I’d really like to see Monzo chat with providers like freetrade about introducing a stocks and shares account/pot via the marketplace. What I’d like to see for beginner investors with a partner like freetrade:
A regular saving pot - minimum £100 per month, invested in S&P or FTSE tracker. Just a simple value reported in monzo, with a % growth over time (which monzo can easily calc) so people can see it at least beats inflation and saving in cash.
Advantages for freetrade - introduce them to customers who have no interest in stocks and would never discover or download their app. Customers who do become interested could later download the app for more control.
Advantages for monzo - give their marketplace a really interesting product no-one else has. Help their users learn about long term saving. Real rates or return way above 1% per year (with caveat of more volatility).
It would be nice to see the marketplace grow to encompass lots of interesting account types like this, not just cash saving.
+1 for me! I use Vanguard for our joint investments, but it would be nice to have the option for my own wee slush fund to move some into an index tracker
As a fellow Freetrade user and advocate I am for this idea except for this restriction of a minimum regular saver. It’s prohibitive to put up a barrier like this which does nothing but add unnecessary friction.
I’d much prefer the application of microsaving to to the Freetrade pot, whereby any round ups can be invested automatically with the addition of any scheduled payments the user so wishes.
Investing should be as easy as saving. Minimums and other caveats are exclusionary imho.
Exacting what @danbeddows pointed out, the beauty of Freetrade is that basic end of day trades are free so there aren’t any transaction costs.
The only hurdle for this idea is who bears the cost of it; the Founder of Freetrade said he’s opposed to paying the fee Monzo would require to be listed in their marketplace and I’m guessing Monzo wouldn’t host it without any source of revenue from it.
Well, that’s one of the attractions, however it is only for scheduled trades. At scale it would certainly be possible to allow micro purchases and charge no fees (by scheduling them all up at 4pm that day). The ISA £3 a month I feel would be a more significant hurdle for customers. I think an ISA would be best for clarity and because it would lend authority to the offering in the minds of those who don’t know the provider (free trade or other), however Freetrade do need to make money somehow - at present their model is a flat fee on things like ISAs, and a fee for immediate trades. That could be adjusted for a product like this to hide fees somewhat, but the money has to come from somewhere. Those are all minor details though where most could live with whatever choices were made. Not too important where the fee is charged if it is transparent and low.
I see that as more of a negotiating position than a definite no I do see why Freetrade want to pursue that approach and grow customers themselves right now, and also their hostility to a referral fees, given how abused these have been in financial products. I’m hoping they change their mind and perhaps there could be moderation on both sides (low ask from Monzo, flexibility from Freetrade). IMO it’d be good for both Monzo and Freetrade and would be a perfect fit for the Monzo marketplace because it brings customers who would never consider Freetrade otherwise.
There’s a huge market of people out there who will never want to trade, don’t know or care that their pension is invested in stocks, but DO want to earn more money than a paltry 1.5% a year interest on their savings. Those people don’t want to research stocks or learn jargon like ETFs, they just want to get a decent return which is reasonably safe over the long term. They are essentially never going to become customers of free trade except if offered a simpler product via their bank. Interesting figures here from the UK gov. on ISA subscriptions 40 million in cash (losing money in real terms), vs 30 million on stocks this year.
The perfect way for free trade to target those people is to offer an incredibly simple bundled product which hides the details of trading, and just says we’ll buy £100 of the USA for you every month, don’t sweat the details, very low fees and watch it grow over the years - would have to be branded as long term savings, but I think it’d be great for Monzo, Freetrade and customers.
But from Monzo’s point of view, this doesn’t have to be one integration/provider, they could offer a few different simplified S&S ISA offerings from different providers.
I agree that there are people who will never want to trade but the problem with a simplified product and no knowledge is that when people see the amount they’ve saved has reduced (which it will at some stage, even just for a few weeks in a blip) they’ll panic and withdraw their money. Then they’ll say what a crap product it is.
I’d like to see some kind of integration but I’m not sure if it would be in Freetrade’s best interests at this stage
I think you’d have to brand it heavily as Long Term Saving and make that bit of it at least very very clear with advice not to save for less than say 5 years. That’s the risk you take for a far better return (and it’s not a big deal IF you are saving long term). Education is definitely a problem to be overcome though if you choose to target beginner investors but there are a lot of people out there who could benefit from this and know nothing about stock markets.
