Commission-free trading app, Stake, is a new kid in town but its aiming to win over more British investors after a £22million ($30million) fundraising from US-based Tiger Global.
The app, which is taking on the might of DIY investing platforms, such as Hargreaves Lansdown and Interactive Investor, as well as newcomers, such as FreeTrade and Trading 212, has a major difference in its investment offering compared to most British rivals – it only offers US stocks.
It says these are overwhelmingly the most popular with traders and claims it offers the cheapest way to buy and sell.
Stake offers retail investors access to more than 4,400 US stocks and ETFs, with $0 brokerage
While it only launched in Britain last year, Stake’s founder and chief executive, Matt Leibowitz, doesn’t hold back taking a swipe at competitors.
‘Other brokers may charge a hefty commission fee and then charge an FX fee, and won’t let you buy directly in US dollars.’
He claims there’s a lack of transparency across the industry.
‘New and old brokerages are calling it “low brokerage fees” but it’s ridiculous FX fees on every trade.’
These are bold words and Matt’s ambition, together with co-founder Dan Silver who is chief operating officer, is to give Stake users the ability to access the US market easily.
He believes people should be able to trade shares like Google, Facebook, Tesla and Spotify without restriction – much in the same way as if they were living in the US.
He adds: ‘That’s still not happening even from the new players in the UK who are claiming to be new, fresh and solving a problem.
‘But I think they are making it worse and allows us to reach customers who want the requisite access to the US market.’
Matt Leibowitz, founder of Stake, believes the company is set to change the game for retail investors following the launch in the UK
The Stake app – found at hellostake.com and not to be confused with gambling site stake.com – allows investors to access more than 4,400 US stocks and Exchange Traded Funds as well as fractional shares.
There are a few downsides to using it for British investors.
There’s no Isa available and there’s only US stocks on offer.
This could change, but Stake says it has no immediate plans to offer UK shares.
It claims that US stocks are consistently the most popular with UK investors and that the US is the largest market with approximately 45 per cent of the global stock market.
Matt says: ‘We started with US stocks and ETFs, but that’s just the beginning.
‘Access is in our DNA and we’ve got exciting plans to give UK investors even more opportunities both in the short and long-term.’
While there are no brokerage or FX fees on trades there are other costs to be aware of.
Stake currently makes money from its UK customers in two ways: a 0.5 per cent FX fee for transfers in and out of the Stake account and through its premium account Stake Black where it charges users $9 a month (£6.36 a month).
Stake Black offers users more enhanced features, enabling them access to analyst ratings, premium data, price targets, fundamental data and the ability to trade on unsettled funds.
Matt says the fee structure is kept simple, pointing out that with competitors it’s all about fees, forms and complexities.
‘When you transfer once from pound to US dollars – we charge a 0.5 per cent FX fee and you can keep your money in US dollars for as long as you want.
‘Fees [with competitors] are murky while Stake provides institutional access to retail investors.’
However, on initial small trades, investors can fall short with Stake. This is because on the first withdrawal and deposit Stake charges a minimum fee of $2 (£1.41).
It’s when subsequent trades are made that it would work out cheaper for Stake customers than those who trade on Trading212 and through Freetrade’s general investment account, for example, because Stake doesn’t charge further FX fees.
|Trading app||Brokerage fees||FX fee||First FX cost on investing £50 in Tesla||First FX cost on investing £500 in Tesla||First FX cost on investing in £5,000 in Tesla|
|Source: Stake, Freetrade, Trading 212; Correct as at 26 May, 2021. *For all deposits and withdrawals Stake charges a 0.5% fee with a minimum of $2 (£1.41)|
When it comes to initial deposits, Stake is more expensive than these two other competitors. So if you invested £50 in Tesla you’ll pay $2 (£1.41) as an initial fee and then nothing thereafter until you withdraw, see Trading apps compared on initial deposits (above).
