The Den of Dividends

Stake announced that unlimited and fractional trades on the Starter Pack this morning. This represents a change to the proposed subscription brokerage model. A marketing email was sent to Stake customers early this morning with the details of the change. There has not been a blog post covering the pack changes published at the time of this article.

The changes address the feedback of users who have been quite vocal on how the original changes affected them. Some strong comments left on the r/AusFinance subreddit and a number of other online forums like Whirlpool. Many users there were quite unhappy with the changes, with one user selling all holdings within Stake and cashing out.

While we here at Den of Dividends have been quite direct on the proposed changes. To Stake’s credit both CEO Matt Leibowitz and Stake representatives asked us for feedback. I personally met with a rep just prior to their launch into the crowded UK market this week. We put our case forward and floated some additional ideas.

The fees on Brokerage Packs do not take effect until July. Where customers do not specify a paid pack, they will be placed on Starter Pack.

Revised subscription model announced

So what has changed? Unlimited free and fractional trades are back in the Free Pack at the expense of the Limit Order function. This is a fair swap considering the unlimited trades being reinstated. My preference would see limit orders remain on the Starter Pack but providing free trading limits what is possible. Australian timezones mean placing an order pre-market may result in a costly fill if the stock gaps up at open. Having limit orders available means that Starter users will not see that occur.

Although the existing Starter Pack gets a bit of love, the Unlimited and Black Packs have had little change. The paid packs need to add more value to drive the change in business model. Customers do not want to pay an ongoing service fee if it is not in their interest. But unless you add new features or benefits, it makes it hard to justify paying that monthly fee. Options Trading is being considered by the Stake team which helps that value proposition. Otherwise the only additional value today is being termed Analyst-grade market data on the Black Pack.

What is in the future?

The announcement email suggests that the Starter Pack will remain as unlimited free trades and fractional orders going forward. Reading between the lines, we understand that no additional features will be added to the Free Pack. All new features will be limited to paid packs to drive revenue.

Here is what we are now asking Stake to consider as new features in paid brokerage packs:

• An annual option for paid brokerage packs at a discount. Additional options for payment method (credit card) instead of from the USD account;
• Reduction down to the lowest possible FX spread through OFX transfers;
• Options trading, with L2 (spreads/covered calls) in Unlimited Pack and more functionality (L3/L4) in Black;
• Brokerage-processed DRP in Unlimited, with the ability to turn on reinvestment for each individual stock or in bulk;
• Additional order types, including AMEND on Unlimited;
• Adding of additional exchanges – ASX and NZX with cheaper brokerage would be attractive;
• With the UK launch, London Exchange (LSE) access would possibly provide additional value.

We will be continuing our content on Stake going forward. This includes a comparison how the new packs compare for investors in Australia.

DISCLOSURES:
The author is an active customer of Stake at the time of this article being published.
The author has had in-confidence discussions with Stake within the last 14 days.
No payment or inducement has been provided by Stake for this article.
Den Of Dividends has not received nor agreed to any editorial control on this article.