March 19

Weekend reading: Who will win the platform consolidation prize?

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Weekend reading logo

What caught my eye this week.

A reminder that platform consolidation continues apace. Monevator readers have noticed a Legal & General statement on logging into their accounts stating they’re set to be transferred to Fidelity. Meanwhile EQi has emailed me – and I presume others, unless it thinks I smell – to confirm my account is to be spirited away to Interactive Investor.

The L&G move is the result of a £5.8bn deal struck last October. After the handover, Fidelity will administer the 300,000 accounts it acquired in the deal, but your money will remain in L&G’s funds. You can also choose to invest in a wider range of other shares and funds, too.

Fidelity claimed when the deal was struck that acquired customers would pay “the same or less”. You might want to run the numbers to check this, though.

I must confess to a bit of sentimental sadness about this particular platform consolidation. L&G was the first place I invested my money, nearly 20 years ago.

End of an era!

Twist and shout

As for the tricky Scrabble hand that is EQi-to-II, I’m not hugely upset.

Interactive Investor offers cheaper share dealing than EQi and the assets being transferred are chunky enough for me to benefit from its flat fees.

So no need for me to hunt for a cheaper alternative using TA’s peerless – albeit eye-straining – broker comparison table just yet.

Still, it’s a bit annoying.

EQi deleted some of my old Selftrade records when it took over the latter a few years ago. That meant hassle with unsheltered holdings. I’d prefer it hadn’t bothered, given it hasn’t stuck around.

There was a Know Your Customer faff, too. I hope that doesn’t happen again.

Penny Lane

Who will win as this platform consolidation plays out? How many will win? Will the winners include you and me? What will we be charged?

It all seems up for grabs.

For example I like the super-dominant Hargreaves Lansdown, both as a platform and as a monster business. But I recently sold its shares. I fear its fat margins will be squeezed by competition from the likes of Freetrade.

At the same I’ve considered upgrading my Freetrade account to the ‘Plus’ offering. This would give me access to lots more shares as well as some other good stuff – including an ISA wrapper – at a cost of £9.99 a month.

Freetrade also recently launched a SIPP, again at £9.99 a month. The gap between the legacy and upstart platforms is shrinking.1

While still very competitive versus rivals, we’re not quite talking free investing anymore. At the least, sensible investors will want to lay down £3 a month for the must-have ISA tax shield.

The Freetrade platform is slick and modern. For an active investor like me it is liberating to shuffle a portfolio around without the friction of dealing fees.

So I see plenty to like, even with some extra costs. Which is heartening, given I’m a Freetrade shareholder…

However these add-on charges highlight that there will surely be some minimum cost wherever you go at the end of this platform consolidation – at least for those who want to deal in a wide range of securities.

Free as a bird

Fair enough – everyone has to make a living and we hardly want to keep our lifesavings with brokers who can’t afford to protect them.

But does such an inescapable cost mean Hargreaves Lansdown’s margins are safe?

You’d think maybe not, because its fees for share dealing might still look egregious compared to £0 trades with Freetrade and others of its ilk.

Yet Hargreaves just reported profits boosted by rampant customer share trading!

Maybe its wealthier customers don’t mind stumping up? Perhaps they’re happy to pay a premium for its very well-established platform, and the reassurance of its great reputation for customer service?

Maybe – but how much of a premium?

I think it’s fascinating watching the industry’s combination of consolidation, competition, and cost obfuscation playing out like this.

Especially as fresh competitors will keep emerging.

For instance the 14-year old Israeli broker eToro this week announced it will go public in the US in a $10bn ‘SPAC merger’ deal. The social trading platform already operates in the UK, but it could do so with a bigger warchest if backed by a lofty market valuation.

How could that affect the incumbents?

Don’t let me down

Remember you can try Freetrade by signing up via my link and we’ll both get a free share. You don’t have to pay for those premium features, unless you want them.

I don’t just keep inserting my link to Freetrade for the freebie share – though that’s clearly part of it! Nor even because I’m a shareholder.

I really do think everyone should give one of these modern trading apps a go. You might be surprised how fluid they feel. I was.

