A new generation of DIY investment platforms has emerged to challenge the challengers
A defining investment narrative of the pandemic has been the rise of a new breed of DIY investor and return of individual share picking.
Established platforms like Hargreaves Lansdown and AJ Bell have benefited from a growing number of investors, with both reporting record numbers since the start of the pandemic. Meanwhile, rival Interactive Investor is planning to join them by floating on the stock market itself.
Hot on their heels is a generation of new share trading apps which promise to 'democratise' the investment industry with low cost and sometimes free share dealing and the ability to invest for less in big US names by buying fractional shares.
Among this bunch, the already established eToro, Freetrade and Trading212 have all seen their popularity soar and are widely regarded as the chief challengers to more traditional DIY investing platforms.
But behind them is an even newer crop of platforms emerging that are looking to disrupt the industry even further. For these apps it's not a question of making trading as cheap as possible, but harnessing tech to build wealth, offer something different, and challenge the challengers.
We look at how some of the new apps, Wombat, Circa5000, Plum and Lightyear, stack up against the more established players...
Wombat is not really a new kid on the block. It's been around since 2017, but hasn't enjoyed as much attention as other trading platforms.
Wombat promises commission-free trading with 'no hidden fees', but it also says users can invest in a range of thematic funds.
Themes include the British Bulldog, which includes some of the UK's best known businesses like Tesco, Barclays and Rolls-Royce, while The Money Maker theme includes some of the world's biggest banks and the Techie theme gives users the chance to invest in the likes of Netflix, Google and Apple.
Wombat also allows users to buy fractional shares in some of the world's biggest companies including Shopify, Paypal, Netflix and a host of domestic stocks.
There is a minimum £10 deposit to start investing on Wombat - as well as an option to contribute monthly - and charges start to kick in when the account value is over £250.
It then costs £1 a month plus 0.10 per cent of the account value - billed monthly - as well as a fund provider fee of between 0.07 per cent and 0.75 per cent.
Wombat has bolstered its investment credentials in recent months by appointing heavyweights from rival platforms Hargreaves Lansdown and eToro to its advisory board.
There also seems to be a push forfinancial education and responsible investing so its auto-invest function - which takes funds via direct debit - is a key differentiator.
The platform also offers 'Round Ups', much like savings app Plum and challenger bank Monzo. It rounds up everyday purchases to the nearest pound and sends the spare change to the Wombat cash account. Find out more on Wombat here.
Freetrade, eToro and Trading 212
A trio of names have emerged at the head of the challenger investing app pack in the UK, all offer free share dealing and some access to ETFs and investment trusts. They do not offer investment funds, however.
Freetrade has swiftly built up a sizeable customer base since its 2018 app launch, with its fee-free share dealing, offering a wide range of UK and US shares. It also has some ETFs and some investment trusts. Freetrade's general investment account has no charges, while its Isa carries a £3 per month fee and its Sipp (self-invested personal pension) charges £9.99 per month. Some stocks, including many smaller companies, are only available on Freetrade Plus, which costs £9.99 per month and includes the Isa fee. This also gets customers 3 per cent interest on up to £4,000 of cash in their account. A foreign currency charge of 0.45 per cent applies for overseas stocks.
eToro is an established platform, founded in Tel Aviv in 2007, which initially captured attention with its social and copy trading. It has since launched an investing service in the UK. The investing service has zero commission on shares from around the world and ETFs, no account fees and absorbs stamp duty costs for UK stocks. Alongside this, eToro also offers high risk CFD trading - which This is Money advises individual investors to avoid (67 per cent of customers lose money). It also offers cryptocurrencies.
Trading 212 is a popular app, offering free share trading in the UK since 2017. It offers more than 10,000 global stocks and ETFs, including UK stock market-listed firms. There is a 0.15 per cent for trades of stocks and ETFs not in your home currency and also a 0.5 per cent currency conversion charge. It has a feature called Pies, a way of building portfolios and quickly rebalancing them, and the option to auto invest regularly. Trading 212 also offers an Isa with no fee. The app has a CFD trading function, which again we advise people to avoid (76% of investor accounts lose money).
Lightyear is the latest commission-free stock trading app to come out of stealth mode, having launched earlier this summer before starting to onboard users this month.
While it is launching in an increasingly crowded market, Lightyear's founders Martin Sokk and Mihkel Aamer are well-versed in how the fintech world works, having both worked at Wise, formerly Transferwise.
The co-founder of the money transfer app Taavet Hinrikus is an early investor and recently made his first investment in publicly-listed shares through the app.
After working on removing some of the barriers associated with sending money abroad at Wise, Sokk and Aamer have said they want to do the same for investing.
Lightyear offers its users multi-currency accounts and 'free' access to global markets by removing foreign exchange fees. After £3,000 of trades per month, users will have to pay 0.35 per cent in FX fees.
Like other trading apps, Lightyear customers will be able to buy fractional shares in large companies like Microsoft and Apple.
It has already raised $10million in cash and is looking to invest across Europe in the coming months. They are looking at introducing a subscription model for access to more tools, news and sophisticated products but has said its standard investment account will remain free. Find out more about Lightyear here.
Circa5000 (formerly Tickr)
Circa5000, which recently rebranded from Tickr, is an investment app that primarily offers ethical companies.
