What is Freetrade?
Freetrade launched in 2018 with the simple aim of making stock trading and stock ownership accessible and affordable. There are none of the fancy calculators, guides or research on offer such as those provided by investing stalwarts such as Hargreaves Lansdown and AJ Bell, but what you do get is a low-cost share trading account that allows you build up a portfolio starting from just £1, solely through a smartphone app. You can even hold your shares in an ISA so any interest and dividends are tax-free.
It was founded by Adam Dodds and Davide Fioranelli, both of whom previously worked in corporate finance for KPMG. The platform’s unique selling points is that its app lets users buy and trade real shares with zero commissions or fees via their smartphone.
Freetrade has attracted a loyal following of more than 80,000 users. Many have contributed to crowdfunding rounds that have raised more than £10m and the platform has also benefited from a $7.5m Series A investment from one of Europe’s top tech-focused VC funds, Draper Esprit.
How does Freetrade work?
Share trading can be pricey on traditional DIY investment platforms. This is mainly because providers such as Hargreaves Lansdown, AJ Bell and Interactive Investor have a stronger focus on funds.
In contrast, Freetrade is solely focused on shares. You can build up your own portfolio from just £1 and there are no fees for buying or selling. Trades are made toward the end of the day but those who want to take part in day trading and lock-in a current price can pay an extra £1 for an instant trade during market hours. You can purchase shares in companies listed in the UK and US as well as exchange-traded funds (ETFs). There is nothing to pay for a basic trading account other than stamp duty and fund charges for ETFs. Holding your shares in an ISA will cost £3 a month. There are two options for depositing cash. Either set up a bank transfer or make a direct payment from a debit or credit card.
There may be a wait for a bank transfer to clear but a card payment will be instant meaning you can start trading straight away. You can withdraw funds from Freetrade to the same bank account by transferring from the app for free. A standard withdrawal will take three to five working days. You can also request a same-day withdrawal by messaging Freetrade’s live chat service. Same-day withdrawals cost £5 and must be requested by 2pm. Cash from sold investments cannot be requested for withdrawal until the cash has settled. This is completed two days after the trade has executed.
How to set up a Freetrade account
Freetrade has a website where you can find information about the platform, read reviews and chat with other users on its forum. But the only way to open an account is by downloading its Apple or Android app on your smartphone. This means the platform is only really for those that are used to using an app to manage their money and of course you will need enough storage space to download it. The setup process takes just a few minutes. You start by entering your email and will be sent a verification code to activate your account.
Once you have entered your personal details such as your name, address, date of birth and national insurance number you are ready to start trading. Users can transfer funds by setting up a linked bank account or make a payment using Apple or GooglePay. The app lets you search for stocks and ETFs, see pricing and performance over a day, week, month or all time and see the most popular companies. Once you have invested you can also monitor how your portfolio is performing and buy and sell through the app. The buying and selling process is displayed in a user-friendly way, showing the share price and how much of the stock you will receive based on how much you want to buy.
- Commission-free investing - DIY investment platforms can charge anything from £1 to more than £10 per trade for those buying and selling shares. Freetrade doesn’t charge anything for share dealing.
- Low minimum investment - You can start investing in shares from just £1.
- More than 600 UK, US stocks and ETFs - Invest in some of the world’s largest and best-known listed companies such as Google, Facebook and Apple or try to spot rising stars.
- ISA - Earn interest and dividends from shares tax-free through an ISA. You can also transfer old ISA money to your Freetrade account.
- Free share - Refer a friend to Freetrade from the app and you will receive a free share in a company worth between £3 and £200. That could be a good way to get exposure to high-flying stocks.
- Shareholder perks - Some companies will provide shareholders with freebies once you earn a minimum amount. For example, if you own 500 shares in Fuller Smith & Turner, you can get a discount card for its pubs and hotels.
How much does Freetrade cost?
A breakdown of Freetrade's basic account costs.
|ISA||£3 per month|
|Same day bank transfer||£5|
|Standard bank transfer||Free|
|Forex rate||Spot rate plus 0.45%|
Freetrade’s Basic account is free. It lets you buy, sell and hold shares. If you want to earn your interest and any dividends tax-free, you will need to open an ISA, which costs £3 a month to run. Freetrade also charges £1 for instant trades and £5 for same-day bank transfers. If you are buying US stocks, the exchange rate will also be reflected in the price. This is based on the price plus 0.45%.
