Why We Don’t Invest With Freetrade

Account overviews

Plan	Stocks & Shares ISA	FX fee	Customer Service	SIPP
Basic (Free)	❌	0.99%	Basic	❌
Standard (£59.98 per year)	✅	0.59%	Basic	❌
Plus (£119.98 per year)	✅	0.39%	Priority	✅

Effective ISA fees (annual)

£5,000 in ETFs	£125,000 in ETFs	£500,000 in ETFs
1.2%	0.05%	0.01%

Effective SIPP fees (annual)

£5,000 in ETFs	£125,000 in ETFs	£500,000 in ETFs
2.4%	0.1%	0.02%

FX fee comparison on shares

Broker	ISA FX fee
Freetrade	0.59%*
Trading 212	0.15%
AJ Bell	0.75%** + £5 per trade
Hargreaves Lansdown	1%**
Fidelity	0.75%** + £7.50 per trade
Vanguard	Fund only platform, no FX
InvestEngine	Fund only platform, no FX

Freetrade was founded in 2016 with the goal of making investing simple and accessible for everyone.

Since then, they’ve amassed a user base of over 1.4 million people, which begs the question: why don’t we invest with Freetrade?

Well, there are a few reasons, so let’s take a look.

The plus points

Let’s start by examining the reasons why we would consider investing with Freetrade. They do have some positive points, and I want this to be a balanced review.

Zero trading fees

One of Freetrade’s biggest selling points is their zero commission on trades. This means you won’t incur additional charges for buying or selling stocks and funds.

This feature makes Freetrade one of the more cost-effective platforms in terms of investing fees. If you’re investing a substantial amount of money each month, or regularly trading stocks, this can be a significant benefit.

Great app

The Freetrade mobile app is well-designed and user-friendly. It makes browsing, filtering and investing extremely simple for people of all experience levels.

This is arguably what Freetrade does best: providing an easy-to-understand platform for mobile users.

For those new to investing who don’t require an extensive list of funds and shares, Freetrade appears to be a good option on the surface — and it likely is a suitable choice for many even after doing some digging.

Interest on uninvested cash

If you’re on Freetrade’s Standard or Plus account, you can earn interest on your uninvested cash — a feature only offered by a handful of other brokers.

However, to benefit from this, you would need to have cash sitting idle in your investment account, which isn’t exactly what it’s designed for.

At the time of publishing this review, the interest rates are 3% on the Standard plan, which is relatively low, and a more competitive 5% on the Plus plan, capped at £3,000 of uninvested cash. If your goal is just to earn interest on uninvested cash, there are higher rates available on the market in savings accounts or cash ISAs, and Trading 212 offers a higher rate on their uninvested cash at the time of writing — the current rate is 4.60% as of our last data update.

Affordable for large ETF balances

For investors with significant amounts invested, Freetrade can be very cost-effective compared to most (though not all) other brokers.

If you’re investing in ETFs priced in GBP (£) within the UK, and your investment balance has a value of £125,000, you’d be paying Freetrade an effective annual fee of 0.05% on the Standard plan (£59.98). This shrinks to 0.01% when investing £500,000 in the same way.

This is lower than the likes of Vanguard where you’d pay 0.15% (capped at £375), and much lower than competitors like Hargreaves Lansdown (0.45% on the first £250,000, then 0.25% up to £1m).

However, there are cheaper options too. These are highlighted and compared in our guide to the best Stocks & Shares ISAs.

What we don’t like

Now, let’s look at why we don’t use Freetrade. To be honest, there are quite a few reasons.

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Relatively high fees on smaller balances

The main issue with Freetrade is the fees associated when using the platform with smaller investment portfolios.

While it may seem like a cheap option on the surface, the effective fee you’re paying each year is very high compared to numerous competitors.

Let’s look at their Stocks and Shares ISA. Many platforms offer this service for free, but gaining access to a Stocks and Shares ISA with Freetrade requires paying for their Standard account, which costs either £59.88 upfront per year or £5.99 per month.

