There are a lot of trading platforms out there but few are as innovative as eToro. Having built a very sizeable following through pioneering ‘social’ trading and cryptocurrencies, the company is now looking to shake up the UK equity space. Our editor James Faulkner caught up with Iqbal Gandham, eToro’s UK Managing Director, to find out more…
James Faulkner: We’re all familiar with social networks such as Facebook and LinkedIn, but readers may not be familiar with eToro, which has taken the social network concept to the investment world. Please explain to our readers what eToro is all about.
Iqbal Gandham: eToro was founded in 2007 with the vision of opening up the global markets for everyone to trade and invest in a simple and transparent way. We wanted eToro to become a community where people could share their ideas. We built the platform as a social network for traders and investors, where they can execute trades, but also see what others are doing and talk to each other.
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While we have come a long way since 2007, this social or community ethos still holds true. We now have a community of over 10 million registered users from over 140 countries. Today, eToro acts as a bridge between the old world of investing and the new, helping investors navigate and benefit from the transition of assets to the blockchain. eToro is the only place where investors can hold traditional assets such as stocks or commodities alongside ‘new’ assets such as bitcoin. We believe that in the future all assets will be tokenized and that crypto is just the first step on this journey.
JF: How does the performance of copy traders compare to those traders who perform their investing manually? Is there any research available on this?
IG: We invented copy trading, or at least brought it to the masses, and ‘copy’ remains a key feature of our multi-asset platform today. Around half of our clients use it, both in terms of following others, or investing in our growing range of CopyPortfolios.
For those who lack the time or experience, our CopyTraderTM technology enables clients to replicate another trader’s portfolio and trading activity automatically so that they benefit from others in-depth knowledge and investment expertise.
Investors can use our CopyPortfolios to access unique investment portfolios. Top Trader CopyPortfolios comprise the strategies of the best performing traders on eToro. Market CopyPortfolios bundle asset classes together under one chosen market strategy; and Partner CopyPortfolios offer portfolios from third party experts.
Our data suggests that social trading and investing works. Out of 124 million copied trades on eToro 73% closed in profit.
JF: For those of your clients who manage to become a “Popular Investor”, what additional financial benefits can they enjoy? Can you provide some examples of individuals who have achieved this and how they did it?
IG: eToro’s business model is based on its clients’ financial success, so when they succeed – we succeed. That’s why we encourage our top traders to share their knowledge and reward them when more people copy them. The Popular Investor programme allows users to earn directly from eToro when their investments are copied, and allows others to gain from their wisdom, experience and success.
The programme is built from 4 levels (Cadet – Elite) and each level has its own benefits and requirements. Elite Popular Investors can earn up to 2% of their annual assets under management (AUM) i.e. the total amount of money copying them, and so in a month where a PI has a $1m average AUM, they would earn $1,666. The payment level is determined by the average number of daily verified copiers throughout each month and the minimum account equity throughout the month.
Jay Smith, 30, is based in Basingstoke and goes by the name of ‘jaynemesis’ on eToro. Having dropped out of school at 13, he focused on the things he was passionate about: economics, politics, and eSports. He joined eToro in 2014 as he saw it as a trustworthy place he could trade bitcoin alongside traditional investments. The social features were also very appealing. Jay keeps in touch with his copiers via his livestream on Twitch and via chat. He highlights the financial benefits of becoming a PI which has allowed him to leave his job at eSports to trade full time.
Lena Birse is in her 40s and has the bulk of her eToro portfolio in tech firms as well as software company Microsoft and payment providers Mastercard, Visa and PayPal. Lena started investing full time about six years ago when she and her husband sold their renewable energy company and were left with a cash lump sum. She now has close to 1,000 followers on the eToro platform, collectively representing more than £1m of invested cash.
JF: You currently absorb the stamp duty on all UK shares, which already makes you one of the cheapest places to buy and sell stocks in the UK. However, you recently announced plans to go one step further. Can you tell us more?
IG: We’re on a mission to get Britain investing. First step, make it far more affordable. If I’m a first time investor wanting to buy a few stocks, how can you justify charging me 3% to do so? Either the new investor baulks at the outset, or is stung later down the line when they discover the cost. It’s an instant barrier to investing. So we’re making it simple – no transaction fees, no mark-up on spreads, no custody charge, and no stamp duty.
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As an industry we need to get people excited about investing. Price is a great starting point but alone is not enough. We need to show people how they can invest in their passions and the brands they care about. For most investors the FTSE100 means absolutely nothing.
