Is Trading 212 Legitimate? Uncover the Truth About Safety

Trading 212 is a relatively new investing platform with aggressive marketing and low costs. Is Trading 212 too good to be true? In this blog we answer the key questions about T212, how they make money and what protections you as a customer have. This deep dive answers the key question of is Trading 212 legitimate?

Trading 212 is a relatively new, low-cost investing platform. It joins other financial start ups such as Invest Engine in an increasingly competitive field.

Trading 212 have been aggressively marketing throughout the last couple of years. You may well have seen one of their adverts on TV or online. They’ve sponsored YouTube content creators and recently re-launched their free shares promotion.

When investing to grow your wealth, you want to be sure your money is safe. You want to pick the best broker to meet your investment goals. With Trading 212 offering ‘free’ investing, is Trading 212 too good to be true? In this deep dive we discuss the history of Trading 212, whether Trading 212 is trustworthy and critically answer the question of is Trading 212 legitimate?

This blog has been written to answer these very questions because when it comes to money, I want my cash to be with a company I trust and beleive is legitiamte. This blog is not advertising, but should you decide to open an account with Trading 212, you can get a free share with Trading 212’s current promotion.

Trading 212 was founded in Bulgaria under the name Avus Capital in 2004. It came to the UK in 2014 upon receiving FCA accreditation and moved their headquarters to London.

Trading 212 now have 3,000,000 customer accounts and have grown their assets under management to £3.5 billion. Worldwide, their trading app has 15 million downloads and is the number 1 ranked trading app in the UK (and Germany).

They recently launched the Trading 212 Cash ISA which is amongst the best on the market, and made their stocks and shares ISA flexible. They offer these products alongside the Trading 212 Card, a cashback debit card and CFD (Contract For Difference) trading.

Trading 212 has been an increasingly common talking point in financial communities, with the market leading interest rate offered on uninvested funds and low cost foreign exchange fees.

Trading 212 have also been one of the first brokers to offer investment pies, a way to split your money over a number of investments based on a percentage split that you define. They also offer the regular marketed ‘one click rebalance’ to sell and buy shares to rebalance your portfolio back your your intended weightings.

Trading 212 are regulated in the UK by the Financial Conduct Authority. They are authorised to hold client funds and offer investment services however do not currently have licence to offer pensions.

Being regulated by the FCA is a big deal. To qualify, companies must meet obligations set out by the Financial Services and Markets Act 2000. This regulatory objectives are to provide market confidence, public awareness, the protection of customers and the reduction of financial crime.

To become regulated by the FCA a series of criteria must be met. The application process required evidence to be submitted against these criteria and reviews occur regularly. Companies are obliged to report key information to the FCA to retain a licence to operate. In short, companies must prove they are fit to operate in the UK.

You should never use an unregulated provider.

Trading 212 is regulated by the FCA and meets the key criteria set out in the legislation.

A key question for any investor is my money safe with Trading 212? What happens if Trading 212 goes bust?

Trading 212 is FSCS protected. This means Trading 212 has no right to use your money to cover its debts and must keep customer funds separate from company funds.

In the unlikely event Trading 212 goes bust, your money will be protected up to £85,000. The Financial Services Compensation Scheme website covers this in more detail.

This FSCS protection operated in the same way for pretty much all regulated investment brokers in the UK and Trading 212 explain their implementation on their website.

The exception here is if you opt into Trading 212’s 5.2% interest on uninvested cash. In this case you opt into investing in Money Market Funds and hence opt out of this protection. Your Trading 212 Cash ISA will be FSCS protected.

Once you invest your cash, your investments may go up and down in value. The more niche the ETFs you choose to invest in are, the more volatile the investments are likely to be. If you invest in a sector that crashes, then you will lose money and this loss won’t be protected in any way. This is true of investing in general.

CFDs in particular are something to stay away for all but the most experienced and risk accepting customers. In fact, when answering is Trading 212 safe for beginners, some will say no simply before Trading 212 offer CFDs. Don’t use the CFD tab in your account, and Trading 212 is perfect for beginners.

For Trading 212, uninvested cash in your investment accounts, including your stocks and shares ISA are protected as long as you do not opt into Money Market Funds. This uninvested cash along with money in your cash ISA is protected up to £85,000 in total, the best protection you can get in the UK.

Whilst free shares, no comission and low FX fees make Trading 212 an attractive proposition, when it comes to somewhere you place your money you want to ensure a company is profitable. If not, the company is at risk of collapse which at best will cause you some inconvenience and at worst will take your money with it.

We’ve already discussed how Trading 212 is regulated in the UK so your money is safe. If you are paying no fees though, how does Trading 212 make money?

Foreign Exchange Fees

Trading 212 charge very reasonable foreign exchange fees of 0.15%. When you convert from GBP to USD for example, the conversion will be the interbank rate, the rate banks use to convert large amounts of currency. You’ll also be charged the 0.15% fee, which Trading 212 will pocket.