Co-founders Matt Latham and Tom McGillycuddy worked in investment management before launching Circa5000 in 2019.
Circa5000 does not offer individual share dealing and instead has three themed portfolios built using ETFs for people to choose from: People, Planet, Planet & People and it also offers three risk levels, cautious, balanced and adventurous, using green and government bonds and cash as a counterweight to equities.
This is how it describes its themes:
You'll invest in companies helping humanity to thrive. Focusing on health, education and cybersecurity.
You'll invest in companies making the essentials accessible. Focusing on sustainable food, water and energy.
Planet & People
A combination of our Planet and People portfolios. You'll invest in energy, water, food, health, education and cybersecurity.
Circa5000's not entirely commission-free. A subscription costs £1 per month with a platform fee of 0.3 per cent per annum for accounts with a balance over £3,000.
McGillycuddy told This Is Money the platform had benefited from the meme stock frenzy earlier this year, as with other investment platforms, but 'it needed to become clearer what kind of investing we do'.
'It's about making us completely distinct from everything else that's happening in the industry which is more anchored in short term investing and getting people to build wealth themselves for their future,' he said.
It says it is on track to have more than 200,000 customers by the end of the year.
It offers a stocks and shares ISA, a general investment account and a junior ISA. Like other popular investment apps, Circa5000 allows users to invest in ETFs through its People and Planet themes with a minimum investment of just £5. It has plans to roll out a suite of its own ETFs over the next few months.
While it offers different risk profiles within the themes - cautious, balanced and adventurous - it does not offer a robo-advisory service which means users have to build their own portfolio.
As well as investing, the platform allows customers to spend their cash via partnerships with other sustainable companies and offset their carbon footprint through a subscription. Find out more about Circa5000 here.
Victor Trokoudes is another ex-Wise employee and former trader who is looking to disrupt the investment market with savings app Plum.
Launched in 2017, with his co-founder Alex Michael, the pair aimed to create with Plum a money management app that could automate savings using artificial intelligence.
Plum's core product remains its savings feature - its AI links a customers' bank account, analyses spending and transfers small sums into a savings pot that pays 0.25 per cent. This core product remains free.
The Plum Plus account gives customers the opportunity to invest for just £1 a month. Alongside the savings features, customers have access to Plum's 12 investment funds in a risk assessed portfolio. These include options such as Clean and Green, Tech Giants, Best of British and American Dream.
For those fund portfolios Plum works with Vanguard directly and there is a 0.48 per cent annual average fund management and product provider fee.
Trokoudes told This Is Money that Plum would start to roll out share investing in the UK in the next month.
'Everyone will be allowed at least one trade free per month. Depending on how active you want to be, you will be able to get 3 trades for £3 or five trades for £5. And we're thinking there will be an unlimited tier as well,' he added.
The team is also actively looking at introducing cryptocurrencies in the near future.
Finally, Plum has a 'Pro' tier which costs £2.99 a month and includes features like savings goals, Pockets (essentially savings pots) which pay 0.4 per cent AER interest, and pensions.
In June Plum launched its first pensions product - Plum Sipp - which charges a 0.45 per cent annual fee and offers a range of retirement funds. Users can also consolidate existing pension pots in the app. Find out more about Plum here.
Compare the best DIY investing platforms and stocks & shares Isa
When it comes to choosing an investment platform, stocks & shares Isa or a general investing account, the range of options might seem overwhelming.
Every provider has a slightly different offering, charging more or less for trading or holding shares and giving access to a different range of stocks, funds and investment trusts.
When weighing up the right one for you, it's important to to look at the service that it offers, along with administration charges and dealing fees, plus any other extra costs.
To help you compare investment accounts, we've crunched the facts and pulled together a comprehensive guide to choosing the best and cheapest investing account for you.
We highlight the main players in the table below but would advise doing your own research and considering the points in our full guide linked here.
>> This is Money's full guide to the best investing platforms and Isas
|Admin charge||Charges notes||Fund dealing||Standard share, trust, ETF dealing||Regular investing||Dividend reinvestment|
|AJ Bell YouInvest||0.25%||Max £3.50 per month for shares, trusts, ETFs.||£1.50||£9.95||£1.50||1% (Min £1.50, max £9.95)||More details|
|Charles Stanley Direct||0.35%||No platform fee on shares if a trade in that month and annual max of £240||Free||£11.50||n/a||n/a||More details|
|Fidelity||0.35% on funds||£45 fee up to £7,500. Max £45 per year for shares, trusts, ETFs||Free||£10||Free funds £1.50 shares, trusts ETFs||£1.50||More details|
|Hargreaves Lansdown||0.45%||Capped at £45 for shares, trusts, ETFs||Free||£11.95||£1.50||1% (£1 min, £10 max)||More details|
|Interactive Investor||£119.88 as £9.99 per month||£7.99 per month back in trading credit||£7.99||£7.99||Free||£0.99||More details|
|iWeb||£100 one-off||£5||£5||n/a||2%, max £5||More details|
|Freetrade||Free for standard account £3 month for Isa||Freetrade Plus with more investments is £9.99/month inc. Isa fee||No funds||Free||n/a||n/a||More details|
Only Vanguard funds
|Free||Free only Vanguard ETFs||Free||n/a||More details|
|(Source: ThisisMoney.co.uk July 2021. Admin charges quoted annually, may be monthly or quarterly)|