It’s worth noting that Freetrade and Trading 212 do offer the opportunity to invest in shares trading on the UK stock market and other countries’ markets too.
A spokesperson for Stake says: ‘Irrespective of the trade value, on both Freetrade and Trading 212 customers are being charged the more they trade the US market.
‘Once customers trade a US stock four or more times (that’s only buying and selling twice) they will be paying more via Freetrade or Trading 212 than they would be on Stake… and the fees only go up from there.’
Growing a trading app in a fierce market
The funding by Tiger Global, which has backed some of the world’s biggest tech companies, follows Stake’s launch in the UK last year and its increase in popularity, which has seen its customer base grow more than six times over.
Stake has seen an average 25 per cent monthly UK customer growth. The company claims 2021 is proving to be a bumper year across all markets with over 126,000 new customers acquired.
|Trades||Stake* (0.5% on deposit and withdrawal)||Freetrade (0.45% FX on every US trade)||Trading212 (0.15% FX on every trade)|
|Prices correct as at 10 June, 2021. *Stake charges 0.5% on deposits into accounts and a further 0.5% when money is withdrawn, so a total cost of £5|
Besides the UK it also launched in Brazil and New Zealand and now has 330,000 customers globally.
Stake customer numbers are still, however, less than competitors Freetrade and Trading212.
Back in February this year Trading212 boasted on Facebook that it had boosted its client membership by 250 per cent from 400,000 to 1.4million. Meanwhile, Freetrade says it has 700,000 customers.
|Trades||Stake (0.5% on deposit and withdrawal only)||Freetrade (0.45% FX on every US trade)||Trading212 (0.15% FX on every trade)|
|Prices correct as at 10 June, 2021 *Stake charges 0.5% on deposits into accounts and a further 0.5% when money is withdrawn, so a total cost of £50|
The business, which was first launched in August 2017, has come a long way from its early days where it was funded by Matt himself, as well as friends and family.
Matt had originally trained as a lawyer but before creating Stake, he worked as at global trading firm Optiver for ten years reaching senior partner level.
He spent more than three years leading trading teams at the company’s Chicago office.
New and old brokerages are calling it ‘low brokerage fees’ but it’s ridiculous FX fees on every trade
Matt Leibowitz – Stake founder
When he moved back to his native Sydney he felt frustrated that he had no option for investing in the US, which is why he decided to build one.
Matt says they boot-strapped the business from the get-go: ‘It took us AU$4million (£2.3million) to get it to where we are now.
He adds: ‘We were lean. We had deep domain knowledge and a real passion for what we were doing. The blood sweat and tears was worth it – worth more than any money we could’ve raised in the beginning.’
When asked what obligations the business had to his new investors he says simply: ‘To return capital to them. It’s still about making sure we run to our four tenants which are staff, customers, partners and shareholders. When we make decisions, they all need to align.’
Since its UK launch in early 2020, Stake has seen an average 25% month-on-month UK customer growth
He assures he won’t be obliged to push prices up. He says: ‘They [Tiger Global] aren’t thinking that way.
‘We have taken the business to a really good spot – they just want to support us and nothing will change on that front.’
It appears the business is in a good spot. Matt says the company has done well over $1billion in trades each month and have ‘well over a $1billion in assets on the platform’.
It’s grown five times year on year in terms of customer numbers – except for this year where it’s growing six times year on year.
The next step is to break into Europe. Matt says: ‘Europe is well within our sites having grown the business in the UK to a point where we can make sure we provide the same access to those in Europe especially those who have smaller markets and also want that same US access.’
Matt’s advice on navigating the US stockmarket is simple: ‘Look out for FX fees on every trade. It’s something massively under-researched in the UK and it really adds up.
‘When someone says they are ‘commission free’ really check if there’s an FX fee in every trade.’
His general tip is to be cautious. He warns: ‘Start small, learn your craft and even if you’re a seasoned investor you have to manage your risk – you got to know why you’re buying or selling. The platform will not save you if you make poor decisions.’