Freetrade must go beyond “simple, zero-fee investing”

Freetrade is a challenger stockbroker in the UK, similar to Robinhood in the US. Having raised over £4m through crowdfunding and built a waiting list with tens of thousands of potential customers, they started rolling out their service in October.

There’s a lot to love about Freetrade. The experience is incredibly slick given how early it is in its development and the company’s culture is very open; they share what they’re doing and have built a community around the product. There are many similarities to Monzo, especially when it comes to how excited people are about the potential they have to change the industry.

To outrun their competition and achieve this potential, I believe they must go beyond straightforward low-cost investing and solve the bigger, more challenging problems in this space.

A perfect brand-experience fit

I said in my Fintech Design Summit talk that it’s essential for any company to have a clear brand promise that contrasts with people’s current situation.

Freetrade have nailed it: “Simple, zero-fee investing. Stop paying up to £12 for every trade”. This can be understood instantly and targets one of the main frustrations with investing. More importantly, the experience of using the app lives up to this promise.

So a great proposition, wonderful product and a company that inspires admiration and respect — what’s not to like?

“Stop paying up to £12 for every trade” isn’t enough

Framing Freetrade as simple, zero-fee investing is perfect for where they are right now because it is attractive yet achieveable. But it is also perishable — it is (relatively) easily copied and only appeals to part of the potential market.

Easily copied: Like Monzo, Freetrade have many advantages that are hard for larger incumbents to copy: customer-focused culture, a modern tech stack, transparency and openness, community, etc. But the basic business model of offering lower fees on stock trades is relatively easy to copy. This is especially dangerous when there are other fintechs like Revolut who are also exploring this space. What is to stop others from offering a similar service?

Only appeals to part of the market: As it says in the description: stop paying up to £12 for every trade. I think Freetrade currently appeals to the following audiences:

• Existing investors who know the fees are too high and/or the UX is terrible
• People who used to hold shares and are now lapsed, but still have some interest in investing
• People who have invested in crypto and are curious about shares, but have not found investing easily accessible

In other words, the value of Freetrade can only be understood by people who already know that simplicity and low costs are such a rarity in the industry. By comparison, when Monzo calls itself “the bank of the future” more people can understand the value of this because everyone has a bank account and many realise that their current experience is poor.

Competing for the above audiences alone is fine for now as Freetrade is such a contrast to the norm, but as competitors respond and launch similar services, it will be progressively tougher to differentiate themselves.

The bigger prize: people who don’t invest

The number of people who could and should invest but do not is shockingly high. By understanding why and designing for these needs, Freetrade has the potential to make investing accessible and rewarding in a way that no-one else has managed so far.

Think about how Headspace has made meditation feel like an essential part of modern daily life rather than a niche, hippy pastime. Or how Duolingo makes learning a new language feel do-able. Or how Airbnb makes staying in a stranger’s home a perfectly normal way to travel. This is what Freetrade can do for investing.

Ok, but how?

How could this ambition translate into reality? Clearly it takes more than one person idly speculating on Medium to figure this out, but having conducted customer research for a few clients in the industry, I thought I would share some ideas.

A central premise of what follows is that if you design for a novice investor, you will by extension improve the experience for more seasoned users as well. This is similar to the principles of accessibility and inclusive design.

Idea 1: Freetrade as a teacher 👩‍🏫

Be the best way to learn about investing.

The customer need:

• People have low levels of financial literacy in the UK and even those who already invest can have big holes in their knowledge.
• People are reluctant to start or continue investing if they feel out of their depth.
• It’s hard to learn about investing online because information sources from stockbrokers, banks and third-parties are poor.

Potential solutions:

• Written, video or interactive content explaining the fundamentals of investing. Headspace’s videos are a good example of this. Or something like Brilliant. Content could be grouped into courses that you complete, making it feel more like a curriculum.
• Optional tutorial, guiding you through the process. Similar to many games.
• Simulator mode, allowing you to see what would happen to a virtual portfolio try before you commit real money.

Idea 2: Freetrade as a coach ✋

Protect your investments from yourself.

The customer need:

• There’s a lot of research showing how irrational and emotional decision-making leads to bad investment decisions.
• Stockbrokers do nothing to prevent people making bad decisions, probably because they get such hefty fees on transactions.

Potential solution:

• With behavioural economics in mind, design the app to look out for and prevent investment mistakes (e.g. lack of diversification, looking too often at investments) while avoiding making this something that could be construed as ‘advice’.

Idea 3: Freetrade as an explorer 🗺

Be the best source of investment ideas.

The customer need:

• Many investors stick to what they know and inadvertently create a portfolio that is too concentrated in a particular sector.
• People don’t do enough homework on companies or funds before they buy them.

Potential solutions:

• Highlight companies in the news (e.g. here’s a list of those that are releasing earnings this week).
• Partner with news sources to showcase companies with a particular theme. For example, Google Maps now has a feature where it lists places that are mentioned in articles (e.g. London’s top cocktail bars).
• Show trends associated with certain companies e.g. by popularity.
• Let staff or approved users curate lists of companies/investment ideas.
• On the screen for an individual company, provide much more information about the organisation, links to news, links to the investor website, etc.

In summary

It’s easy to be an armchair commentator on this stuff. Making decisions about where to take a product or service is incredibly hard and takes more consideration than anyone would put into a Medium article, but hopefully the ideas above illustrate the point that Freetrade can and should be a lot more than just a simple and low cost way to buy and sell shares.