Anyway, have a great weekend. This time next Saturday we’ll be on the eve of our first post-lockdown mini-garden parties in England…

From Monevator

How to automatically donate share dividends to charity – Monevator

How I lost £436,957 trading Tesla shares – Monevator

From the archive-ator: Index tracker costs to watch out for – Monevator

News

Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!2

UK government borrowing hits February record – BBC

Cornwall overtakes London as most searched for location for movers – Guardian

Treasury raises £1.1bn in Natwest share sale; taxpayers still own 59.8% – ThisIsMoney

IR35 tax change for the private sector begins 6 April: are you affected? – Which

Scottish Mortgage Trust’s James Anderson to retire next year – Portfolio Adviser

Slipping? Retirement income prospects for Generation X [Report, PDF]ILC

The rout in long government bonds continues to roil the tech sector – FT

Products and services

Royal Mint gold rush causes chaos for customers – ThisIsMoney

AirBnB offers estimate of what your home would rent for [Top left]AirBnB

We both get £50 to invest at Seedrs if you sign-up via my link and invest £500 in 30 days – Seedrs

Yorkshire Building Society first to bring back 95% mortgages – Guardian

10 surprising facts about Bitcoin – The Big Picture

Eco-friendly homes for sale, in pictures – Guardian

Comment and opinion

A candid account of another early retirement gone wrong – LivingaFI

Will the inflation dog bark? – Real Returns

“I can’t possibly afford it”: how Covid dashed retirement dreams – Guardian

Bond declines ain’t so bad – The Irrelevant Investor

Get rich versus stay rich – The Belle Curve

Twelve truths – Humble Dollar

‘I gambled £50,000 on a horse and lost everything’BBC

Larry Swedroe: Have you been framed? – The Evidence-based Investor

Don’t worry be bullish mini-special

How to stop carrying too much financial anxiety – Incognito Money Scribe

Most people would be wise to assume markets rise – Of Dollars and Data

Ray Dalio and the power of setting defaults for optimism – AWOCS

Naughty corner: Active antics

Deliveroo offers retail investors a slice of the IPO action [Search result]FT

Donkeys – Enso Finance

A chat with Ted Seides, author of Capital Allocators [Podcast]Meb Faber

Analyst anchors – Klement on Investing

Is quality on sale? – Validea

The new Credit Suisse Global Returns Yearbook is out [PDF]Credit Suisse

Covid and politics

UK death rate ‘no longer Europe’s worst’ by winter – BBC

Report finds small number of Facebook users responsible for most Covid vaccine skepticism – Guardian

My mum believes in QAnon. I’ve been trying to get her out – BuzzFeed

Marina Hyde: How long until the next Priti Patel brainwave? – Guardian

Kindle book bargains

Business Adventures: 12 Classic Tales from Wall Street by John Brooks – £0.99 on Kindle

Money Saving Book: Simple Hacks for a Happy Life by Holly Smith – £0.99 on Kindle

Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist by Kate Raworth – £0.99 on Kindle

Billion Dollar Loser: The Epic Rise and Fall of WeWork by Reeves Weideman – £0.99 on Kindle

Buy a Kindle and you can sell all your leather bookmarks on eBay for cash!

Environmental factors

Government sets out £1bn plan to cut industrial carbon emissions – BBC

Gen Z’s high-speed rail meme dream, explained – Vox

Sperm whales in 19th century shared ship attack information – Guardian

Off our beat

The Great Amazon flip-a-thon – New York Times

Will I ever work in an office again? – Guardian

American Special Op forces are everywhere – The Atlantic

What happens when a firm introduces a five-hour workday – Fast Company

The things we go back to – Seth Godin

And finally…

“There’s zero correlation between being the best talker and having the best ideas.”
– Susan Cain, Quiet: The Power of Introverts in a World That Can’t Stop Talking

Like these links? Subscribe to get them every Friday! Like these links? Note this article includes affiliate links, such as from Amazon, Hargreaves Lansdown, Interactive Investor, and Freetrade. We may be  compensated if you pursue these offers – that will not affect the price you pay.

  1. If you open a SIPP you also get a 30% discount on Plus.
  2. Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”.

The post Weekend reading: Who will win the platform consolidation prize? appeared first on Monevator.


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