For investors who, like me, have only ever invested during the internet age, it’s hard to imagine week-long dealing periods and paper share certificates. My first investment account (an ISA set up with IG) cost me £24 a quarter with no added fees to buy funds. By the time I felt confident enough to start buying shares the price for share trading had come down to just £8 (it has since fallen further and the quarterly fee has disappeared).
Still newer investors - those who were swept up in the market hype of the last couple of years - find the history of share dealing even more unfathomable. I have a friend who has just closed his Freetrade account and withdrawn the funds because the platform raised its prices from £3 a month to £5 a month for the basic account (a free account is still available but you can't open an ISA with this). According to him £60 a year just isn’t worth it.
It’s a far cry from the experiences of private investors who became enthralled by the markets last time a share dealing revolution was afoot. In the 1980s when big British businesses were being privatised causing a rapid uptick in demand for individual investor share dealing, execution-only brokerages began popping up all over London. The arrival of competitors from the US helped bring down prices, while the internet put paid to cheques, share certificates and telephone-only dealing.
A similar surge in demand in the last few years has seen another new generation of private investor-friendly brokerages spring up. This time they come in the form of apps.
Freetrade has taken the market by storm, racking up a user base of over 1m investors. It faced early competition from US-born Robinhood, whose difficulties during the Gamestop saga halted adoption in the UK. More recently we’ve seen the launch of Dodl, an app-based share dealing platform from AJ Bell. eToro has become the cheerleader for ‘social investing’ and claims to allow you to copy other investors' successful portfolios at no charge.
And as the new kids on the block have started to gather followers, the incumbents have felt the need to change their ways. interactive investor took the first strides towards a more holistic offering by buying up many of its competitors, including one of London’s original online brokerages, The Share Centre. More…
