Guest Interview: Dan Lane from Freetrade
(Edition Number: Twenty One)
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Both Trading 212 and Freetrade will be well known to UK investors, with Freetrade being the smaller of the two. After the success of Robinhood in the US, these UK-based commission-free brokerages are shaking up the UK retail investing scene in a similar fashion to their US counterpart.
Dane Lane, Senior Analyst at Freetrade
After spending six years at Fidelity International, where he was active across several roles, concluding as a Senior Investment Writer & Senior Personal Investing Manager, Dan left Fidelity to join Freetrade in October 2020 as a Senior Analyst & Investment Writer.
This one excited me, as it would offer an opportunity to pick the brain of a man who is behind the scenes at one of the UK’s most promising fintech firms, looking to bring to the UK markets what Robinhood did for the US, but with a notable difference.
Unlike Robinhood, Freetrade does not offer derivatives or complex securities to its investors.
Freetrade prides itself on the fact they are not encouraging the gamification of investing.
Instead, the focus is on educating everyone about the benefits of long-term investing, offering clear and simple pricing, and building a business that puts customers first.
Today’s interview offers an insight into how this fascinating space. You can find Dan on Twitter under the handle @JasonDanielLane.
“For years there’s been this throwaway phrase in the press that investing is for everyone. It absolutely should be but big fees, complicated sites, a dearth of educational support and an all-around intimidating experience made investing less accessible for a lot of people.
We want to be the exact opposite of that and make it easy for everyone to take charge of their financial futures sensibly. I think a lot of people just want to know they’re doing the best they can for their future selves and we want to provide the framework for that.”
Good morning Dan, and thank you for taking the time to be here today. When the opportunity for this interview came forward, I was excited to be able to pick your brain, as well as offer something new to readers here.
So, I mentioned in the opening remarks that you are currently the senior analyst at Freetrade, after having served a long stint at Fidelity International.
Before we get into some more granular detail about what you are doing in the present day, I thought it would first be interesting to hear about your history.
So, if you wouldn’t mind, where did the passion for writing about this industry spark from originally? Moreover, can you perhaps take us through the various paths in your journey that led you to where you are today?
Thanks for having me, Conor. Yes, of course, I actually started in the industry on a graduate scheme that gave me access to equity analysis, sales and how investment platforms are run - quite the range.
Two of my rotations were in investment writing, in the retail and institutional spaces. And, to be honest, I was hooked. Quizzing fund managers on their stock selection and learning how they run huge portfolios, and then providing research teams with my take on the market, really shaped me.
If there’s one way to make someone back their knowledge and interpretation of the big picture and what stocks could benefit, it’s getting them to publish a piece with their face beside it.
I rolled off the scheme into a team of analysts and writers, producing investment guidance full time.
When the opportunity came up at Freetrade to come and write for people like me, and be part of a truly great, unique movement I jumped at it.
Okay, so now let us move on to discuss what you are doing now. First off, can you explain to us what Freetrade’s place in the market is, and a little about what they do as a company?
Secondly, UK readers will likely know of Trading 212, the leading commission-free trading platform. Freetrade suggests its focus is on transparency and trust.
They do not offer some of the complex products that T212 offer, such as CFDs, and they pride themselves on the absence of hidden fees or inflated spreads, which is something a lot of commission-free brokers are criticised for.
What, in your opinion, separates Freetrade from the pack, and makes them a more attractive alternative to the other platforms that can be found within the UK?
I know that Freetrade operates its own in-house brokerage platform, do you feel that is a competitive advantage?
Freetrade’s mission is to get everyone investing. That’s the cause that completely underpins everything we do.
We have an app that gives access to US and UK stocks, investment trusts, SPACs and ETFs, and a full suite of investment analysis content and educational articles on our site. We also run a daily market newsletter called Honey to keep everyone up to date with the investment world and have an extremely engaged community on our forum, which anyone can join.
For years there’s been this throwaway phrase in the press that investing is for everyone. It absolutely should be but big fees, complicated sites, a dearth of educational support and an all-around intimidating experience made investing less accessible for a lot of people.
We want to be the exact opposite of that and make it easy for everyone to take charge of their financial futures sensibly. I think a lot of people just want to know they’re doing the best they can for their future selves and we want to provide the framework for that.
As you’ve said, we have some incredible in-house talent running everything from the back-end tech to customer support, to the graphics and design I just love. Being able to ask our customers what they want in their app and do our absolute best to deliver that for them is proving to be very valuable. When you’ve got that drive and underlying mission behind everything it’s a great thing to be part of.
