There is a massive problem with trying to encourage people in the UK to invest, and that is, when they start investing, they are not going to invest in the UK, they are going to invest in the US.
If the Treasury really wants the Invest For The Future Campaign to succeed, they need to make the British markets more appealing.
There is no problem with accessing investments; every week, there is a new investment app that lets people invest as good as for free.
People can now buy fractional shares, which means they can buy £10 worth of shares instead of having to pay £191 for a single share of Games Workshop.
The issue is not a lack of great current investments or access to the market, it’s that I can’t see how brokers can make any money out of promoting British shares.
Brokers can make money on US stocks through FX fees. When you deposit GBP and want to buy Tesla shares, it is converted into USD, and the broker will earn from 0.3% to 1%.
This has essentially replaced commission, as many investment platforms in the UK have moved to commission-free trading.
Also, US brokers can take on UK customers and manage their accounts in the US and earn money through payment for order flow (selling the actual buying and selling of shares to hedge funds).
But, if a UK broker wants to offer UK stocks to UK customers, they must let them buy and sell for free (without the ability to earn income on the execution of the trade as long as the customer price is not worse). There is no money to be made on FX conversions, and many brokers in desperate attempts to complete must also offer zero account fees.
For the UK investment industry, the pricing race to the bottom is nearly over.
Also, the FCA recently started telling brokers that they had to pass on interest on uninvested funds to clients. So there is no money to be earned there either.
Despite trying to get people to invest rather than save, they essentially forced platforms to turn themselves into savings accounts.
Plus, and to cap it all off, the Treasury, who are making big noises about how great it is to invest in the UK, still charge 0.5% stamp duty when UK investors buy British shares. Even the CEO of the London Stock Exchange called stamp duty a “punitive tax”.
There was an excellent discussion on this at the Good Money Guide London Summit, which you can watch below:
It’s time for the Government to put their money where its mouth is and get rid of stamp duty on shares.
You’ll note that on the panel discussing “how we can make UK markets more appealing to global investors” are the CEO’s of two American brokers and one Danish one.
I asked the CEO’s of all the UK-established platforms if they would like to talk on the panel, but none bothered to turn up.
So there you go, even UK brokers don’t care about making the UK markets more appealing.
Why, because they don’t make any money from it…
The only people actually making any money from the brokerage industry offering UK shares as investments are the Government.
Brokers in the UK only really make money when people buy US stocks.
Another thing needs to change, the FCA needs to stop mollycoddling UK investors and let platforms advertise without terrifying risk warnings and restrictive language.
Thankfully, there is some progress here.
Instead, they should focus their time on catching and fining scam investment schemes by policing the social media platforms that are deliberately profiting from running fraudulent ads.
Richard is the founder of the Good Money Guide (formerly Good Broker Guide), one of the original investment comparison sites established in 2015. With a career spanning two decades as a broker, he brings extensive expertise and knowledge to the financial landscape.
Having worked as a broker at Investors Intelligence and a multi-asset derivatives broker at MF Global (Man Financial), Richard has acquired substantial experience in the industry. His career began as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson), following internships on the NYMEX oil trading floor in New York and London IPE in 2001 and 2000.
Richard’s contributions and expertise have been recognized by respected publications such as The Sunday Times, BusinessInsider, Yahoo Finance, BusinessNews.org.uk, Master Investor, Wealth Briefing, iNews, and The FT, among many others.
Under Richard’s leadership, the Good Money Guide has evolved into a valuable destination for comprehensive information and expert guidance, specialising in trading, investment, and currency exchange. His commitment to delivering high-quality insights has solidified the Good Money Guide’s standing as a well-respected resource for both customers and industry colleagues.