Investors will be able to give out accounts to friends and family for as little as £1 a month, in a drive by the UK’s second-largest retail investment platform to win the loyalty of the next generation of savers.
Interactive Investor said that for a monthly flat fee of £5 clients will be able to give out up to five accounts to “friends and family”, allowing the new recruits to buy stocks and funds as well as open tax-protected investing vehicles.
The move comes as the wealth and investing industry prepares for a vast transfer of wealth from baby boomers born before the 1960s to millennials born in the 1980s and 1990s. Over the next decade, £327bn will change hands in the UK, according to Brooks MacDonald, a wealth manager.
Investment platforms face competition from a range of youth-friendly investing and trading start-ups as they seek to recruit millennial and Generation Z customers, some of whom have been drawn into higher-risk products such as cryptocurrencies.
Richard Wilson, chief executive of Interactive Investor, which — unlike rivals Hargreaves Lansdown and AJ Bell — charges flat fees rather than a percentage of clients’ assets, said the “friends and family” plan would open up the broker’s services to a “much wider audience”.
“Flat fees don’t lend themselves so well to smaller amounts invested — where a percentage fee can be more competitive — at least in the early days. Our friends and family launch solves this problem,” he said.
The broker, which is in talks to sell itself to Abrdn for around £1.5bn, in 2019 launched what it called a “Netflix-like” subscription pricing model with three tiers of services. The company holds about £55bn for its retail clients, making it the second-largest UK investment platform.
Just as parents might share video streaming accounts with their families, Interactive Investor now hopes to enlist its subscribers’ grown-up children and other young investors.
Word of mouth plays a key role in driving growth for investment businesses, which often spend heavily on convincing new customers to trust them with their assets. Freetrade, a low-cost UK stock trading service, for instance, hands out free shares to clients who refer their friends.
Family-oriented offerings are more common among wealth managers, who often manage money for entire clans or advise clients on handing over wealth to the next generation.
Quilter, a wealth manager which offers customers investments via financial advisers, launched “family linking” in 2020. By pooling portfolios, families benefit from lower fees under the tiered fee structure, as they can access a higher tier. Around half of its customers have now taken advantage of the feature.
Netwealth, an online wealth manager, also allows clients to link up with friends and family to capitalise on lower percentage fees based on the combined value of their investments. The company had reduced the minimum investment amount for members of these linked account “networks” from £50,000 to £5,000, making it easier to access for younger investors.
Nearly half of the new accounts that Interactive Investor handed out during a year-long pilot of the friends and family plan went to under-35s, compared with an average age of 57 across its 400,000 clients. Close to 70 per cent of the new joiners were women, versus about 30 per cent of existing customers.
Customers using friends and family accounts can invest up to £30,000, after which they will have to pay Interactive Investor’s standard charges.