In terms of the product itself, we haven’t just stuck a slick interface over a white-labelled product. We’ve built our brokerage platform from scratch.
This allows us to scale more efficiently and, we believe, it offers our customers a superior experience by offering execution on exchange or through the LSE’s RSP network.
Thanks Dan, a few more questions on Freetrade before we move on.
Freetrade was grown from a UK base, so I believe this is where the focus appears to be right now. I also know that the company is looking to expand into Europe fairly soon. Do you have any flavour on European expansion, and what some of the obstacles there are?
Yes, you’re right, the waitlists for Germany, Sweden, the Netherlands and Ireland are live and I get a lot of emails from Freetrade fans from further afield asking to set up shop in their neck of the woods. Hopefully, we’ll be able to serve them sooner rather than later, it’s certainly in the works.
When you think about the quirks of the investment industry in the UK, what it takes to be in a position to offer ISAs, pensions, the investments themselves, the supportive guidance - it all really adds up. Each country has its own version of that - they aren’t obstacles, they’re just brilliant opportunities to truly get everyone investing and maybe offer solutions for people who haven’t had access to them before.
From my own understanding, it appears that Freetrade allocates a great deal more of their resources towards community and education. As well as their blog, you also offer a short and snappy market newsletter called “Honey”, that you mentioned earlier.
The investing newsletter economy is certainly booming. I should know, as it’s now (thankfully) my full-time job.
Why do you feel this aspect of the business is important, specifically for retail investors, who might be new to investing?
I’m so glad you’ve read Honey! My colleague David Kimberley and I have really put our heart and soul into it, the articles on our Invest Hub and the Weekend Read.
I’ve worked in the investment industry long enough to know there are people who would rather it all stayed complicated and inaccessible. Honey is designed to be the antidote to that and the remedy to the thinking that investing is only for some people.
Encouraging new investors to develop good habits and really take control of their own money has been a personal goal of mine for a long time, I think the likes of Honey really lets us do that at Freetrade.
Newsletters are an amazing way to meet readers on their own terms - bitesize thought leadership is the antithesis of the 10,000 word dusty reports the industry had got used to churning out.
If you can help people develop their knowledge at the pace and regularity they feel comfortable with, and you don’t come across as intimidating or condescending, you can create real value through something as simple as a newsletter.
Before moving on to discuss some more holistic topics, could you possibly share with us what attracted you to Freetrade? I understand that you joined the team after serving more than 6 years at Fidelity International.
This was a senior role, at a large global firm. So, it always interests me to understand the thought process of someone who leaves a role like that to join a smaller, but perhaps faster pace environment.
There was no push factor at all in that decision, it was all pull! Getting stuck in and building something I completely believe will turn out to be a once-in-a-generation proposition was very attractive.
Sometimes you get sold the dream and realise that’s all it is but it’s amazing to see the mission backed up by so many committed and energetic people at Freetrade.
It came at the right time for me too. I was, and still am, definitely in building mode. Sometimes if you aren’t a big cog in the overall machine you can take your foot off the pedal, I didn’t want that to happen to me.
Hopefully, I can lend some of that experience in investing to our customers - that’s who I really want to help and get feedback from.
Thanks, Dan. Let us now shift focus a little.
The UK is an interesting market. However, for me, being based in the UK, I find myself more attracted to US-based companies.
Even if we look at FTSE 100, or perhaps the FTSE 250, the constituents tend to be larger, more mature, and are heavily weighted across financials, consumer staples, industrials and energy, with a fractional weighting in technology.
There are many exciting, young, companies in the UK. Trading 212, Freetrade, GymShark, Monzo, Starling, TransferWise, Gousto, Revolut.
There are many who utilise technology across various sectors, with some emphasis on fintech especially. We recently saw Deliveroo go public, which is an exciting company, despite the performance of the IPO.
My question to you comes in two parts.
First, why do you feel there is a supposed lack of innovation in the UK? Or perhaps, why do you feel there is a lack of public entities that are representing the technology sector in the UK?
Second, do you think this dynamic will change over the next decade, as there are evidently a lot of great start-ups here, some of which have global appeal?
Yes, 2020 and the US tech boom really highlighted that lack of big tech in the UK but I think if you look further down the cap scale there are a few UK tech gems.
