Remember the dark days of the pandemic in 2020, when we couldn’t go more than 5km from home? Back then, we were all saving what cash we could, partly because we had nowhere to spend it once the high of online shopping wore off, and partly because we had no idea how long this would all last, and if our jobs would survive it.
Two years later and for some people at least, the lack of social and leisure spending has meant a serious increase in their savings. In Ireland, we are sitting on €135 billion in our bank accounts, and according to the Central Bank of Ireland, at least €15 billion of that can be classed as “excess savings”, ie it is there to be spent, rather than earmarked for something like a house deposit, holidays or essential home maintenance.
That pandemic pile is slowly losing its value, though, thanks to the rising cost of living and low interest rates that have led to some banks levying charges on deposit accounts to cover the cost of holding money on your behalf.
Invest, rather than save, is the advice from some quarters, once you have a comfortable level of savings behind you. But unlike in the past, you don’t need a large quantity of money to invest, and you don’t necessarily need to hand it over to someone else to make the decisions for you.
A new generation of app-based investment platforms are opening up the world of share trading to the average person, who is realising just how poor of a return they are getting on their money.
“That’s one of the reasons also why we see quite some growth coming from people that are new to investing. They start to finally start to realise that if I keep my money on my savings account, I’m actually getting poorer,” said Yorick Naeff, founder of investment platform Bux Zero. “The underlying macro-economic situation is for us the perfect storm. People need to start looking at other ways to build wealth for the future, because keeping the money on their savings account, or any bank account for that matter, will just cost them money, or the inflation rate is high right now.”
Made inroads
Bux Zero is a relatively new entrant to the Irish market, but it has already made inroads elsewhere in Europe, with more than 700,000 people signed up in the The Netherlands, Germany, Austria, France and Belgium. It’s an exclusively mobile platform, and it offers zero-commission investing, so you can make your money work harder without having to pay high commissions.
The company says its goal is to create a more equitable financial future by giving everyone the chance to invest. Bux launched here at a time when trust in the traditional banking sector has been eroded by the crash and the ensuing financial supports from successive governments to keep the banks going, and as consolidation in the sector is removing choice from consumers.
Consumer interest in share trading may also have been piqued by last year’s frenzy around GameStop, which resulted in trading platform Robinhood restricting trade in it and other heavily shorted names.
But unlike in the US where having a share portfolio is more common, the market is still relatively young in Europe.
“There is a shift to more self-directed investing, but Europe is completely different,” said Naeff. “That same penetration rate is below 15 per cent; in many countries it is actually below 10 per cent. So the amount of people actually investing is very, very low.”
Early-stage investors
Bux is not necessarily trying to target those existing investors and shift them to its platform, with the focus more on early-stage investors looking to make their money work a bit harder. And like its rivals, giving users the option to invest via a smartphone app and with relatively low barriers to entry makes it a bit less intimidating.
“Back in 2014 when we started to set up the company, access to financial markets was really something for the wealthy people or the older people,” he said. “Especially for the newer generations, it was something that was complex, you need to have a big fat wallet and be able to be able to do that. It was tremendously inaccessible. We thought if we want to make that market more accessible we should actually start now because now is the time where you can offer these types of products to a smartphone and have direct access to the financial markets in a very simple and intuitive user interface, as well as always when you’re on the go, and we can cater for the more Instagram generation.
“These kinds of things didn’t exist yet. You had these old traditional banks, you had more traditional web-based brokers, but on a mobile phone in a very accessible way it didn’t exist.”
Zero commission
The affordability part of the business came later, with changes in regulation and the zero-commission proposition. “That’s where we really pivoted a little bit to make it both accessible and affordable,” said Naeff. “And that’s when we really accelerated as a firm.”
Naeff said the company doesn’t sell its order flow to high-frequency trading firms, and it also made the decision to separate its speculative trading business into a different app, two key differences with other platforms elsewhere in the world. Its stocks are also mainly blue chip, which would be considered lower risk.
You can also invest in exchange traded funds, a basket of assets, allowing you to build up a diversified portfolio, or fractional shares, where you buy a slice of a stock if a full share is too rich for your tastes.