Many investors will be buying ETFs which will be listed in GBP, however if you are dabbling in stocks, then unless you are buying into the UK market, you’ll need to exchange your money and pay the fee.

If you have an invest account, you can store different currencies, however if you use a stocks and shares ISA, the you can only keep uninvested cash in GBP. As a result, any purchase you make in a foreign currency, any sale of a foreign investment and any payment of foreign dividends will be automatically converted to or from GBP and you’ll pay this fee.

Trading 212 are very transparent with these fees, explaining how multi-currency works and when you’ll incur the foreign exchange fee on their website.

CFDs

A CFD (Contract For Difference) allows you to speculate on the price movements of stocks or currencies without actually owning them. With a CFD, you create a contract with Trading 212 in which you agree to exchange the difference in price of the asset between the opening and closing of the contract.

CFDs are risky, and you can lose more than you put into a CFD, although Trading 212 will look to prevent this from happening. Your assets may be sold to cover or prevent losses.

You must carefully consider your financial circumstances and risk tolerance before trading CFDs. CFD trading is an activity that carries a high risk to your capital. Don’t use money you can’t afford to lose.

Trading 212’s Risk Disclosure Notice for CFDs

To help quantify the risk, the Apple Store even notes 78% of CFD accounts with Trading 212 lose money. At one stage Trading 212 also issued this warning on their website or when you clicked the CFD tab in your account, however that warning is either no longer displayed or is no longer as visible.

Fees On Card Deposits

If you deposit funds into your Trading 212 account using a debit card, Google Pay, Apple Pay or similar, you will be charged a fee of 0.7% on any funds above £2000.

Whilst a card can be a convenient way to deposit funds, you can deposit via bank transfer which is completely free, so this is an easy cost to avoid.

Interest on Uninvested Cash

Even though Trading 212 offer market leading interest rates on uninvested cash, and a market beating 5.2% interest on their cash ISA, they will still be making interest on top of this. The Bank of England Base Rate is after all 5.25% currently, 0.05% higher than the interest you receive on your uninvested cash.

Share Lending

Share lending is the concept of loaning out rights for the shares you own to an interested party, usually for a charge. In doing so the borrower can have voting rights and may use the shares for leverage or hedging, including short selling.

Trading 212 offer share lending and will pay a small fee to those who opt into loan their shares. You won’t be able to do this in an ISA. Trading 212 offer security for share lending. Whilst trading 212 pay you to participate in share lending, they make money on top of this.

Other Funding

Trading 212 also benefited from a Research and Development Expenditure Credit (RDEC) during 2023 amounting to £7,430,989. This is a payment received based on qualifying activities under the banner of creating new or appreciably improved technology through the resolution of technological uncertainties.

In short, Trading 212 were able to offset some tax payments because of credits due to research activity.

In the UK companies are obliged to disclose certain financial information to the government. These are made publicly accessible via Companies House. Companies report financial earnings within 9 months of the end of the tax year hence the figures here are a little out of date at the time of writing.

Trading 212 Profits

Trading 212 has been turning a profit since 2020.

• 2019: (£314,735)
• 2020: £21,897,883
• 2021: £45,287,966
• 2022: £41,103,795
• 2023: £30,369,121

It’s important to note that Trading 212 did not receive any income from loans in 2023, when they did in 2022. 2023 saw a similar level of income from investment brokerage services, £95.3m, compared with 2022, £98.7m.

Marketing and Advertising Costs

2023 saw Trading 212 make a huge push for increased marketing. The amount spent on advertising increased from £3.4m in 2022 to a huge £18m in 2023. Royalties paid also increased from £370k to £2.8m.

Trading 212’s report implies this marketing push is working:

• Number of funded Invest / ISA accounts up 20%
• Number of monthly active users up 28%
• Number of monthly active trades up 32%
• Total value of client deposits up 22%
• Total value of client money up 37%
• Total value of client custody assets up 55%

Trading 212 Annual Report and Financial Statements year end 31 December 2023

Trading 212 Risks

In their annual report, Trading 212 highlight a number of key risks. Many of these risks such as FCA changes to customer duty rules apply to all brokers however it is reassuring to see Trading 212 invest in policies and compliance to ensure they meet these rules and stay regulated.

The age old phrase is that the harder is it to find the fees, the higher they are. In Trading 212’s case they have a clear outline of all their fees available on their website. This outline also includes all the possible fees incurred by way of government regulations including stamp duty and withholding tax.

Please make sure to read the costs page in detail. Trading 212 have displayed these prominently, but as with every broker, the costs are varied and there are many fees which apply in different situations.

If you are picking ETFs, remember every ETF has a series of fees associated with them which we explain in the little more detail in our blog about how to pick the perfect ETF.

Whilst an investment platform may well be legitimate and technically safe, it’s also important to check if they are trustworthy. Trustworthy may mean something different to different people however there are a few common questions asked about Trading 212’s business practices that are worth exploring as they will determine customer’s view of how trustworthy trading 212 is.

Many will consider Trading 212 shady simply because they offer a CFD product in which many will lose money, however you don’t have to open a CFD account!

