One of the largest traders of shares in the U.K. isn’t one of the traditional brokers, nor is it one of the so-called ‘meme’ trading apps. Freetrade is a company that sits in the middle of the investment spectrum, offering retail investors easy access to the world’s markets.
“We are what we always set out to be; an easy, affordable, reliable alternative to traditional share brokers, with the firm belief that investing should be a thoughtful, long-term exercise, not a get-rich-quick scheme,” says CEO and founder Adam Dodds.
Originally from Canada, Dodds started his career as an accountant, auditing stockbrokers, where he gained a deep understanding of brokerage business models. When he moved to the U.K. and tried to set up an investment account he was shocked to discover how expensive and difficult it was.
He says: “I thought it was ridiculous that they wanted to charge me £12 for each purchase, and it became clear to me how many cost-savings could be passed on to retail investors by eliminating commission fees. I decided to set something up on my own; a company that broke down the barriers to share dealing and allowed everyone to invest.”
After launching Freetrade in 2018 Dodds turned to crowdfunding to secure growth funding, and having raised six rounds to date, the funding model has played a key role in the company’s story so far. “Crowdfunding is hugely important to us as we believe our customers should have a chance to own a piece of Freetrade and participate in our growth from an early stage,” he says.
It was also how he met his cofounder Viktor Nebehaj, who, like Dodds, had relocated to the U.K. for work and was unable to find an investment platform that served his needs. His career background, however, was in growth marketing. Nebehaj was an early employee in Google’s European office and after stints in a few startups and agencies, he had amassed a wealth of practical knowledge in building a company from the ground up.
“We draw on this broader experience to optimize how we grow as a business,” says Dodds. “We have created software and a tech stack that enables us to cut commissions, scale globally and provide users with a simple and low-cost investing experience, while keeping incremental costs to a minimum.”
Rather than using intermediaries, Freetrade connects directly with the London Stock Exchange, significantly reducing the costs for each transaction. Revenues are generated through paid-for products such as ISAs for £3 a month, and a premium service with benefits such as 3% interest on cash deposits and access to additional stocks.
“I trained as a chartered accountant so I understand the value of turning a profit,” says Dodds. “But we’re in it for the long haul and that’s about helping our customers achieve better financial outcomes time and time again.”
More than two-thirds (68%) of Freetrade’s core demographic of 26-35-year-olds own their own home, and half of the top ten stocks they buy are Exchange Traded Funds (ETFs), such as those that track the FTSE100 and the NASDAQ 100. Half of their new customers have never bought shares before, and just 2.5% use social media as their sole research tool.
It’s not just Freetrade’s customers that have made gains. Six of its early crowdfunding investors bought stakes in the business that are currently worth around £1 million. Over the last 12 months the number of funded customers, revenue and assets under administration have all grown fourfold as the team has ridden the wave of the lockdown trading boom.
Last month (October), registered users exceeded the one million mark, and they are currently the second-largest broker on the London Stock Exchange by number of trades. A European launch is scheduled for later this year, with plans to launch in Australia, Canada, and Japan.
Dodd says: “Investors today expect a simple and intuitive experience that enables them to choose how they want to put their money to work in the markets, whether that means backing companies that are making a positive impact on the environment and society or investing in a brand they use regularly. Our vision is for a new global investment network, offering retail investors simple access to the world’s markets.”