A few clarifying points to the above.
I have no idea what’s going on at Freetrade, but its headwinds seem obvious to me. Last year VCs went nuts for investing fintechs, which IMO was in part due to the nonsense around meme stocks and crypto hype flowing over into retail investing.
That party has ended → investing products are quite hard to monetise due to regulatory restrictions (PFOF is illegalish) and low trading fees. AUM is the name of the game, not trade volumes - and Freetrade doesn’t really have that much AUM. Its product has relatively little moat, competing against incumbents for boomer business, fintechs for millennial business (Gen-z has no money), and well-funded challenger banks launching their own products.
Building your own investing infrastructure is pretty knowledge-intensive, and expensive. BUT it’s also commoditised by companies like Drivewealth (which Freetrade uses anyway), Alpaca Markets, Upvest etc.
Even Robinhood initially launched on Apex Clearing’s infrastructure, but later spent a fortune building its own.
Freetrade won’t have as sophisticated infrastructure as those either, as it hasn’t continually invested in the same capacity and compounded the benefits of focus on infrastructure as those companies have.
Railsbank, Clear.Bank, Solarisbank etc have all turned a banking stack into a product, and even if Monzo were to launch again today it probably would consider building on those rails for the same reason.
The services required to build an investing offering include: brokerage, portfolio management (rebalancing, automating investing, ISA subscription management), custody (you need to be/use a custodian bank - Monzo can’t just custody its own assets), and more.
Using an API product (by design) enables you to bring innovative products to market, scale them securely, and it’s super affordable in comparison. Custody fees are % based, aligning with your own monetisation, trading fees passed on at cost probably.
Hope that helps!
P.S I truly wish you all the best if you’ve invested in Freetrade, it’s a great platform (which I use for ISA/SIPP) but we should all try to avoid confirmation bias.
P.P.S I hear Project Imagine / Dozens was wound up partly due to failures of Dozens + wasting money building convoluted infrastructure.
P.P.P.S I think Freetrade actually uses Drivewealth in its own stack, which kinda negates the whole conversation. It’d be white labelling another companies tech.