But there are already robo advisors so why change to try and fill a gap that doesn’t exist?
Freetrade are new but they’ll grow and will become known. The lack of fees is a huge advantage. Most people won’t need an ISA but I thought their proposed pricing was very good? Not something I’ve researched much though
Personally I’m not keen on the current roboadvisors or funds, they charge % fees, which is awful for long term saving. To me that’s the gap - transparent low cost saving into your choice of ETF, not obfuscated saving products which charge % fees, which is a killer for growth in the long term.
A nice flat low fee like free trade with a choice of a few global ETFs would be far better for people starting out, and would be an introduction to more complex trading later via the freetrade app (if they wish).
We’re anti-intermediation at Freetrade. Intermediaries, or middle-men, just drive up the price for the end customers. The fintech ‘marketplaces’, aggregators and the like are simply intermediaries that need to get paid (or disappear).
We’d love to partner with a company like Monzo, to offer a Freetrade pot, for example. But we wouldn’t pay for it.
The interesting point is about the assumption that Monzo would require a fee. They’re not in this for charity, but it’d be interesting to unpack this a bit more and see what would be mutually beneficial.
I wrote a bit about platforms and this exact case. This is what I had to say - I think it still stands:
Why would Freetrade sign up to the Monzo marketplace if they were asked to pay referral fees? They have their own app, so what’s in it for them?
The answer (I think) is threefold:
At scale, a platform would connect more customers and suppliers than would otherwise find each other natively. This would have the effect of growing the market for everyone and giving Freetrade a broader ready-made market.
If Monzo were able and willing to provide identity services – by which I mean somehow pass to Freetrade the identity checks that were carried out when you joined Monzo, then both the cost to Free trade and barriers to entry for the user would be reduced.
Not relevant to Freetrade perhaps (a share trading app is likely to be sophisticated if hopefully not complex), but the platform could potentially evolve to providing the user interface for some standard types of account – or provide a simple way for third parties to run apps within the app (think of Farmville on Facebook). This opens the potential for the financial services market to reconfigure itself – imagine a smaller savings and mortgage provider deciding not to spend money on their own app (why would they when there are companies like Monzo that could do it for them?) focusing instead on their core business and competitive rates.
But what about that pesky referrals fee point? I think, oddly, money is a red herring. Scale is everything when it comes to platforms. Platforms need to grow – and grow fast. While Monzo might need referral fees in the short term to break even, the Freetrade comment is instructive – a different model might be needed to bring as many folk onto the platform as smoothly and as quickly as possible. These things only work when they’re big!
Adam’s comments were back in May so maybe they’ve given it more thought since the launch.
Might be better to raise this on the Freetrade forum as it’s not so much about integration but creating an entirely new product
I think they’ve probably got more than enough to be getting on with for the short to medium term, though.
When they’re on their growth phase (like Monzo is now) it would be worthwhile partnering with Monzo, I think. The interesting part there will be the commercial agreement. Monzo needs more companies on board to prove the concept and get momentum; Freetrade will want customer acquisition. The key will be a fee to Monzo that is less than they would pay by traditional means but which a) advances Monzo’s goals and b) drives Freetrade customer acquisition.
Completely agree with everything you’ve said here @Peter_G , thanks for quoting that comment and linking to the article, bookmarked for later.
Exactly. With sufficient scale, Monzo will become too large to ignore and their marketplace could become a really powerful force, and yet they will not need to charge much per integration to make money, making them even more attractive to companies trying to get their product in front of a young audience with money to spend on financial products. So I think the marketplace idea is a very good one if they execute on growth. I also think with sufficient scale they’ll be able to disrupt the payments marketplace too and challenge incumbents like visa…
The key attraction of this idea to me for Freetrade is that they’ll want to expand into people who have traditionally shown no interest in stocks - they can attract those who are interested already easily enough directly to their app, but reeling in those who have money but see stocks as risky is harder and requires using other channels, not just the App Store.
I do see why Freetrade want to pursue that approach and grow customers themselves right now, and also their hostility to a referral fees, given how abused these have been in financial products. I’m hoping they change their mind and perhaps there could be moderation on both sides (low ask from Monzo, flexibility from Freetrade). IMO it’d be good for both Monzo and Freetrade and would be a perfect fit for the Monzo marketplace because it brings customers who would never consider Freetrade otherwise.