On 21 February Bux announced a change to the fee structure:
- New: Service Fee from €0 to €2.99 per month.
- US-stocks trade fee increases from €0 to €0.99; (market- and limit orders).
- US-stocks trade FX Mark-up decrease from 0.35% to 0.25% per trade.
- EU-stocks trade fee increases from €1,5 to €1.99.
- Zero trades from unlimited to max 3 per month.
- Savings-plan from 1 euro per plan to free.
There is already a large discussion on Bux’s forum about these changes, especially the newly announced service fee. As a reaction, I sold all my ETFs and stocks on Bux Zero. In this analysis I will explain why I sold all my positions and how I look to the future.
Small investors get hurt
Bux Zero focuses on young adults. Many of them are new investors who have little to spare. Let’s say I start with €1.000 euro to invest. Under the new service fee, they would pay 3.5%(!) / €35,88 per year just for using the app. This is a massive fee and incomparable to any other broker. In terms of costs this compares to risky leveraged CFD trading. Many people lose money in leverage CFDs, so that is not a good sign.
But there are more fees. I haven’t bought anything yet. Let’s buy 10 US stocks for 100 euro each. The FX mark up (currency conversion) to dollar will cost you €2.5 euro. And with every trade comes a ‘hidden’ spread of 0.06% which would count for €0,6 euro. Everything will be bought from Zero-orders in 4 months’ time. The total costs would look like this:
€1000 investment
-€35,88 per year service cost
-€2,5 FX mark up
-€0,6 spread
=€961,02
This will cost you 3.9%(!!!) for the first year. Assuming you would do good and get a return for 7%, your net return would only be 3.1%. So basically, this means more than half of your profit will go to Bux. And that is if you only use Zero orders which are limited to 3 per month. This is very costly and makes me question how much money you need to invest to keep making profits on Bux. Maybe 15k? Or even more?
New investors get hurt even more
Everyone starts with limited knowledge about investing. I started in March 2020 and since then I learned a lot about the stock market; fees, brokers and everything with it. The easiest ways to lose money is to pay high fees to brokers. Of course, you want to avoid this. Right? You start comparing brokers. And you look up the fees and pricing on the brokers website. Let’s look at Bux Zero’s new fee structure!
Bux new fee structure is complicated. You will not only pay for buying a stock, but you would also pay a spread, a monthly service fee regardless of stocks owned and a FX mark-up in case of US stocks. Also, there is a different fee in the order type and the stock/ETF you want to buy. Oh, and there is a limit to certain order types to. And this is just for the broker: the investment you buy also has costs like management fees on ETFs and taxing on dividend payouts. This is way to complicated and you miss oversight, whilst you haven’t even started investing yet.
The point I want to make is that Bux Zero fees are very complicated and new investors will fall into this trap. As stated above small investors will get hurt in terms their profit/return, but what hurts even more is that they don’t know why they are losing money because it is very complicated and needs a lot of calculation to understand the true costs of investing via Bux Zero. The biggest drawback to me is that new investors might never return to equity if they lose money at first. And will never return after. To summarize: the new fee structure is too complex to understand for new investors and they will pay more than they expect.
Free stock and growth for everything
Bux started with very low fees. Back in 2020, I paid almost zero to none fees and I even received some free stock from Bux. Back then, Bux wasn’t profitable as a company and they invested in growth in the years to come. They made TV appearances, gave away free stock and invested in good marketing. In all those years I was happy to use Bux because the costs were low, transparent and were very predictable.
Yorick, the Bux CEO, stated that Bux wants to become profitable this year and so they need to increase fees. I fully understand that from a business perspective. But in the other hand: customers join your platform expecting these low fees. If you change that, in order to become profitable, what would you do as a customer? Personally, I would look for a different broker. Not because I don’t like Bux as a company (because I do!!) but because it costs me too much money I don’t want to pay. And there are better alternatives.
Other companies, like Just Eat Takeaway (Thuisbezorgd) work this way too. They invested very much in growth by borrowing money and attracting investors to invest in Bux/Just Eat; but in the long run the only way to become profitable is to drastically increase prices. What happens? People get angry. Why? Because they didn’t expect it.
I believe any company should be profitable. That’s why I only invest in profitable companies like in the S&P500 and other indexes. The thing is, don’t attract people with low fees willingly knowing you need to become (much) more expensive and complicated later.
Why I sold my portfolio
I don’t want to invest via Bux anymore. Not under the new fees and pricing. Firstly, because they target young investors with small budgets, who will pay a hefty fee. 3.9% on 1000 euro budget is insane. And secondly because the new fee structure is so complex that new investors will get hurt. Don’t expect them to understand the pricing, because there are to many things and what if ’s to consider. And I don’t like that complexity too. Simply there are cheaper options for me and I don’t want the hassle of a service fee. And the final reason is that Bux is losing its initial vision: providing a simple and cheap platform for young investors to start investing in.
Looking forward
I do believe Bux can change its direction moving forward. Seeing all reactions popping up makes me think many investors will leave the platform. Not because we don’t like Bux, we don’t like the pricing model.
I would advise Bux to change course, written from a background in business, IT and government. In order to become profitable and to stay a fun platform, I would make the following changes:
- Cancel the new fees entirely;
- Make a statement to the community;
- Come up with a new fee structure that is:
a. Easy to understand;
b. Has no hidden costs;
c. Is attractive to new investors;
d. Is attractive to small investors;
e. Staying true to the original story and concept. - Some Ideas for better fee structures are:
a. Offer a subscription that allows unlimited trading without any other fees. Or <100 trades for example.
b. Offer a savings-account and/or deposits to both benefit customers and bux. Rates are rising and this can be very profitable. Example: TradeRepublic.
c. Focus purely on trading fees OR a yearly <0.3% service fee. And remove all other costs.
d. Let investors chose between profiles like ‘trader’, ‘ETF investor’, ‘saver’ and ‘DCA’ which have their own fees. Fitting to their needs and risk appetite.
For those still reading, I moved my positions to DEGIRO and ETORO for now. In my case they are cheaper than Bux Zero. But I hope Bux will change course and to return here soon!
