface is refreshingly simple. It’s very easy to get into and the opening guides help to introduce you to the complex world of trading.
• The search function is nice and easy to use and understand. It’s very simple to narrow down your options, and to buy into certain shares.
• You can manage your portfolio completely on the go, via an app for either iOS or Android. It’s great to see both bases covered.
• You’ll get a free random share, and so will a friend, if you recommend them to the service.  Will you get free stock in Netflix or Apple?  Unlikely, but you can hope.
• Freetrade is very open and transparent on what you can and can’t do.  Unlike some investment services, navigating their initial registration page – and their initial blurb – is very easy to do.  This will make a big difference to beginners.
• You can manage an ISA through the service for free right now, but this will change to a paid service later in the year.

Cons

• You can only trade through two preset order systems.  This means that you can either order stock at the best price of a share, or at its best price at the close of trading (at 4pm).
• There is no option for a card deposit, which seems a little odd on the surface.
• You can only withdraw via bank transfer, which could put the app behind the pack a little.
• There is very little in the way of support or further education once you get started.  While the opening guides are great at helping you find your feet with the service, you’re going to have a hard time developing your investment skills moving forward.
• The service has limited investment options, meaning at present you can only make money through stocks, ETFs, or through an ISA.  Plenty of other investment platforms offer more.
• Freetrade is very limited when it comes to analytics and predictions.  Its choice to lead with a simplified interface and processes may be its downfall here, at least a little.  Without a web or desktop service equivalent, some traders and investors are going to find things a little restrictive.
• Traders will also find the lack of research tools here to be limiting. It’s worth bearing in mind what you actually want or need from your stock investing app.

How Does Freetrade Compare to Robinhood?

Freetrade offers a great little platform for beginners, and the appeal of commission-free trading is a definite plus point.  However, it’s worth bearing in mind that with free trading, comes a few restrictions.  Robinhood offers free trading too, though only to an extent via US stocks.

Where Robinhood appears to trump Freetrade lies in the functionality.  Freetrade offers you two separate order options, while Robinhood supports four.  Freetrade runs its service completely via mobile app, while Robinhood offers up a web alternative.  This means that, generally, you can expect more in-depth analytics and a bit more control over how your stocks are performing.

Robinhood also supports further education and training, at least more than Freetrade does.  While the opening guides for Freetrade are very useful, there doesn’t seem to be any scope for letting you advance as a trader, which would be a welcome touch.

Robinhood lets you dabble in more, too.  While Freetrade offers a nice scope in terms of stocks and ETFs, as well as ISA management, where is the crypto service?  Crypto seems to be here to stay – so it would make sense that a crowdfunded start-up like Freetrade would sit up and take notice.  This will remain to be seen.

It will be great to see both Freetrade and Robinhood open up a little more when it comes to UK and US stocks in future.

This does all seem like Robinhood has the edge over Freetrade.  Generally, it does.  But to be able to appeal to a wide UK market, Robinhood is going to need to make a few tweaks. 

What’s the Best No Fee Investing Model?

Want to invest for free?  Take your time and choose wisely.

Robinhood has led for the longest time as the big name in commission-free trading via mobile.  However, there is stiff competition from overseas.  Freetrade is a great echo of the service with a nice focus on keeping things affordable.  However, it really falls down in some areas, certainly in terms of scope and flexibility.

Beyond this, both services are very easy to set up and use.  Freetrade is already well-loved by many people in the UK, too.  While Robinhood has been held up as the bastion of free investing for some time, it will need to drop fees for UK trading as and when it does arrive.

As Robinhood caters to more markets, and as it seems to be more in-depth, it may already have the edge over Freetrade.  For the time being, however, until it arrives, I’d be inclined to say stick with what you know.

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