While under £6 a month might not sound like much, it can represent a significant percentage of your investment if you’re only investing small amounts each month. For example, if you’re only investing £50 or £100 monthly, you’re effectively paying 6-12% in fees on top of your investment.

Some platforms have no platform fees whatsoever, and many larger brokers charge around 0.2%. This would amount to more than £59.88 on very large balances, but much less for smaller investors – for instance, £20 per year on a £10,000 balance.

Freetrade offers free investing on its Basic account, but as it’s not inside the tax-wrapped ISA, you’d be liable for tax on your profits. Investing in an ISA is almost exactly the same process, but shelters you from the burden of capital gains tax and UK dividends tax.

Tier paywalls

Freetrade’s membership tier system is less than ideal. It feels as though all the best features are locked behind a paywall.

With the Basic account being extremely bare-bones, and potentially exposing you to tax obligations, you’re almost forced to upgrade to a paid account. The Standard membership account isn’t where it ends either – you can upgrade further to the top-tier Plus account, which costs £11.99 a month or £119.88 per year.

On the Plus plan, you get access to a SIPP, “priority” customer support, and more stocks and funds. To be fair to Freetrade, if you have a large balance, approximately £120 per year for a SIPP is very competitive.

Comparing this to InvestEngine’s SIPP, which charges 0.15%, Freetrade is cheaper once your balance exceeds £80,000.

However, it’s the Stocks & Shares ISA where Freetrade isn’t competitive enough for my liking, and it’s the ISA that I personally wouldn’t use Freetrade for.

Large FX fees

In addition to the account costs, there’s a substantial fee for trading in foreign currency (FX): 0.99% on the Basic account, 0.59% on Standard, and 0.39% on Plus.

This tier-based benefit doesn’t offer much value, as even the Plus account’s 0.39% fee isn’t the most competitive.

Comparing to Trading 212, their FX fee is 0.15% across the board. Even a traditionally more expensive broker like Hargreaves Lansdown charges 0.45%, so they’re only beaten on the Plus account.

Non-benefits (that you pay for)

What other benefits do you get for signing up to a Plus account? Well, you can access the website to trade on. Yes, to access Freetrade’s desktop site, you need a Plus account. It’s mobile-only for the plebs.

The web app is another reason why Freetrade doesn’t tick enough boxes for me; it’s still in beta at the time of publishing this review.

You can’t buy stocks and funds on the web version of their app, which is poor considering the company has been operating for 8 years now.

This might sound like a minor point, but the ability for long-term investors to invest via PC is often preferred over mobile because it prevents the temptation to check balances and trade more frequently than desired.

Other platforms offer smooth web and mobile apps without charging the fees Freetrade does, so this is something they need to address. Even the previously-antiquated Vanguard has both a desktop and mobile experience for users now.

I’m not saying Freetrade’s fees are outrageous – they’re lower than some brokers, but they are higher than a number of alternatives.

The Basic account is, well, basic… and doesn’t offer many features or a wide range of stocks and funds.

For the Standard and Plus accounts, you’re paying for features you can often get cheaper elsewhere.

Verdict

Freetrade isn’t a bad option when choosing a broker, especially if you have a large investment portfolio within a SIPP, but we think there are better options out there when considering our own investing preferences and passive fund investing style.

If you’re happy with the limitations, using a Freetrade Basic account is one of the cheapest ways to invest in the market.

Unfortunately, the “cheap” price of the free Basic account prevents you from investing inside an ISA, which means you’d owe taxes on your profits. This can add up to a huge amount over the long term.

It’s a shame that many key features are locked behind their paid account types.

The unfinished website doesn’t help their case, and charging customers for access to it seems a little strange.

Freetrade is still a relatively young company with the potential to improve their product with a few tweaks. They’ve already nailed their mobile app, which is one of the most important things to get right.

Time will tell where they go from here – but as they used to offer free ISA investing, will they ever be able to return to their previous heights?

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