Lightyear Emerges to Challenge Degiro, Freetrade, and Interactive Brokers in Europe

Former Wise employees just launched a new discount stock brokerage in Britain. This brokerage helps European investors buy shares on foreign stock exchanges without paying high fees. Wise showed customers how to transfer money across international borders without paying high currency conversion fees to banks. Now Lightyear plans to do the same thing with stock brokerages.

What Lightyear Offers Now

Lightyear launched with a minimum viable product. British investors can use the app to buy 1,000 stocks that trade on US exchanges. These stocks include major Chinese stocks that are available through ADRs. And Lightyear doesn’t charge commissions on trades. It also doesn’t charge currency conversion fees if you convert less than GBP 3,000 to USD. Above that amount it charges an 0.35 percent currency conversion fee.

Right now, this brokerage just offers stock investing. It doesn’t plan to add CFDs (contracts for difference) or cryptocurrency trading. These products are very risky. Lightspeed may add other financial products such as stock options later. And it hasn’t expanded into other European countries yet but plans to do that soon.

The main benefits of the Lightyear app are improved access to international stocks and a simple, low-cost fee structure. The app also offers multicurrency brokerage accounts.

Making Foreign Stocks More Accessible

One benefit of Lightyear is access to foreign stock markets. It became harder for European investors to invest in foreign markets after new European financial regulations went into effect in 2018. As Eureka Wealth Management reports, the Mifid II rules prevent European investors from buying US ETFs. European investors can still buy individual stocks that trade on the NYSE and NASDAQ, they just can’t buy ETFs.

European regulators want residents of the EU to purchase ETFs from European stock exchanges instead. Wealth management firms like BlackRock and Hargreaves Lansdown do offer ETFs in Europe, including low-cost index funds. But investors in the US can access a wider selection of ETFs.

These regulations still apply to Lightyear’s customers, so only professional investors can use the platform to purchase ETFs. But retail investors can also use the platform to buy individual stocks and create a synthetic ETF. Lightyear has no fees so it’s possible to do that at a low cost.

Lightyear has a long way to go before it can say that it offers access to more stocks than other European brokerages. Freetrade offers access to 5,000 stocks in the US and the UK. And Degiro and Interactive Brokers offer access to major stock exchanges in multiple countries. Again, though, this is just the MVP version of the Lightyear app and the brokerage will offer access to many more stocks soon.

A Simple Fee Structure

Another benefit of Lightyear is its simple fee structure. Lightyear’s main competitors are likely to be brokerages like Degiro and Interactive Brokers that also charge relatively low fees. Investors who are highly concerned about brokerage fees are less likely to use European wealth management firms that offer actively traded mutual funds. Degiro and Interactive Brokers were both originally designed for professional investors who trade frequently, not retail investors, so they have lower fees than wealth management firms created for clients who need additional advice from their brokers.

Lightyear’s main advantage over these platforms is that their fees can be complex and difficult to understand. Consider this comparison between Degiro and Interactive Brokers. It’s not easy to tell which brokerage is less expensive. But it is well known that these brokerages have lower fees than other stock brokerages in Europe.

It’s possible that Degiro and Interactive Brokers may be less expensive than Lightyear in certain situations. Degiro charges an 0.10 percent currency conversion fee on automatic forex conversions. But Degiro and Interactive Brokers also charge fees on trades and Lightyear doesn’t.

Freetrade doesn’t charge commissions on trades either, so it’s another option for British investors who want to purchase US stocks. It does charge a 0.45 percent currency conversion fee that’s slightly higher than the Lightyear fee. It’s also notable that Freetrade generates additional income this way, which indicates that Freetrade can also earn some money by converting large amounts of money for customers.

Multicurrency Brokerage Accounts

Wise was one of the first money transfer apps to offer a multicurrency bank account. With a multicurrency account, you can store bank balances in different currencies. You can visit other countries and spend money directly from your account in that currency without paying conversion fees.

Lightyear is now introducing multicurrency stock brokerage accounts. Stock brokerages normally convert deposits into an account’s base currency. If you buy stocks listed on a foreign country’s stock exchange, you have to pay additional currency conversion fees to buy them.

But with Lightyear you’ll be able to set up stock brokerage accounts with multiple base currencies. That means you can use these accounts to purchase international stocks without paying any currency conversion fees. You’ll also be able to collect dividends in multiple currencies without paying additional conversion fees.

Right now, Lightyear gives all of its customers a GBP, EUR, and USD account. But Wise supports multicurrency accounts for other currencies, so it’s likely that Lightyear will support more currencies in the future as well. Again, Lightyear’s currently offering a minimum viable product and the app could receive major upgrades in the near future.

Conclusion

The biggest benefit of Lightspeed right now is its multicurrency brokerage accounts. It’s rare for a stock brokerage to offer these types of accounts and they could save investors lots of money in hidden fees. There are many situations where an investor would have to pay a currency conversion fee if they regularly purchase or hold foreign stocks.

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