Coupons & Offers

Beware a bargain when tempted by a platform promotion

You can learn a lot about a platform by assessing what promotions it offers
It is rarely likely to be a good idea to base an investment decision on a special offer

According to a survey by RetailMeNot, nearly 70 per cent of millennials lo…

  • You can learn a lot about a platform by assessing what promotions it offers
  • It is rarely likely to be a good idea to base an investment decision on a special offer

According to a survey by RetailMeNot, nearly 70 per cent of millennials look for a deal before making a purchase and two-thirds of consumers have made a purchase they weren't originally planning to make, solely based on finding a coupon or discount. It's all very well to do this with one-off transactions, but when investing you should not base your decisions on what appear to be bargain offers made by your platform. The notorious Stanford Marshmallow experiment springs to mind, where children were offered a choice between one small but immediate reward, or two small rewards if they waited for a period of time.

In follow-up studies, the researchers found that children who were able to wait longer for the preferred rewards tended to have better life outcomes.  Investment platform discounts are great - as long as you don't make decisions based on their availability. And while some genuinely offer valuable rewards, other offers look like they might do more harm than good.

Getting more customers

Some platforms, such as Bestinvest and AJ Bell Youinvest, offer to cover any exit fees your broker charges if you decide to switch to them.

They both offer to cover costs up to a maximum of GBP500. To be eligible for this deal with AJ Bell, the monies being transferred must be worth more than GBP20,000. This is a great offer because it reduces the barriers to competition from brokers which have not followed the regulator's encouragement to remove exit fees.

Most platforms have, however, so it is not a deal of not much use in most potential cases.  interactive investor takes a slightly different approach to transfers. It gives GBP100 in cash to investors transferring individual savings accounts (Isa) and to its platform, if the transfer value is over GBP20,000.

However, interactive investor's website says that the offer ends on 31 August, so it will be interesting to see what it offers those transferring to it after that date - applying urgency to a deal is one of the oldest tricks in the book. Lots of platforms also offer money to recommend a friend. This is one of the most powerful marketing tools platforms have so, while it can be a nice bonus, it is not advisable to be influenced, or to influence anyone else, on the basis of these deals.

There are so many things to consider when picking a platform such as financial stability, availability of securities, customer service levels and costs, that any promotion should be insignificant in the decision making process.   Platforms offering referral bonuses 

Platform Details of referral bonus
AJ Bell  GBP100 when you recommend a friend. You also get a free copy of 'The DIY Investor' written by the company's founder, AJ Bell.
interactive investor  GBP100 when you recommend a friend and the person recommended gets a year's free service.

Account fees are GBP9.99 a month or GBP19.99 for self-invested personal pensions (Sipps) so, for example, Sipp holders could save nearly GBP240 in their first year. 

IG £100 (GBP72.13) if you refer a friend and they make five qualifying trades within three months of opening the account. The reward goes up to a maximum of £2,000, if your friend pays over £4,000 in spreads or commissions within the first three months of opening their account. 
Freetrade Free share if you refer a friend. You can refer as many friends as you want and receive a free share worth between GBP3 and GBP200 each time.

There's no predetermined list so you might get a US or UK listed stock, an exchange traded fund (ETF) or investment trust.

Stake Also offers free stock but options are more limited. You and the person you refer both get a free share in one of GoPro (US:GPRO), Dropbox (US:DBX) or Nike (US:NKE).
eToro £50 if you refer a friend, provided they deposit at least £200 in the account within 14 days of opening it and deal at least £100. 
Investengine This platform, which became available to private investors last month, only offers ETFs. It gives all new joiners GBP50 and an extra GBP25 to both parties for a referral. 
Source: platform providers. 

Hargreaves Lansdown, to its credit, is not currently running a friend referral promotion.

As the surge in customers amid lockdowns put pressure on its operations and led to service delays for transfers, promotions appear to have been scaled back although its marketing spend increased last year. However, it has a scheme for its advisory service: if you take advice following a quick consultation from its advisory helpdesk, it will pay both referrer and referee GBP100.

Luring customers to trade more

Several platforms offer permanent promotions around dealing. IG, Hargreaves Lansdown and AJ Bell lower their dealing fee the more you trade. If you trade often, this can make a considerable difference to your overall cost of investing, so you need to think about how you use your platforms when working out which one is best for you. 

If you trade a lot, there are a growing number of platforms that don't charge any dealing commission. They are establishing so called 'freemium' models, where certain services are provided at no extra cost but in most cases you pay a monthly subscription. When you deal foreign shares, remember that the foreign exchange charge is likely to be significantly higher than any dealing fees. This is why interactive investor's sporadic waiving of its dealing fee for US stocks around earnings season may not save you very much.

Although it cuts the GBP7.99 dealing fee, there is still a 1.5 per cent foreign exchange charge. interactive investor does, however, give every customer one free trade per month. This makes their accounts more cost effective than they may appear at first sight if you don't trade frequently and time your dealing accordingly. 

Tempting with the big bucks! 

Some platforms offer prize draws which really can make a difference to the lucky few. Barclays Smart Investor has launched a new prize draw recently, with 13 cash prizes.

One customer will win GBP10,000, two customers will receive GBP5,000, and 10 more will receive GBP1,000 each. Customers with accounts worth over GBP500 are added to the draw automatically.  Clare Francis, director of savings & investments at Barclays, said: "Our research has shown that more than 80 per cent of those who invested for the first time under lockdown plan to keep up their investment habits, so we've launched this prize draw to support those who are working hard to invest for their future." However, as many as a fifth of its customers don't plan to keep up their investing habits but the prize draw will be a nice boon for those who win.

As far as incentives go, it also feels more generous than others as it is not trying to push you into any action with the offer. One of my favourite offers comes from Hargreaves Lansdown. New customers opening a stocks and shares Isa with them can benefit from its Isa promise, that if you're not satisfied with its service in your first 12 months as a client and choose to switch to another provider, it will refund its annual account charge.

Shame it doesn't offer customers with accounts other than Isas similar offers. 

Vanguard is one of the few platforms that doesn't offer promotions.

Jonathan Goodstone, public relations manager at Vanguard, says: "Generally, our approach is to look for ways to serve all investors equally, across the services and fund range, which lends itself more to initiatives like the comprehensive reduction of fund fees in 2019."