The founder of a fintech company has said getting advice from an IFA is both “expensive and time-consuming”, as it looks to stop investors being “priced out” of investing on the stock exchange through the launch of its commission-free trading platform.
Freetrade, which was recently set up in the UK, has designed a mobile app using a model similar to Uber and Airbnb, which seeks to make stock market investing more accessible.
The “disruptive” technology aims to make it easy to search for listed companies, removes restrictions around portfolio sizes, and uses a zero-commission model so low-value traders are not excluded.
It will offer access to a network of financial advisers who can provide advice directly through the app.
Adam Dodds, cofounder of the platform, argued “costly” broker fees prohibit smaller investors from making money, and claimed the app will help remove one of the “major barriers” to stock market investing.
“Receiving the correct advice is difficult because it tends to require an investor meeting with an IFA in person to receive support, which is both expensive and time-consuming,” he said.
Mr Dodds, who was previously a chartered accountant at KPMG, said giving investors access to advice to help them make informed decisions over the shares they purchase is a “crucial element” missing from many of the US-based solutions.
US companies were only solving half the problem. Adam Dodds“We came across the model they have in the States, and not being satisfied with simply bringing the same concept to the UK, we looked at how we could raise the bar.
“These US companies have shown zero commission trading models can work, but they were only solving half the problem,” he continued.
“Professional advice is an intrinsic part of making a good investment decision, and no one, as far as we can see, is offering low-cost, flexible access to IFAs.”
Freetrade has been accepted onto the Financial Conduct Authority’s Innovation Hub project, which has been developed to try to boost competition and growth in financial services.
It has also applied to the FCA for regulatory permission to be an execution-only broker.
Dan Farrow, director of SBN Wealth Management, said: “This sounds like something that comes from an organisation who is anticipating what clients want, but in reality has little appreciation of regulation and client management.
“I am all for making the client processes streamlined and using technology, but if I were a venture capitalist I’d be steering clear of spending money on this project.”
katherine.denham@ft.com