The UK gaming sector is very well respected for example. And then you have companies like Ocado, which is a tech firm masquerading as a grocer. And Boohoo which is arguably becoming a tech platform that just happens to sell clothes.
I think they give us an insight into the change we’re likely to see in the UK. It might be more about which companies truly embrace tech and amplify their models with it, rather than out-and-out tech plays in the large caps.
In terms of the difference between the US and UK - on a simple level, the US just has more people to use and invest in tech. The likes of Uber and Snap have burned through capital so they need markets with deep pockets. The sector also isn’t known for its dividend payers, something UK investors have really grown fond of with rates being at record lows.
Your examples are pretty much all private firms too. The great thing is that, through crowdfunding, UK investors can access those opportunities - that process is still in its infancy in the US. If you take a step back then, UK investors have some decent options, you just have to look beyond the gigantic names sometimes.
Sticking with this theme somewhat, there are some notable differences between the UK and US in relation to discussions about money, business and investing.
In the UK, it can be a taboo subject when it comes to discussing salaries, or how people manage their own personal finances.
I personally think that we should all be discussing our personal finances, to become more informed. This seems to be a big theme across some of the more nascent challenger banks and fintech companies in the UK.
You recently said the following, when discussing the apparent lack of financial literacy in the UK:
"The greatest advantage you can give your investments is time. So it's concerning that the cohort with the most time on their hands feels so ill-equipped. Whether we realise it or not, investing early on in life could be the difference between reaching our eventual financial goals or missing them entirely. Getting to grips with the basic concepts later in life might just be too late.
It's a real sign of the nation's lack of financial education when a huge portion of the population doesn't know the name of one of the most common savings products. The frustrating thing about the lack of confidence around ISAs is just how helpful, accessible and easy to use ISAs can be. Chances are, if we're unsure about the headline facts around ISAs, we're not using them to help us as much as we could."
What are your opinions on the idea of discussing our personal finances, and do you feel that companies like Monzo, Starling Bank, and Freetrade play an important role in that evolution?
You’re right to call out the inherent cultural differences around money there.
I think there’s still a bit of a stigma in the UK about revealing salaries and coming across like you’re being brash with cash. But the message needs to get through that the actual sum you have in your account is only important to you. It’s the positive saving and investing habits we can share, discuss and help each other with.
I think there’s also the impression that investing or saving is somehow penalising your current spending power. As if it’s like cleaning the bathroom - you resent it but you know you have to do it. I actually think our ability to invest and the accessibility that Freetrade offers is tremendously empowering.
You get to provide for your future self and, once you get there, you can say “I did that.”
If there’s one aspect I think a lot of fintechs are addressing well it’s the intimidation factor of money.
I remember reading financial commentators chucking out terrifying figures that young people had to put away just so they aren’t poor in retirement.
In reality, once you break all that down and take the sensationalism out of it, you realise it’s about those little actions you can take every month, not some grand lottery win that matters.
I fully believe the value of the accessibility and support fintechs are bringing to young people will only become clearer as time goes on.
For any newer investors out there, it can be quite confusing when they are first faced with the prospect of investing their funds. They might feel a lack of confidence in picking individual stocks, they might not understand what an ISA is, or they might have trouble deciding which ETF they should be purchasing.
I always suggest to new investors, they should take some time to read the “Little Book” series on investing, before deciding what they want to do. That series covers passive indexing, stock picking, market cycles, behavioural biases, and a spate of other important considerations we should understand when investing.
Obviously, without soliciting financial advice, what would your suggestions be to a new investor who is struggling to find where to begin?
Start with your goals, the time you have to reach them, and what risk you’re ready to take on. Only then should you choose the assets to match. I’ve lost count of the excited texts I’ve got from friends talking about their assets’ performance. If it’s surprising you, positively or negatively, chances are the balance between those three main factors isn’t right.
There’s more information on investing out there than ever before but that doesn’t mean it’s all high quality. That’s been the mission of the articles on our Learn Hub - simple, clear guidance on getting started and something you can bookmark and come back to in your own time.
Picking individuals companies is hard, and the reality is, that most investors struggle to beat the benchmark return over the long run.
The saying goes “do you like accounting numbers or do you like making money?”.
Whilst comical, and sometimes correct in the short-term, over the long run a solid understanding of basic accounting will do wonders for the understanding of a business.
One approach that removes the activity element of investing, which can be a plague to long-term investors, is the coffee can approach.
(For readers, please see the following two links to get up to speed on the coffee can theory).
