As we have previously explored on Muckle, millennials are a lot more money-minded and engaged than a lot of lazy ‘avocado-on-toast’ journalism would lead you to believe.
However, whilst their aspirations may be similar to those of their parents, they are likely to embark on their journey to financial independence in a slightly different fashion; you may not hear the boys and girls of the internet age announce that they are going to ‘contact my broker to check on my stock portfolio’.
However, if we believe that saving is rarely a bad idea and that investing generally delivers better returns over the long term, young people have the luxury of being in the market for a long period of time so it makes sense for them to have some exposure to stocks and shares and other investments.
With the lines between stockbrokers, robo advisors, micro-investing, money management apps and digital banking increasingly blurred, a new crop of investment tools promise a sleek, app-based and user-friendly revolution of the kind that the fintech pioneers brought to the banking industry.
a new crop of investment tools promise a sleek, app-based and user-friendly revolution
Leading the charge is digital bank Revolut which has launched a new trading feature, offering European customers commission free trading from their mobile device on shares from 300 US listed stocks on the New York Exchange and the NASDAQ – such as Amazon and Tesla.
Revolut alluded to its trading platform in a blog post in August 2018, when it signalled its intention to change shares investment: ‘Investing in the stock market has been closed off to ordinary people for far too long, which has led to real problems for people as they search for effective ways to make the most out of their savings,’ Nik Storonsky, founder and CEO of Revolut, said in a statement.
The service will be trialled with Revolut’s metal card customers – its high-end banking service – before being made more widely to customers in the UK and EU; it is starting with US stocks as it claims customer feedback showed they were the most in-demand.
The service is not without limits – Revolut Metal customers get 100 free trades per month, Premium customers eight, and Standard customers three; additional trades cost £1 each, an annual custody fee of 0.01% per cent is levied, and other trading fees may apply from US regulators.
The scale of Revolut’s disruption can be seen when its fees are set against the fact that most EU based stockbrokers, typically charge between £6 and £12 per trade.
Revolut is aiming to get a foot in a growing market, where there has been a large increase in the number of investment apps that offer people the chance to put some of their earnings or savings into stocks and shares; money management apps and the ability to invest through smartphones has opened up new potential audiences.
The most successful has been Silicon Valley based Robinhood, which has tempted younger people into buying stocks, as well as supporting the trading of cryptocurrencies.
Robinhood recently announced a funding round of $323 million (£264m) led by DST Global at a valuation of $7.6 billion (£6.22bn); it has four million users.
Launched in 2014, Acorns rounds-up spending and puts the ‘spare’ money into investments; spend £9.80 on lunch and pay through its debit card it will take the extra 20p micro-invest it.
Acorns says more than $1bn (£820m) has been invested through the company; Stash is an alternative which offers subscription-based investing with a series of monthly payment plans.
Revolut is the first of the UK’s largest challenger banks to offer its customers investment options, and others, including Monzo, N26 and Starling, are likely to follow suit.
In announcing its initiative, Chad West, head of communications at Revolut said: ‘Trading at the moment, it’s very wealthy people – typically the 35 or 40 plus market. Now we can really open up to younger audiences who are looking for more savvy ways to invest their money by removing two barriers to entry: usability and accessibility.’
Now we can really open up to younger audiences who are looking for more savvy ways to invest
West said that savings accounts are often seen as the go-to means of accumulating cash, despite the rates of many falling short of inflation.
A tab labelled ‘Trading’ on the app, will allow customers to select the companies they’re interested in, returning the previous 12 months stock performance, and insight into whether it would make a wise investment decision. Unusually, the app offers the ability to purchase fractional shares for as little as $1 – handy, given that some of the most competitive companies in the world stocks can cost more than $400, with Amazon trading at almost $2,000 a share.
Future developments will deliver access to UK and European stocks, Exchange Traded Funds (ETFs) and the ability to invest via a Stocks and Shares ISA.
Revolut customers have been able to trade up to 29 crypto currencies via an exchange on its app since March.
The company has not been a stranger to controversy as it has rolled out its proposition; it has been investigated by the Financial Conduct Authority over how it handles payments, and questions have been raised over its working cultire.
The company has been working hard to change its image, and will be under pressure to ensure that its customers are not allowed to invest irresponsibly; Mr West says that the regulator forbids Revolut from supplying investment advice and that it has ensured that there are plenty of warning signs alerting customers to the possibility that they may lose their money, and volatile stocks will be highlighted in red.
‘People don’t want to have six apps on their phone,’ he said, ‘yhey don’t want one for their banking, one for their cryptocurrency, one for their investments, one for their insurance; if they can have everything centralised in one app, they’ll do it.’