FreeTrade Review 2024: Pros & Cons

Founded in 2016, Freetrade has become a prominent commission-free investment platform with a mission to make stock trading accessible and affordable. Launched in 2018, the platform, founded by Adam Dodds and Davide Fioranelli, distinguishes itself by offering over 6,000 UK, US, and European stocks and ETFs through a user-friendly smartphone app.

Despite lacking in-depth research tools compared to industry stalwarts like Hargreaves Lansdown and AJ Bell , Freetrade's simplicity and zero-commission approach have garnered a loyal user base exceeding 1,400,000 registered users. The platform's freemium model, providing certain features for free and additional offerings at a cost, includes perks such as commission-free trading and opportunities for users to receive free shares through referral programs.

With its slick interface and vibrant pink color scheme, Freetrade stands out as a popular choice for new investors and beginners seeking an attractive app and an easy-to-use investment platform.

Freetrade Account Types Overview

Freetrade offers three main account types to cater to different investment needs and preferences:

1. Stock and Shares ISA:

• A tax-efficient individual savings account for investing in the stock market.
• Allows tax-free returns on investments, with a maximum allowance of £20,000 for the tax year 2022/23.
• Access to over 4,000 stocks and ETFs listed globally.
• Key Features: Commission-free investing, instant trades during market hours, and the option to invest as little as £2 in fractional shares.
• Charges: Free under the Standard Plan, or £4.99 per month under the Plus Plan.

2. Self-Invested Personal Pension (SIPP):

• A pension account offering greater control over pension investments.
• Allows contributions of up to 100% of salary with tax relief on contributions up to £40,000 per year.
• Enables consolidation of existing pensions into a single Freetrade account.
• Included in the Plus Plan, costing £9.99 per month.

3. General Investment Account (GIA):

• Non-tax-advantaged account providing flexibility and control over investments.
• Subject to capital gains and dividend taxes on profits exceeding allowances.
• Ideal for investors seeking more control or those who have maximized contributions to tax-advantaged accounts.
• Commission-free and available under the Freetrade Basic Plan.

Deposit and Withdrawal Options:

• Deposits: Bank transfer (free or £25 for CHAPS), card transfer (0.3% fee), Apple Pay, and Google Pay (up to £250 lifetime limit).
• Withdrawals: Only via bank transfer, taking 2-5 business days, with no withdrawal fees.

Interest on Cash Balances:

• Freetrade offers 1% interest on up to £2,000 of uninvested cash under the Standard Plan and 3% interest on up to £4,000 under the Plus Plan.

Additional Notes:

• The GIA is free with the Freetrade Basic plan.
• The Stocks and Shares ISA is part of the Freetrade Standard plan, costing £5.99 per month.
• The SIPP is available for Plus subscribers, costing £11.99 per month.
• Features of the SIPP include a flat fee, fractional shares, the ability to transfer in other pension pots, and tax relief on contributions up to £60,000 annually.

Freetrade Fees Overview

Freetrade is known for its commission-free trading, but users should be aware of certain fees:

• Platform Fees:
  • £0 for Basic Plan
  • £5.99/month for Standard Plan (or £59.88/year)
  • £11.99/month for Plus Plan (or £119.88/year)
• Trading Fees:
  • UK shares: £0
  • US stocks: £0
  • International shares: £0
  • Funds/ETFs: £0
• Foreign Exchange (FX) Fee:
  • 0.99% for Basic Plan
  • 0.59% for Standard Plan
  • 0.39% for Plus Plan
• Regular Investing:
  • Available with recurring orders under Standard/Plus plans
• Withdrawal/Deposit Fee:
  • Withdrawal: £0 (£5 for same-day withdrawal)
• Inactivity Fee:
  • £0

Additional Points:

• Freetrade follows a "freemium" model, offering an opportunity to upgrade for tax-efficient accounts, extra stocks, interest on idle cash, and advanced features.
• For US and European stocks, users will incur an FX fee based on their plan.
• Other costs include UK stamp duty for certain investments and ongoing fees for ETFs and investment trusts, which are not under Freetrade's control.
• The Plus Plan offers additional features like priority customer service and the Freetrade Web Beta.
• Monthly subscription fees for the Standard and Plus plans will change to £5.99 and £11.99, respectively, starting from May.

Freetrade Safety Assurance:

Freetrade prioritizes the safety of its users and their investments through robust regulatory measures. Authorized and regulated by the Financial Conduct Authority (FCA) , Freetrade adheres to strict standards, ensuring customer protection. In the unlikely event of any issues, user funds are kept separately from business funds, providing an additional layer of security.

Moreover, Freetrade is a member of the Financial Services Compensation Scheme (FSCS) , offering government-backed protection for users' money up to £85,000. This FSCS coverage acts as a safeguard, providing reassurance to investors in the rare circumstance of any financial challenges faced by Freetrade. The Freetrade app is equipped with various security features, enhancing the overall safety of users' portfolios. However, it's essential to recognize that, as with any investment, there is an inherent risk to capital.

Freetrade Customer Reviews

Freetrade has garnered positive feedback from users, earning a notable score of 4.1/5 on Trustpilot , classified as "great." With over 3,700 reviews, customers appreciate Freetrade for its low prices, diverse stock options, excellent customer service, and as a valuable platform for learning about investing.

Pros of Freetrade

1. Easy Setup: Freetrade offers a fast and straightforward setup process, allowing users to be invested in the stock markets within minutes.
2. User-Friendly App: The app is designed with simplicity in mind, featuring five easily navigable sections. Users can efficiently manage their portfolio, gain insights into asset allocation, explore popular stocks and ETFs, review recent activity, and make quick account top-ups, all through the user-friendly smartphone app.
3. Low Cost: Freetrade stands out for its cost-effectiveness, as it eliminates stock trading commissions. This makes it an attractive option for investors looking to hold shares within a low-cost ISA.
4. Community Engagement: The platform encourages community interaction through a regularly updated blog, providing users with hints, tips, and updates from Freetrade staff. This communal aspect adds a social dimension to the investing experience.

Cons of Freetrade

1. Risk of Loss: The app's user-friendly nature may pose a risk, as investors might be tempted to focus on stocks they like without achieving proper diversification. This lack of balance could leave portfolios vulnerable to sector-specific issues, potentially leading to significant losses.

   The absence of clear warnings about the risks and the ease of buying and selling shares might contribute to this challenge. Implementing payment limits, similar to those on gambling websites, could be a beneficial safeguard.

2. Lack of Research Tools: Freetrade falls short in providing extensive research tools compared to other platforms. While it offers historical share price graphs, the app lacks comprehensive research features that allow users to delve into a company's performance, stock market updates, and future prospects.

   Users are advised to conduct their own research, requiring them to seek information outside the app. Additionally, the blogs provide general guidance on factors to consider, but in-depth research is left to the user's initiative.

Final Thoughts on Freetrade

Freetrade emerges as a potential game-changer in the world of investing, offering commission-free trading that challenges the conventional brokerage model. The platform's ease of use, diverse stock options, and insightful app design make it a strong contender, especially for beginners entering the investment landscape.

While the standard plan is free, advanced features and expanded stock access come at a reasonable cost, providing flexibility for users seeking more in-depth investment tools.

For novice investors seeking a user-friendly and cost-effective platform, Freetrade with its zero-commission model is a solid choice, earning a commendable 4-star rating.

However, for seasoned investors looking for advanced features or access to a broader range of financial instruments, other platforms may better suit their needs. As an alternative, consider exploring platforms like eToro , Trading 212 , XTB , and others for a broader perspective on commission-free trading. As with any investment, caution is advised, and thorough research is essential to make informed decisions.