So there’s this cool fintech company called Freetrade which is founded by Adam Dodds, Viktor Nebehaj and Davide Fioranelli. They’ve totally shaken up the brokerage industry with their free share dealing service. The platform’s goal is to make investing easy, cheap and dependable. They want to help people invest for the long haul instead of trying to get rich quick. So how does Freetrade make money if they don’t charge any fees for trading? Let’s check out how they make their money.
Freetrade: Commission-free Trading Made Easy
Dodds who knows a lot about accounting and financial auditing tried to open an investment account in the UK and was like “Whoa this is way harder and more expensive than I thought it would be!” He saw a chance to get rid of those pesky broker commissions so he started up Freetrade in October 2018. The platform allows you to connect straight to the London Stock Exchange (LSE) instead of going through brokers and this cuts down the cost of each transaction by a lot.
So Freetrade is pretty popular with people aged 26 to 35 who are into trading. Especially if they wanna invest in ETFs. Actually half of Freetrade’s new customers are totally new to trading shares. One of the reasons behind this it is an app that’s like a mix between meme trading apps and fancy brokers. It’s easy to use and won’t cost you a ton of money.
Freetrade is have currently over one million users! They’re even winning awards for their investment app. The company doesn’t charge any commission for brokerage services but if you want some extra features, you can subscribe to their premium packages. We’ll talk about how the make money.
So, How Does Freetrade Make Money?
The primary revenue source for Freetrade is its premium subscription packages. Users can choose from three monthly subscription options:
- Freetrade Stocks and Shares ISA (£3/month): This basic general investment account offers free trades and fractional share trading. The subscription fee grants users access to an individual savings account (ISA) that allows them to invest up to £20,000 without incurring income tax or capital gains tax.
- Freetrade SIPP (£9.99/month): The self-invested personal pension plan (SIPP) provides free transfers and zero share dealing charges. SIPPs are retirement accounts that can only be accessed once the account holder reaches the age of 55.
- Freetrade Plus (£9.99/month): The premium membership account offers additional perks such as limit orders, stop losses, curated stock collections, and priority customer service. Freetrade Plus members also enjoy a 3% interest rate on cash deposits up to a maximum of £4,000. Furthermore, Freetrade Plus members receive free access to the Stocks and Shares ISA account and can subscribe to the Freetrade SIPP at a reduced rate of £7/month.
Additional Streams of Revenue
In addition to premium subscriptions, Freetrade generates revenue from currency conversion fees. When users convert currencies for international trades, Freetrade charges a fee to cover the costs associated with the currency exchange.
Another revenue stream for Freetrade comes from the interest earned on the cash balances held in user accounts. While users wait to invest or withdraw funds, Freetrade pools the cash and earns interest on those funds, contributing to its overall revenue.
Through its innovative revenue model, Freetrade has achieved success in the competitive brokerage industry. By offering commission-free trading and providing additional features through premium subscriptions, Freetrade ensures that its users have access to a range of investment options while generating revenue to sustain its operations and future growth.
Final Words
In conclusion, Freetrade has revolutionized the brokerage industry with its freemium model, providing commission-free trading alongside premium subscription options. Through premium subscriptions, currency conversion fees, and interest earned on user cash balances, Freetrade has established a sustainable revenue model that aligns with its mission of making investing accessible and affordable for all.
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