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Raft of new platforms launch as demand continues to thrive

Competition is heating up among platforms, but which ones will survive?
Raft of new platforms launch as demand continues to thrive
  • A flurry of new investing apps have launched
  • While not burdened by legacy technology, the route to profitability is tough

At least six investment apps have launched in the UK since the pandemic kicked in as new investors continue to set up accounts in droves. Since GameStop (US:GME) first soared to stratospheric levels over half a year ago, platforms feared that new customers may be put off investing for life when the bubble burst - but new figures suggest people are still flocking to set up accounts. 

According to an analysis of the investment app market by the app analytics and marketing platform App Radar, the UK’s top 10 investment apps gained an estimated 1.6m users via Google Play Store since March 2020, with 140,000 of these customers joining in May 2021 alone. The analysis also finds that Plum and Freetrade were the most downloaded apps on Google Play Store with 381,000 and 320,000 respectively, while Hargreaves Lansdown had 273,000 and interactive investor had 29,000. 

It shouldn’t come as a surprise, therefore, that as demand is surging more and more new apps are starting to appear. On Investors' Chronicle's count, as many as four new platforms have launched in the past three months alone. While they are all targeting slightly different audiences, one thing they have in common is that they are trying to offer a slicker and simpler experience than the prevailing options. 

InvestorAi is the most recent, launched by Akshaya Bhargava, a serial entrepreneur and ex-global head of Barclays Wealth. The platform is branded as a “quant in your pocket” for do-it-yourself investors. Its ambition is to use algorithms to analyse trading and customer behaviour in the same way that hedge fund managers and investment bankers do; no small feat for a startup app. 

For less experienced investors, a new app called InvestEngine also became available to do-it-yourself investors last month, with the goal of reforming the “toxic culture of investing” where - it says - less than a third of people are investing at a risk level that is right for them. The platform does not have access to individual stocks, but currently offers a range of around 150 exchange traded funds. And the costs are very low. The do-it-yourself option has no account charge and no dealing fees, while customers who opt for a managed exchange traded fund (ETF) portfolio pay 0.25 per cent per year. 

In a similar vein, Tillit, founded by former Baillie Gifford investment manager Felicia Hjertman, is also trying to simplify the investment process. The platform has a panel of experts that pick around 100 funds to be made available on the platform - both active and passive - so its users are not overwhelmed by options. The platform is at the slightly more pricey end of the spectrum, at 0.4 per cent for the first year, then dropping by 0.01 per cent per year to a minimum of 0.25 per cent. 

Savings app Chip, in conjunction with fund behemoth BlackRock, is also dipping its toe into the investment arena. The platform launched a new subscription offering in June called ChipX, which enables users to pick between ‘cautious’ ‘balanced’ and ‘adventurous’ funds, as well as a range of ESG-friendly options. The platform is limited to a handful of BlackRock funds, purposefully designed to make investment decisions for you. 

Other platform launches since the pandemic struck include The Big Exchange, owned by the Big Issue Group and focusing on ethical funds, as well as Australian trading app Stake, which launched in the UK last March, giving low-cost access to US stocks. Companies that have announced plans to launch investment platforms in the UK include derivatives trading site CMC Markets (CMCX) as well as Goldman Sachs’ Marcus, which currently only offers savings products in the UK.  

Most of the new entrants appear to be focusing on low-cost mass-market solutions. Time will tell if they can pull it off. As Rich Mayor, editorial director at research group Fundscape puts it, “it’s a huge opportunity but margins are extremely thin and the marketing costs required can quickly get out of control.” Another obstacle is trust. People are unlikely to hand over money readily to a company that they are not familiar with.

One advantage that these new platforms have is modern technology. There’s no legacy code from old books of business to administer that more mature platforms have collected over the years. Many older platforms have to undertake so-called 'replatforming' projects to revamp their technologies, which can be a mammoth task. Customers who migrated from Barclays Stock Brokers to Barclays Smart Investor can tell you all about what can go wrong. 

The route to profitability for a new platform is not easy, so it will be interesting to monitor the success of these new entrants. Mayor thinks that they might be inspired by the deals that have happened recently, namely Nutmeg which sold for a huge price despite never making a profit. As for customers, Sam Richardson, analyst at consultancy Platforum,strikes a cautionary note: “Unfortunately, the platforms that prove most popular won’t always deliver the best outcomes”.