Freetrade is currently working on a premium 'Freetrade Alpha' service that will give users everything from an ISA account and instant trading for £10 per month or £100 per year if paying annually. Instant trades will be free for US stocks and 50p per trade for UK stocks, which Freetrade said it is hoping to reduce and eventually eliminate. Freetrade Alpha is probably more suitable for those actively trading stocks quickly.
How does Freetrade make money?
Freetrade’s basic service is free but it generates income from its monthly fee for ISAs as well as charges for those wanting instant trading and same-day bank transfers. In time, it will also receive revenue from those who sign up to its £10 per month or £100 per year Alpha service once it launches.
Is Freetrade safe?
Freetrade is regulated by the Financial Conduct Authority so it must follow rules on segregating client money and treating customers fairly. You can complain both to the platform and the Financial Ombudsman Service if you are unhappy with the offering. Up to £85,000 of your money will also be protected by the Financial Services Compensation Scheme if Freetrade becomes insolvent. Losses that occur through poor investment performance are not covered and so you are fully responsible for the investment decisions you make.
Freetrade customer reviews
The Freetrade app is rated highly on both the Apple and Google Play app stores, with a ranking of 4.7 and 4.6 stars respectively. It was named the best online trading platform at the 2020 British Bank Awards.
Independent review site Trustpilot rates it 4.0 out of 5.0 achieving a status of 'Great'. The majority or 76% rank it as excellent and cite its user-friendly app and good customer service. Around 18% rate it as poor or bad, raising individual issues such as payments not reaching the app or being unable to download onto a new phone if a device gets lost.
Alternatives to Freetrade
Freetrade vs Moneybox
Freetrade may offer a low-cost way to invest in shares but you can get exposure to the markets without much effort using Moneybox. The Moneybox app links to your bank account and rounds up your spending, putting your spare change into a choice of products from a savings account to a Lifetime or stocks and shares ISA. Its savings product and Lifetime ISA is free while the stocks and shares ISA could work out cheaper than Freetrade’s at just £1 a month – waived for the first three months - however it does charge a platform fee of 0.45%. The Moneybox ISA invests in funds rather than shares and may get more expensive depending on the underlying fund charges and strategy chosen. Moneybox users can also invest their spare change in a pension that costs 0.45% per month up to £100,000 and 0.15% over £100,000 plus fund charges. Read our Moneybox review.
Freetrade vs Plum
It can be hard to work out how much you can afford to invest into the financial markets. Plum helps by analysing your spending and using its algorithm to decide how much you have left to invest or save. Plum lets you invest in either just shares or a mixture of shares and bonds. Investing in an ISA with the app costs £1 a month, of which the first is free, with management fees of 0.15% for funds. The fund charges range from 0.08% to 0.9%. Read our Plum review.
- Easy setup - You can be invest in the stock markets within minutes with a fast and simple setup process.
- User-friendly - The app isn’t too complex and is divided into five simple sections. View your portfolio, get insights into how your money is allocated across sectors, search and view information on the most popular stocks and ETFs, see your recent activity and top up your account. All this can be done quickly on your smartphone app.
- Low cost - Stock trading can often be pricey on traditional investment platforms but Freetrade has removed any commission meaning you can hold your shares in a low-cost ISA.
- Community - You can get hints and tips from other users through Freetrade’s regularly updated blog. It also features updates from platform staff.
- Risk of making losses - The key to successful investing is diversification. The downside of the app being so user-friendly is that it can be easy to just buy stocks you like but not get the right balance, which could mean if one sector has an issue your whole portfolio could collapse. There are not many clear warnings about the risk of loss when buying shares on the app. It can also be easy to get addicted due to how easy it is to buy and sell shares. It may be useful for the app to set payment limits similar to gambling websites.
- Lack of research - Other platforms have plenty of research tools so you can dig into a company’s performance and recent stockmarket updates to get a sense of how the stock is progressing and what the future could hold. Freetrade does offer graphs showing the historical share price but little else. Its blogs advise that you should do your research and also highlight the type of factors to look out for, but this all has to be carried out on your own, outside of the app.
- Limits on assets and products - A fund is an effective way to access a basket of diversified shares but you are limited to stocks and ETFs on Freetrade only from the UK and US. This may encompass most global companies but it means you miss out on listed companies in continental Europe and emerging markets. Also, there is no retirement option such as a self-invested personal pension.
Freetrade helps bring stockbroking out of the stuffy city offices and into the 21st century with a snazzy app and low-cost offering. Users must remember that just because the app is easy to use, investing in shares is still risky business and requires research and focus to build a diversified portfolio to ensure your money is put to good use.
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