Low-Cost Apps Encouraging New Generation into Investing Online
A new generation of app-based online stock brokers and apps also being launched by existing companies in the sector are attracting ‘thousands’ of first time investors with an average age of 30 into investing online in the stock market. Dabbl, the country’s first ‘app only’ online stockbroker launched in April of this year and has made a strong start according to co-founder Mark Ackred who explained:
“There’s an entire generation of people who have lacked the confidence, tools and price-point to benefit from investing directly in the stock market. We are reimagining this complex and intimidating experience to make it fair, frictionless and accessible to all.”
The trend popularised by the U.S.-based zero-fee app-only stock broker ‘Robin Hood’ has now arrived in the UK and Europe. As well as drastically reducing the costs traditionally associated with buying and selling shares tech-centric brokers are also focused on injecting the kind of streamlined usability tech disrupters have had success with in other sectors.
Dabbl, which charges users £20 a year for up to 3 trades a month, is far from alone, despite the fintech start-up’s claim to be the only ‘app-only’ service. Freetrade, which will offer a similar ‘freemium’ model to Robin Hood recently raised £3.1 million through a crowdfunding campaign. Part of the capital generated will fund Freetrade’s own stock broking app which it expects to launch within the next few months. Revolut, fintech bank challenger, is also in the process of putting together a commission-free stock trading app which will launch early next year. Trading 212 and Cyrpus-based eToro are other competitors for the new generation of finance-savvy millennials.
Traditional online stock brokers such as UK market leader Hargreaves Lansdown, typically charge around £10 per share trade. No fee and budget app services slash costs in a number of ways. Firstly, trades tend to be executed once a day rather than in real time so they can be bundled by the provider. Shares owned by users are also often lent out to short traders, providing no-commission providers a means to generate income.
More active traders may, however, not find the fee structure quite as cheap. While Dabbl’s subscription includes 3 free trades a month, a Boring Money comparison on behalf of The Times found that someone with a £10,000 portfolio making 5 trades a month adding up to £2000 would incur total annual costs of £75. However, this still compares favourably with established online stock brokers such as HL and AJ Bell, with whom the same transactions would add up to several hundred pounds. It remains to be seen how their model, which does include value-added resources such as research, will stand up to the new arrivals. The good news is it looks as though end users will be the winners as tech disruption slashes costs.
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