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The refer a friend perks DIY investing platforms and apps offer

DIY investment platforms have enjoyed a surge in interest as more people become interested in investing during the pandemic.

Big players such as AJ Bell, Hargreaves Lansdown and Interactive Investor have reported a significant number of new customers, as savers shun low interest rates, investors try to cash in on the rebound from the coronavirus crisis, and a new generation of DIY investors emerges.

And one way that the established DIY investing platforms and newer rivals in the form of trading apps, such as Freetrade and Trading 212, are trying to reel in more customers is by offering recommend a friend perks. 

These could bag you a free share worth up to £200 with Freetrade, or a £100 payment at AJ Bell or Interactive Investor, while the latter is also offering those referred a year of no monthly charges.

Commission-free trading apps like Freetrade are looking to grow their customer base by offering free shares through its referral programme

Freetrade is promoting its free share offer at the moment. It has enjoyed a meteoric rise since its launch in 2018 and the app-only trading platform, which allows users to invest in stocks and ETFs, now has more than 600,000 users.

Now it is looking to expand its customer base further by offering a referral scheme for customers. 

The referred friend is sent a link and must download the app, fund their account and fill out a W-8BEN form that would allow them to invest in US stocks. Both parties then receive a free share from Freetrade.

The stocks are randomly selected from a list of 90 UK and US companies, ETFs and trusts with a value from £3 to £200, and will be dropped into a general investment account.

The probability is weighted so more expensive shares will be rarer but there is no limit on the number of referrals a customer can make. 

Trading 212 is offering its customers one free share worth up to £100 once the referred friend has funded their investment or Isa account with a minimum deposit of €1. Customers can refer up to 20 friends.

The shares can be sold immediately and the cash value of the share may be withdrawn 30 days after the bonus is received. There is one small problem though, Trading 212 says that due to unprecendented demand it is not currentl accepting new UK customers.

Both these apps saw a surge in customers as a new generation of share investors and traders arrived on the scene over the past 18 months. 

The rebound of tech-influenced stocks, such as Zoom and Tesla added early fuel to this, while at the start of this year came the meme stock frenzy - which saw shares rally off the back of social media hype.

It even prompted the Financial Conduct Authority to warn young traders about the risks involved in investing, particularly in ‘unsuitable’ risky assets. 

Commission-free stock trading has been one of the factors underlying the recent wave of investment, particularly among young people. They have attracted new investors by offering fractionalisation, which allows users to buy fractions of whole shares. 

But critics say the trading apps can promote financial products and behaviour unsuitable for long-term investing.  

Stake is another new kid on the block, trying to take on the more established players, as well as the newcomers like Freetrade. Unlike its peers however, it only offers US stocks and ETFs and it claims to offer the cheapest way to buy and sell.

Now it is trying to ramp up its presence with a referral programme which offers both the customer and the friend the opportunity to win free stock from Dropbox, GoPro or Nike. 

Other more established trading platforms offer a similar refer a friend scheme but grant the referrer cash rather than shares.

eToro offers referrers $50 and it is available to users who have completed a first time deposit of at least $200 to their trading account and have opened one or more trades of at least $100 in total.

Similarly, Hargreaves Lansdown offers its customers and the referred friend £100. New customers must be eligible to receive advisory services and the payment will be treated as taxable income.

AJ Bell Youinvest offers customers £100 if they refer a friend who opens a Sipp or Isa and funds it with £10,000, while Interactive Investor offers a referred friend a year of its standard £9.99 per month service for free (worth £119.88) and £100 to the referrer.

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