Start-ups bring share dealing to the smartphone
App-based challengers for banking and payments are everywhere, says Ben Judge. Now it could be time for them to upend the investment industry.
App-based challengers for banking and payments are everywhere now it could be time for them to upend the investment industry.
In recent years, digital wealth managers or robo-advisers such as Nutmeg, Moneyfarm and Scalable Capital have sprung up to simplify the process of investing with automated portfolios of exchange-traded funds. Most are aiming to appeal to a younger generation, who are starting to invest for the first time and are used to doing everything online and through an app on their phone if possible.
The trouble with many of the services that take all the hassle out of investing is that they also take away the control. In addition, many of them can be quite expensive. So what if you want to get your hands dirty and buy your own stocks? Not spread betting or trading contracts for difference (there are plenty of apps for those), but buying the actual shares in listed companies?
Investing through an app
The big brokers such as Hargreaves Lansdown, Charles Stanley and AJ Bell offer mobile phone apps. But they're essentially bolt-ons to traditional platforms. They're not aiming to disrupt the existing industry. But we're now starting to see the first app-only brokers hoping to bring direct share investing to a younger, mobile-oriented audience.
The first such app to launch in the UK is Dabbl (iPhone only, at the moment, though an Android version is promised soon), which touts itself as "a new wayto invest for a new breed of investor". This outfit offers stocks from the UK, US and Europe. While trading isn't free, it's not expensive if you're not fussy about exactly when your order gets placed, and your portfolio is very small.
"Dabbl later" trades cost £1 each and are combined with orders from other users and placed at 3pm each day (users get three free trades per month). The firm will soon launch "Dabbl now" trades, which will be executed in the market "as soon as possible" at a cost of £5 for UK shares and £8 for non-UK shares. There is a monthly fee of £2, plus a further monthly administration fee of £2.50 if your portfolio is valued at over £7,500.
Dabbl aims to make buying shares as simple as possible (whether that's a good or bad thing is matter of opinion). It distils company financials into "health scores" out of ten, and allows users to "follow" stocks, tracking their performance. Searching for a company can be as easy as taking a photo of the brand logo the app will then take you to details on the company, its parent or related firms.
Trade for nothing
Dabbl is cheap but not much cheaper than the rates from existing brokers if you use them in the right way. Another app called Freetrade, which is aiming to launch soon, wants to make basic share trading entirely free, charging only for services such as individual savings accounts (Isas), self-invested personal pensions (Sipps) or investment advice. Premium accounts will incur a fee of £1 per £1,000 invested. The firm plans to offer "fractional trading" in US stocks, meaning that there will be no minimum investment you'll be able to buy £1 of Apple, for example. As with Dabbl, trades will not be made in real time, but are collated and made in bulk at a set time each day.
Neither Dabbl nor Freetrade offer the range of investments and international markets that major brokers cover. Users must also consider whether the way that these new firms place trades might mean worse execution (that is, you get a worse price, offsetting the low fees). But their simplicity could still draw a new generation of investors and force traditional brokers to update their services in response.