What are your opinions on the coffee can portfolio?
I like the premise - one of my favourite investors Nick Train has always said that his ideal holding period for a stock, in a perfect world, would be forever. He went four years without buying a stock for his portfolio and still outperformed the UK market by a huge margin.
The likes of the coffee can portfolio highlight something investors either realise early on, to their benefit or later, to their detriment - holding long-term quality compounders beats hopping in and out of short-term ‘cross-your-fingers’ stocks.
If you can realise the benefits early on of identifying good companies and just letting them grow, you’re one step ahead of a lot of investors.
It would be interesting to know how you approach investing. Are you more of a passive index investor, do you like to pick individual companies, and then maybe some colour on what you are looking to achieve with your own investing?
I’m probably a skewed example because my job requires me to analyse stocks and markets all day. But my goals, time horizon and risk tolerance mean I’m suited to looking for high-quality dominant companies able to control their own futures and stave off competition. I did fancy myself as a value investor once upon a time but I quickly found how exhausting it was and how much lowly-valued stocks can keep you awake at night. I have a lot of respect for that crowd.
I like the idea of a core and satellite approach of basic ETFs forming the basis of a portfolio, peppered with individual stocks on the periphery. I’m much more able to keep track of a handful of holdings than maybe 100 and I think that’s an approach investors like you and me can manage by ourselves.
A big pet hate of mine is when professional fund managers’ portfolios are basically closet index trackers because they’re terrified of doing something different to the crowd. That provides no value over what I can do as an individual, in my opinion, and I’d rather not pay their fees for the privilege.
Four of the most important variables in investing are time, luck, skill, and mindset.
Where would you rank each of these variables over both the short and long-term, in relation to investing performance?
I used to consult on behavioural economics so I would certainly say mindset is a massive factor to get right before you start. The most important thing I have learnt is to get ready for volatility before it hits.
If sudden movements shake your nerve in the moment you will either freeze or do something stupid.
“In March 2020 when the FTSE crashed I was in a meeting with a portfolio manager who off-handedly updated us that he had just lost £100m in the previous 30 mins. He didn’t break a sweat. His fund has been one of the best sector performers since then. Mindset is everything.”
You can’t plan for timing or luck, so there’s no point. Control the controllable, that’s all you can do. And we all have a weird view of our own skill - we blame the market when things go badly and praise ourselves when things go well. I never trust my view of my own skill.
This does not have to be a question that extracts any direct opinion from yourself, but as someone who works directly in the brokerage industry, and one that caters to the retail investor, I would be interesting to hear your thoughts on cryptocurrency.
I know that Freetrade does not currently offer access to this asset class, but perhaps more holistically, have you seen demand for this product from current Freetrade users, and do you feel it has a place in the modern financial industry?
Yes, there is demand and I can certainly see why.
A really positive thing for me is seeing our customers on our community forum discuss the sector in a mature way.
I can appreciate the base case for crypto but it’s not being used as a currency yet. We use fiat because of the relative certainty of what it can buy. Bitcoin etc, aren’t there yet and maybe it’ll take a bit more innovation in the space to provide that.
Ultimately, I think anyone in the space agrees on the future value of the blockchain, regardless of their view on individual coins. If you start to think about what that could achieve, we’ve probably only scratched the surface.
Lastly, I always conclude these interviews with some quotes. My favourite will always be Graham’s weighing machine analogy. So, to finish this off, what are some of your favourite quotes, and why?
Without a doubt, the one that sticks with me is Terry Smith’s line, “When the party gets raided, sometimes even the nice kids get arrested.”
He told me that just after a broader market dip had taken some of his quality compounders down. He wasn’t worried because he knew everything about his holdings and, even if the whole market was down, his companies could hold their own in the end.
I’m also a sucker for pretty much everything Peter Lynch has ever said. He gave an interview when he retired at 46 years old that stayed with me. He had achieved his goals and recognised investing was a tool to enjoy life. I get wrapped up in the industry because I love it but that gave me a bit of balance. If Peter Lynch can recognise it, I should too.
I would like to conclude by thanking Dan for his willingness to answer these questions today, I valued your time greatly.
Being based in the UK myself, and as a person who is interested in the plethora of interesting private fintech companies, I got a lot of value from this interview, and look forward to seeing how this market grows over the years to come.
Remember, you can find Dan on Twitter under the handle @JasonDanielLane.
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Lead Analyst at Occasio Capital Ltd