Not everything is zero commission, although it is possible to trade without paying the fees as long as you stick to certain trades. Bux will charge a commission for certain order types on European shares – for example if you want to execute an order at a certain price or immediately, that will attract a fee. Foreign exchange mark-ups will also be charged for shares that are not denominated in euro. Bux also offers an investment plan where it can automate investments for you on a recurring basis, with a small monthly subscription fee.
Sensible investment rules
There are still some sensible investment rules you should stick to. The golden rule is never invest what you can’t afford to lose. If the past couple of years – and the 2008 banking crash – have taught us anything, it’s that that nothing is guaranteed and you can just as easily lose your money as you can grow it into a sizable nest egg. Once you accept that possibility and act accordingly, you shouldn’t get into too much trouble.
And educating yourself about what you are investing in is equally important. “We try to put a lot of time and effort into educating our customer base,” said Naeff. “A lot of time and effort has been put into financial literacy things – we put in video content, we put in news, we put in our own curated content ourselves inside the application. We really try to make sure that we educate the customer base but there’s a lot of work still to be done. We’re trying to balance, educating customers to explain them how to properly build a portfolio to our investment plan, while at the same time keeping them engaged as well.”
Another element to that education is encouraging women to get more involved in share trading. Bux’s own figures show that of its Irish clients already signed up, they are about 80 per cent male. Some of the issue appears to be with the “overly macho” image of share trading, Naeff said, that it is something men do rather than women. “We’re actively trying to change that picture,” he said. “Purely from a statistical perspective, women are actually better investors than men. The numbers just show that and we can see that as well on our platform. So we’re trying to help them get started. That financial literacy is also to a large extent applicable for educating our female customer base.”
Ireland
Despite its growth in recent months, Naeff said there is a long way, and a large market to conquer. Ireland is an important part of that, despite our smaller population.
“Many other firms tend to skip Ireland because they feel it’s a small country. We don’t agree – we want to make sure that everybody in Europe gets access to zero-commission investing and gets affordable access to the financial markets,” he said. “Ireland is one of the countries where we see very, very healthy unit economics. It’s a very developed country. We also see that our messages resonate with the Irish people. There’s little competition, to be honest, as well. So from all those angles, I’m actually surprised we’re not bigger than we currently are. But we’ll make sure that we become a more top-of-mind brand in Ireland very, very soon. And make sure that people can use us to build a better financial future.
The rivals:
Revolut
London-based fintech Revolut has taken the banking world by storm, one of the new generation of fintech firms that have made inroads into the banking market in Ireland. It began offering share trading to customers in in 2019, starting with its subscription-paying Metal customers and then rolling it out to all customers a month later. There are a selection of stocks you can invest in, including big names such as Apple, Tesla, Amazon and Microsoft.
The commission-free trading depends on what type of account you have. For the top-tier Metal account, which costs €13 per month and brings with it other benefits such as cashback for day-to-day banking, commission-free trading is largely unlimited. For those with the fee-paying Premium account, it is five free trades a month before you start paying commission, while Plus account holders get three. Standard-account holders on the free tier will get a single trade commission free.
Degiro
One of the largest brokers in Europe, Degiro allows you to invest in stocks outside your home market. You can invest in everything from stocks and bonds to future and crypto trackers, and it offers an app to make it easier and more accessible to retail investors. Like others, it offers low fees to people getting into the investment market, and it also has a library of educational material at its disposal to make sure you are well educated before you start ploughing money into stocks.
Now merged with Flatex, the platform has more than 2 million customers in 18 countries, and wants to more than triple that to 7-8 million by 2026.
El Toro
El Toro ads can often be seen on social media, which is probably because it markets itself as making investing “social”. In practice what it means is that it offers the ability to get involved in discussions with traders on the platform, follow them on eToro and copy their trades.
There are some trades that are commission free, and other transactions that will attract a fee, so read the small print carefully. If you have enough realised equity at the end of each day, you can also gain access to the eToro club, which offers services and tools to customers to help further their experience and understanding of capital markets and other investment offerings.
