Sunday Times has this article today. It contains at least 3 errors in what it says about Trading 212. The article is mainly about Freetrade.
What are the alternatives?
Trading 212 also charges no platform or trading fee. It makes money through the spread between the buy and sell price of a share and you also pay a currency conversion fee for non-UK shares.
Trading 212 also warns that some customer funds may be held in non-UK bank accounts so the FSCS may not apply. Freetrade is fully covered by the FSCS.
When I tried to add a comment that very politely pointed out errors in these statements, it was blocked, marked “pending approval”. It was eventually approved two hours after positing.
Those who have access to the Times may wish to read the article. I may be wrong, but it reads very much as if the author, Ali Hussain, researched the entire article by talking to someone at Freetrade and believed everything he was told,
The last point may not be 100% accurate but seems to be from a mis understanding. Your shares may not be held in a trust as they are supposed to be so may be for example sold to pay for 212 debts in the case of insolvency. Fscs isn’t guaranteed to cover this, and certainly won’t cover this if you go over the 85k in total fees and losses. (It’s in the terms and conditions)
Edit: oh and they’re talking about funds there not stocks, funds could be held in a foreign bank account? If that’s the case they may be correct
The information shared in the article is not accurate, as you have pointed out. We already took measures to contact them so that we can avoid the potential confusion of the readers.
To sum up:
We charge no fees whatsoever.
100% of client money is held in the UK banks, hence our clients have no risk associated with non-UK banks. We have never actually held a client money bank account outside of the UK and we do not intend to so in the future.
On a side note - about the FSCS coverage. Let’s be as clear as they are on the FSCS website - if a firm is FCA or PRA regulated, the FSCS compensation scheme covers it for its activity. As you can see from their website, the conditions are not referring to where the money is being held, neither to where a client is based. All FCA regulated brokers use the same FSCS coverage. Keep in mind that FSCS specifically say that they would cover any client money shortfall, confirming that they are the last line of defence for your investments and funds.
Meanwhile - all of your funds and investment are ring-fenced and segregated in client accounts. Even in the unlikely event of default (let’s not forget we are a profitable and debt-free company, not relying on funding rounds) your funds and investments cannot be touched by creditors and you will get them back.
And for those of you who actually want to know how things work and like to do your own research, it might be worth looking into the funding of FSCS. Each FCA/PRA regulated firm pays an annual fee to the FSCS, based on the size of the company business. The more we grow, the larger part of our profit we pay to the FSCS fund and its running costs.
@Richard.W Thank you for your support and interest in ensuring that all information in the article is accurate.
Peeves me too. So many comments below the article seem to be from people (perhaps working for legacy brokers) who have very negative and prejudiced views of younger and DIY investors.
Just for fun, here is a selection of comments posted below the Times article.
Oh this is great it’s commission free. Don’t worry your bid / offer spread is 30 bips… ugggh what’s a bid offer spread??? Best stick to minecraft kids
These muppets aren’t “traders” they’re gamblers
Reminds me of a news video maybe ten years ago, of a room of Chinese women day traders. When everything was going up, it. needed as much skill or knowledge as changing a light bulb.
There is probably no easier way to make money than finding younger people who think that they are really clever, and with smart marketing using " Free" as the bait, getting them to hand over their cash. Wisdom usually comes with age and experience…
The company, based in Bulgaria and not easy to get hold of…
What could possibly go wrong?
They can gouge you on the spread without charging any fee at all. Caveat Emptor!
It’s actually so difficult to sell people somethings that’s free, it makes them very sceptical. Shame there’s no way to easily show transparency and good intentions, people will always think there’s something malicious
12.7. We may hold client money in a client bank account located in a jurisdiction outside the UK. The legal and regulatory regime applying to any such bank will be different from that of the UK and in the event of the insolvency or any other equivalent failure of that bank, your money may be treated differently from the treatment which would apply if the money was held with a bank in the UK.
13.5. Investments purchased by us on your behalf or transferred to us will be registered in the name of a nominee company or our name or a sub-custodian. We will be responsible and liable for our nominee to the same extent as for our own acts, including losses arising from fraud, wilful default or negligence.
13.9. You agree that because of the nature of applicable laws or market practices in certain overseas jurisdictions, we may decide that it is in your best interest for your Investments held with us to be registered or recorded in our name or in the name of the person who is a custodian for the purposes of the FCA Rules, and if it is not feasible for us to do this, then:
your Investments may be registered or recorded in the name of the firm or custodian as the case may be;
your Investments may not be segregated and separately identifiable from the Investments of the firm or custodian in whose name your investments are registered; and
as a consequence, in the event of a failure, your Investments may not be as well protected from claims made on behalf of our general creditors. You should note that when we arrange for a third-party to hold your Investments overseas there may be different settlement, legal and regulatory requirements than those applied in the UK.
Not that there’s anything wrong with these terms but what you’re saying and what your terms say are two different things.
FSCS do not provide a 100% guarantee to cover assets or funds held outside of U.K. regulatory or legal requirements, as you also point out in your terms.