You’re probably an EasyEquities user who has heard of Robinhood – the US-based equivalent. Sadly, it’s limited to the United States, leaving South Africans with nothing else except EasyEquities and a few other options. However, it is worth looking into the differences in their business models, and pricing structures for a few reasons. These include understanding how the Purple Group (PPE) makes its money, and fee changes we can expect in the next few years. I believe that the R25 platform fee is just the beginning of business model changes.
Robinhood vs EasyEquities
Robinhood is a financial services company that offers commission-free stock trading and investing through its app. However, it is only available to people in the United States. To apply for a Robinhood account, you need to be a U.S. citizen, U.S. permanent resident, or have a valid U.S. visa.
It allows users to trade stocks, options, ETFs, and cryptocurrencies without paying commission fees. But here’s the catch: they make their profit through margin lending (basically borrowing money to buy more shares). The app also provides tools to help users manage their investments and offers features such as a cash card and a 24-hour market for trading.
EasyEquities is a South African investment platform that allows users to invest in shares, ETFs, retirement annuities, tax-free savings accounts (TFSA), unit trusts, all at low costs and easily accessible in one app. It also extends the brand into cryptocurrencies (EasyCrypto and the EC10 index), property investing (EasyProperties) and recently EasyCredit (allowing you to borrow against your investment).
Both platforms allow trading in fractional shares: investors can buy fractional shares of stocks and exchange-traded funds (ETFs).
EasyEquities vs Robinhood: Business Models:
Robinhood is a freemium. You can do basic things such as commission-free trading of stocks, ETFs, options, and crypto, however, if you want more features, you need to pay for it.
It generates revenue primarily through:
- Margin lending: Margin investing enables you to borrow funds from a brokerage to buy securities, leveraging the value of their existing securities. This borrowed money is backed by the investor’s securities, requiring interest payments. While it boosts buying power and trading flexibility, it amplifies both gains and losses.
- Payment for order flow: the practice of routing trades through market-makers like Citadel Securities in return for a slice of the profits. The phenomenon has allowed Robinhood to drive commissions down to zero, making it cheaper generally for consumers to invest in stocks
- Robinhood Gold: Robinhood Gold is a premium subscription service priced at $5 per month, offering enhanced tools and features for investors. Members receive benefits such as a higher 5% APY on uninvested cash (compared to 1.5% without Gold), quicker access to larger Instant Deposits, discounted margin investing at an 8% yearly interest rate, and access to professional research from Morningstar along with Level II market data from Nasdaq. These perks aim to elevate the investing experience for Robinhood Gold subscribers.
EasyEquities make their money per transaction. They charge a flat brokerage fee per trade, regardless of the order amount. This incentivises frequent trading and generates revenue for the company.
- Fractional shares: EasyEquities allows investing in fractional shares of various stocks, making it accessible for investors with limited capital.
- EasyEquities Thrive fee: A monthly subscription service offering lower brokerage fees, exclusive investment benefits, and research tools. This is a mandatory fee but is waived if you do certain things like dance with coffee in front of their offices (and max out your TFSA).
There are also withdrawal fees and conversion fees payable for conversion to other currencies (through EasyFx) and an asset under management (AUM) fee is payable for EasyCrypto (e.g. EC10 bundle), EasyProperties and RAs/share bundles/Easy Asset Management.
Comparing The Pricing Models of EasyEquities vs RobinHood
- Trading: Commission-free for stocks, ETFs, options, and crypto.
- Margin lending: Robinhood offers margin lending with a standard margin interest rate of 12% and a margin interest rate of 8% for customers who subscribe to Gold. The margin interest rate is calculated by adding 6.5% for non-Gold customers or 2.5% for Gold, which is set by the Federal Reserve and is subject to change without notice
- Robinhood Gold: $5 per month for access to margin lending at lower rates, extended trading hours, and research reports.
- Trading: A flat brokerage fee of 0.25% of the trade value, with a minimum of R1
- Fractional shares: No additional fees for investing in fractional shares.
- EasyEquities Thrive: R25 per month for lower brokerage fees exclusive benefits, and research tools.
Side By Side Comparison of Robinhood and Easy Equities
|Commission-free, margin lending fees, Robinhood Gold subscription
|Flat brokerage fee, EasyEquities thrive
|0.25% of trade value (min. R1)
|Stocks, ETFs, option contracts, crypto
|Stocks, ETFs, local, international fractional shares, Easyproperties and Easycrypto
If you are a US citizen, or resident, have a US passport or the like, then Robinhood will make you warm and fuzzy. Robinhood, a freemium product allows for commission-free trading and offers additional services like margin lending and premium subscriptions (Robinhood Gold).
EasyEquities, for South African citizens/residents, adopts a more straightforward transactional model, appealing to investors with a flat brokerage fee structure and subscription-based benefits (EasyEquities thrive). For a more in-depth review of EasyEquties check out this article investing with EasyEquities
Both platforms have their distinct strengths and cater to different types of investors. Understanding their business models, pricing structures, and target audiences will help individuals make informed decisions based on their investment preferences and financial goals.
P.S.If you’re new to investing, check out EasyEquities’ 101 section