Trading 212 Customer Support & Live Chat

Trading 212 offer live chat customer support via their app. This has been hugely beneficial for some and has historically been a great avenue to get problems resolved.

Over the last few months however it seems live chat response times have become increasingly long with users commenting they haven’t been able to get responses for many hours.

This is probably a reflection on Trading 212’s rapid growth and influx of inexperienced customers. In most cases you won’t need to use live chat or get customer support as Trading 212 have comprehensive help pages online. That said, being able to contact someone quickly and easily when you have challenges with your money and investments will bring peace of mind, so it’s an area of Trading 212 that is worth keeping an eye on to see if it improves.

Prevent Trades

Occasionally Trading 212 may place a sell order on your behalf. This will be in response to market movement to prevent you going into a negative balance.

To avoid this occurring, Trading 212 will only let you invest up to 95% of your free funds in a single trade, as outlined on their help pages.

Different Price Shown Than Displayed

Trading 212 will show you an expected price when you place your buy or sell order however they (as with any broker) cannot guarantee that is the price that your order will execute at. Trading 212 will use the latest available information when they display the prices to you.

They acknowledge this and explain the process on their website.

Trading 212 Bid Offer Spread

Some people have speculated that Trading 212 have large bid offer spreads. This is the difference between the price you can buy an asset at and the price you sell an asset for. There is always a difference between the two prices.

As Trading 212 is regulated in the UK, they are obliged to follow best execution rules which means sticking to the bid offer spread direct from the market. Trading 212 do not add any additional mark up.

Bid offer spread is often higher in smaller, illiquid assets such as penny stocks vs large very liquid assets such as global ETFs.

Best execution rules do not apply for CFDs, hence Trading 212 can add markup.

Restrictions On Withdrawals

Trading 212 will sometimes place restrictions on your withdrawals. This is either part of their obligation to anti money laundering or there are other reasons to prevent the withdrawal.

Reasons may include:

• Not having enough free cash left in the portfolio
  • Trading 212 will not let you withdraw invested funds, you you will need to sell investments to free up enough cash to withdraw.
• Pending Investments
  • You may have pending investment buys which will reduce your free cash balance
• Your funds are locked into a promotion
  • If you’ve used the free shares promotion or the cashback offer on ISA investments then you may be subject to a lock in period for the value of these shares / cashback. Once the lock-in period expires you will be free to withdraw these funds.
• Your cash is in an investment pie
  • Trading 212 offers a great way of investing according to your defined balance through the use of an investment pie. Funds however will remain in a pie and you’ll need to move them back into free funds in your overall portfolio to withdraw them. To move funds out of a pie, view your pie overview and hit ‘withdraw’.
• Your bank account is not verified
  • To withdraw more than £500, you’ll need to verify your account by providing a bank statement.

Often any complaints customers have are simply mistakes or misunderstandings and are easily avoidably by reading the terms and conditions.

So is Trading 212 legitimate? Is Trading 212 too good to be true? Trading 212 are regulated by the FCA, are backed with FSCS protection, make the fees transparent and clear and have a clear business strategy. Even if Trading 212 go bust, you’ll still be the holder of the underlying assets and Trading 212 has no claim over them. Whilst it will be inconvenient if Trading 212 collapses, it’s a risk with any investment platform or bank. You won’t lose money.

I have a stocks and shares ISA with Trading 212. For me, alongside Invest Engine they offered the best value for an ISA.

Introductory Offers

At the time I signed up, I was able to take advantage of the Trading 212 free shares promotion. This was in addition to a generous cashback offer on any funds invested in a T212 stocks and shares ISA in the 2024/2025 tax year. For any funds deposited within the tax year, you’d receive 1% cashback into a General Investment Account (GIA).

If you invested the maximum £20,000 for the tax year this would be a £200 bonus! This, alongside the free shares and low costs persuaded me to go with Trading 212. Note with the ISA changes for 2024, I was also able to open an ISA with Invest Engine, so I had the option to explore the platforms a little before deciding where to invest the majority of my money.

Bad Press

There are regular posts online calling Trading 212 bad or criticising them, however often these are factless claims when people simply haven’t read the terms and conditions. In cases where people are speculating about unethical business practices or how Trading 212 are ‘pocketing money’ from exaggerated bid offer spreads, then I’d suggest people become familiar with the FCA regulations. Trading 212 have to jump through a lot of hoops to be regulated and they won’t want to throw that away! If anyone does believe anything unethical has taken place, then I’d encourage them to contact the FCA who take these kind of allegations very seriously.

My View on Trading 212

Trading 212 are a low cost investment platform that rivals the best out there. If you want the history of a larger investing institution then Trading 212 is not for you, but you will pay a premium for that.

Compared with Invest Engine, my other favourite platform, Trading 212 offers individual stocks vs just ETFs, however I don’t think the interface is as intuitive.

If you want a cost effective solution to grow your wealth then Trading 212 is a great option that I can personally recommend.