Millennial Wow, or how Freetrade can win

Disclosure: I am an investor in Freetrade

Last month start-up stockbroker Freetrade zoomed past 500k users¹, affirming its position as a leading challenger in the U.K.’s DIY retail investment space. That market (worth ~£200bn) is dominated overwhelming by the company that pioneered it over two decades ago: Hargreaves Lansdown. This powerful incumbent has over 40% market share², and is still growing at a fair clip — revenues were up 16% in H2 2020 vs H2 2019.

Freetrade is riding something of a high right now, with the GameStop frenzy sparking a leap in users, including a surge of more than 50,000 users in just one day. In amongst the giddiness it is important to keep grounded and recall just what Freetrade is up against.

Slide from Hargreaves Landsdown’s Interim Results 2021

Over roughly the same period that Freetrade have been alive, Hargreaves have grown Assets Under Management (AUM) by 118% and doubled clients (users) to 1.5m. All the while maintaining a retention rate of around 93%³. To put that in context, Freetrade’s target AUM for end 2020 was £430m⁴, or 0.36% of Hargreaves’ AUM. That is quite the mountain to climb.

Hargreaves posses formidable strategic advantages. The company is widely known — perhaps as close to a household name as you’re going to get for a stockbroker in the U.K. — and widely trusted, having built up its brand and reputation since the 90s. It is known, in part, for having great customer service. It also benefits greatly from stickiness, or ’switching costs’ — no-one with £10k or £100k carefully invested in a portfolio has much interest in pulling that setup apart and transferring their small fortune of (probably) life savings to some new provider.

So Hargreaves is dominant, deeply entrenched and growing; hardly a sitting duck.

Freetrade cheerleaders would point to rapid growth (150k>550k users in ~9 months), a superior product experience and the attractions of a radically lower-cost pricing model. And all this is true, but does it really add up to actually one day taking the taking the crown from Hargreaves?

Pricing is a bit of a red-herring in the long run. Yes the pricing models are different, but in the end Hargreaves can always lower costs or build new pricing tiers. The net effect could easily just be lower industry margins (as per the FT’s lex column recently: “There must be a risk that Hargreaves’ juicy profit margins come under pressure”⁵). Freetrade could delight on user numbers but remain decidedly unremarkable on revenues, set against sky-high, start-up-valuation expectations.

Rapid user growth and ‘best-in-class’ product execution hit all the right notes in start-up land, but they are no guarantee of fundamental structural change in an industry. Monzo, that darling of the Fintech world and one of the most charismatic start-ups to emerge from the U.K. in recent years, offers striking parallels of how this can go. Despite lofty talk of re-making the banking industry, Monzo is — how shall we say it — in a bit of a funk. It has lots of users yes, but also a regulator breathing down its neck because it doesn’t make any money. It hasn’t remade the industry (yet), except inasmuch as the incumbents are copying most of their features.

To make this concrete consider that Goldman Sachs’ Marcus entered the U.K market in September 2018 and within 8 months had amassed over £6bn in deposits, 86x what Monzo had built in deposits (£71m) since launching⁶. User numbers do not necessarily equal deposits. The success of network-effect-driven global super-apps like Uber, Airbnb, Facebook, Instagram, Google etc has left us with a legacy of thinking user numbers are all that matter to start-ups. But that isn’t true in finance, driven as it is by switching costs, trust and regulation. Traction in Fintech needs to be measured by something with a pound sign in front of it.

Freetrade’s product experience is vastly superior to Hargreaves’ yes, and the roadmap is piled with exciting features. But so is Monzo’s relative to the traditional banks. The experience of the start-up banks should give pause for thought about the extent to which a whizzy UI and shiny features can unlock the movement of billions of pounds of private capital.

So what is to be done?

Freetrade’s best chance of becoming a major player in this industry is to completely own and dominate the millennial market, picking up the loyalties of emerging investors early in their journey before habits become entrenched. This idea is hardly novel but let’s remember that Hargreaves are also actively focussed on this same segment, and with some success — the average age of a Hargreaves investor was 37 in 2020, down from 54 in 2010⁷.

The strategic dynamic between Freetrade and Hargreaves is perhaps best framed as a battle to win the hearts and minds (and wallets) of millennial investors. The difference is that for Freetrade the battle is existential — without victory here it is hard to see how it can be a major force in the industry. The game then is for Freetrade to establish themselves as the overwhemingly favourable option for any millennial who wants to grow their own wealth over the long-term.

How does Freetrade win?

Freetrade’s unique advantages are:

This can be parsed-out into a strategic formula for assessing the attractiveness of any major product initiative that Freetrade might undertake. Let’s call it ‘Millennial Wow’. Under this approach, Freetrade should prioritise building large-scale features or product offerings that have the following four characteristics:

So let’s consider the idea of Freetrade going into Crypto (as part, presumably, of the general investment account). How would that fare?

Overall Score: 3/5

Truth be told, the items on the (visible) Freetrade roadmap look pretty underwhelming from the stand-point of millennial wow — mostly conventional, iterative improvements on the current experience. Which isn’t to say they’re bad or not valuable, but simply that they look unlikely to be of strategic significance.

The Freetrade roadmap

The wind is all behind Freetrade right now, they have users pouring through the door, a strong and increasingly recognised brand, first-rate product execution, a huge community of fans and followers, and unique market positioning blending ‘tech start-up’ with mainstream investment provider.

Millennial wow is motivated by taking this story as far as it can go, to the moon, to the day when Freetrade is the major player in the market and billions of pounds are being transacted through its servers each week. It is a call for brave, intuitive, radical, first-principles thinking about what experiences Freetrade could bring into existence for younger investors. An opportunity to influence how a whole generation thinks about investing, while at the same time ensuring (inevitably) limited resources are focussed on the point of maximum strategic advantage.

¹ Hargreaves Lansdown, Key financial data

² Interim Results 2021 from

³ Interim Results 2021 Analyst Presentation from

⁴ Freetrade Crowdfunding 2018

⁵ FT, Hargreaves Lansdown: platform game

⁶ Business Insider, UK customers are swarming to Goldman’s Marcus

⁷ FT, Where do the next generation of investors go from here?

⁸ Paul Graham, How to Make Wealth



Data scientist, product junkie, one-time founder. London-based. @tgh44

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Data scientist, product junkie, one-time founder. London-based. @tgh44