Zero commission for UK investors buying and selling stocks on eToro will go live soon.
JF: One of the positives of crypto is that it has broadened the appeal of investing, especially among young millennials. Meanwhile, you have spoken out against the concentration of wealth in the hands of a tiny elite of financiers and asset managers. Is it your hope that eToro will ‘democratise’ investing and bring capitalism to the masses?
IG: eToro data shows that the crypto boom has helped to create a new generation of investors. The majority (73 percent) of new investors joining eToro in 2017 and 2018 purchased crypto. Of these investors, more than one in ten (11 percent) have since gone on to invest in other assets including stocks, commodities and forex alongside their crypto investment. The move to invest in other financial instruments alongside crypto is particularly prominent in the younger generation, with nearly half (44 percent) of all those diversifying aged between 25 and 34.
Globally, the most popular asset class for crypto investors to try next was stocks, with one-in-three (33%) of these investors doing so. 31 percent chose to copy the activities of other eToro users as their second action and 23 percent invested in commodities.
Everyday we read another story about how ordinary people, especially millennials, are not investing enough. Yet crypto shows us that if you can capture their interest then people will invest. Regardless of whether you believe in the long-term opportunity offered by crypto, it is worth us looking at what we can learn from these crypto investors, especially as we’ve seen that once they have dipped their toes into investing, some were then prepared to diversify.
As an industry we need to rise to the challenge and work harder to engage consumers. For too long investing has been seen as the preserve of the wealthy and/or something that is too complicated for the average man on the street. Crypto changed that. We now have an opportunity to show those people whose first experience of investing was crypto the other opportunities that exist. By making sure people can access all the assets they want to own in one place, we can encourage a new generation of investors to take more control of growing their wealth with a diversified portfolio of investments, including crypto.
eToro was founded 11 years ago with the vision of opening up traditional markets to all investors. Today we want to go one step further and also unlock the tokenized world.
The world has heard about the potential for blockchain to revolutionize global finance and we’re beginning to see the industry accelerate adoption. We believe that we will see the greatest transfer of wealth ever onto the blockchain.
JF: Your community has grown incredibly quickly over the past few years. You already have over 10 million registered users. For those who are still not convinced by the “social trading” model, is there anything you can say that might convince them to give eToro a try?
IG: We believe that investors are looking for three things: 1) access to the assets they want; 2) knowledge and insight; and 3) someone to make the process easy. Unlike traditional providers, eToro offers all three and at a price point which makes investing accessible to everyone. Joining eToro gives investors of all types access to the assets they want today from commodities and stocks, through to cryptoassets. They also benefit from being part of a global community of more than 10 million registered users who share their investment strategies and insights and anyone can follow the approaches of those who have been the most successful. It is simple and easy to set up an account, then buy, hold and sell assets. For those new to investing, the community aspect of eToro’s platform and the educational resources introduce users to the risk profiles of the different asset classes and the types of returns to expect. Our community is alive 24/7 to answer questions and share insight.
JF: Given that eToro has been an early advocate of investing themes such as crypto and cannabis, what are the next big investing themes that our readers should be aware of?
IG: We are convinced that crypto and the blockchain technology that underpins it will have a huge impact on global finance and it is therefore a major focus for our firm. Blockchain has the potential to revolutionalise finance. We are already seeing the tokenization of assets – crypto is one example but we are also seeing tokenized gold and art. Just as eToro has opened up traditional markets to investors, we want to do the same in a tokenized world.
About Iqbal Gandham, eToro UK Managing Director
Iqbal manages eToro’s business activities in the UK and is Chair of CryptoUK, the first self-regulatory trade association for the UK cryptoasset industry. Prior to eToro, he held senior positions as a CMO and CTO, in addition to founding several companies. He co-founded India’s largest web-hosting business, launched a telecoms start-up and then progressed to cloud computing. Following this, he joined a fledgling start-up called Nutmeg as CMO and helped shape it into the UK’s largest robo-advisor.
eToro empowers people to invest on their own terms. The platform enables people to invest in the assets they want, from stocks and commodities through to cryptoassets. eToro is a global community of more than ten million registered users who share their investment strategies; and anyone can follow the approaches of those who have been the most successful. Due to the simplicity of the platform users can easily buy, hold and sell assets, monitor their portfolio in real time, and transact whenever they want.