- App quality is of increasing importance
- Investors should use them with care
Increasing numbers of private investors are expediting technological disruption in the platform industry. This isn't just because of lockdowns and market volatility luring people to trade, but a growing need for people to take control of their finances following pensions freedoms and the decline in final salary schemes.
This trend hasn’t gone unnoticed by fund managers. In an interesting note published last week, Iain McCombie, co-manager of Baillie Gifford UK Growth Fund (BGUK), reported that he has been selling investment management firms and adding to platforms as a way to play the growth in retirement savings.
One of the most striking trends to come out of the burgeoning platform arena is the rise in the use of mobile. Some of the newer investment platforms are only available via mobile apps, and many of the more traditional ones have seen a rapid growth in investors managing their portfolio on-app.
“The mobile proposition is a key digital investing battleground ,which has gone from being ‘nice to have’ to ‘expected by most’ in a few short years”, says Jeremy Fawcett, head of research consultancy Platforum. “Monitoring a portfolio used to be good enough, but the better services now offer transactional capability and the best can capably deliver their entire service through a handset.”
Platforum’s latest investor experience research rates Fidelity Personal Investing as having the best mobile proposition, followed by AJ Bell Youinvest (AJB) and Hargreaves Lansdown (HL.). Fawcett says that some bank-owned services, such as Barclays Smart Investor, are integrating with their online banking app but, while this is a great idea, it is slowing down their development.
Of course, having a good mobile app is not going to be important to everyone. But Holly Mackay, chief executive officer of personal finance website Boring Money, says that half of investors who traded within an individual savings account (Isa) last year did so on a mobile device.
Of platforms, Mackay says, “if you don’t have a good app, you’re not really in the race,” adding that “among the more traditional sites, I think Hargreaves Lansdown and AJ Bell have the best apps”.
Old vs new
Hargreaves Lansdown has seen huge growth in its number of mobile users and had over 2.5 times more app logins than website logins in the past six months of 2020. Year on year, website logins were up 60 per cent in this period, while app logins were up over 150 per cent. And in the first quarter of 2021, more trades were placed via the app than the website.
Alex Lambert, external relations manager at Hargreaves Lansdown, says that as of the end of March, the platform had 687,000 active app users. All securities available on the website can also be bought via the app, of which the users can access live share prices, set stop losses and limit orders, and track investments using watchlists. There are also tools for tracking market movers, and commodity and currency rates.
AJ Bell also has an active app user base, with 40 per cent of its Youinvest platform customers using its app, on average “a few times per week.” All the main features of its website are also available on the app such as the portfolio X-ray tool, comprehensive dealing options, secure messaging and the ability to vote on corporate actions. The the only key difference is that you can’t set up an account via the app.
IG, which doesn't let you invest in unlisted funds but does facilitate derivatives trading, also has a relatively good app, ranking highly in our Top Rated survey, and also on the Apple app store.
Other traditional platforms appear to have a smaller proportion of customers using their app. Approximately a quarter of Fidelity Personal Investing’s customers have downloaded its app, but the majority of transactions done through this platform are via a desktop. Emma Beresford, senior corporate communications manager at Fidelity, says that all products and propositions available on the desktop are also available on the app. This includes an account analysis tool and performance reports and figures.
Myron Jobson, personal finance campaigner at interactive investor, says that roughly 20 per cent of its user sessions are done via the app with the rest via the website. Everything that you can trade on the website is also tradeable on the app, but the app doesn't have portfolio analytics tools. You are also not able to withdraw cash or view transaction history on the app, but Jobson added that these functionalities are being developed and “are on the roadmap for this year".
Around a third of Barclays Smart Investor trades are placed via its app. But the platform is a feature embedded within the app meaning that Smart Investor customers can only use it if they have a Barclays current account. This is convenient for Smart Investor customers who bank with Barclays as they can access all their finances in one place.
Smart Investor’s research centre is not integrated within the app, so customers who want to respond to corporate actions have to do this through the website.
Vanguard, which has been known for driving down costs across the industry, partly through its use of technology, does not have an app. Jonathan Goodstone, public relations manager at Vanguard, says that 66 per cent of its transactions year to date have taken place on desktop devices, with the rest via mobiles or tablets. In terms of overall website visits, 55 per cent of people visiting vanguardinvestor.co.uk do so via mobiles or tablets.
Goodstone says: “Many customers use the mobile site, but we’re always looking to evolve the site in line with our customers’ needs and wouldn’t rule out an app in future if it’s what they want.”
Newer brokers arguably have better apps as these have been designed on a mobile-first basis, with a simpler journey and fewer “byzantine features that can over-complicate the investment process,” according to Alex Campbell, communications lead at Freetrade.
He says that commission-free dealing is a key differentiating factor with Freetrade, as well as its insights tab which provides performance data alongside a benchmark and the integration of community discussion threads. Some 45 per cent of Freetrade customers invest at least once a month and a further 22 per cent at least once every two months.
Trading 212, eToro and Stake also offer commission-free trading. Trading 212 was the most downloaded app in the UK in January and briefly had to close to new customers. eToro, like Trading 212, is available via app and desktop, with the same features available to customers via each media. In February 2021, 69 per cent of eToro's manual transactions were made via mobile and 31 per cent via desktop.
Stake is aimed at more experienced investors, only offers access to the US market, and includes features such as company financials, analyst ratings and price targets on its app. Unlike Trading 212 and eToro, it does not enable users to trade derivatives.
As the chart below shows, the availability of an app appears more important to younger investors.
Caveat emptor!
Increasing numbers of investors are managing their investments on their smartphone and this trend looks set to continue. The ability to trade quickly at low cost with constant news flow should, theoretically, improve your investment chances. But don’t get addicted to checking your app.
As we pointed out in Think twice before dealing on your smartphone (IC, 19.02.21), studies suggest that people who over trade can have poorer investment outcomes. Research also suggests that people who manage their portfolio via a phone may end up making worse decisions.
A study carried out by German and American academics, published by the Leibniz Institute, tracked the transactions of 15,000 customers of two large German retail banks over a seven year period. It found that when people placed transactions on their mobile app they were 8 per cent more likely to buy “riskier lottery-type stocks” than when they traded via a computer. Transactions made via apps were also 12 per cent more likely to be for “past winners” – stocks that have enjoyed a recent surge.
