Looking for a commission-free online broker for the stock market with professional brokers and coaches, check out nextmarkets. The founder and CEO of the neobroker nextmarkets, Manuel Heyden shares more insights into nextmarkets in this exclusive interview with TechBullion.
Please tell us your name and a little about yourself.
My name is Manuel Heyden, I’m 40 years old, and I’ve been working in the FinTech industry or in the online brokerage market for, oh, close to 15 years now. In 2014, I founded the neo-broker nextmarkets with my brother Dominic. We’re lucky in that our talents, skills and areas of interest complement one another perfectly – Dominic, a true “computer geek”, takes care of all technical and procedural issues. I on the other hand focus on product development and the commercial side of things.
What is nextmarkets and what unique services are you bringing to the market?
Well, basically, we saw two problems in the private investor market. On the one hand, being only human, people can act quite irrationally when it comes to the stock market: we’re driven by behavioural anomalies such as greed, fear and arrogance. We, therefore, started with the hypothesis that we – that is, people in general – should actually become more successful on the stock market if we act together with more experienced traders.
To that end, we now have more than 20 so-called trading coaches active on nextmarkets. They write more than 300 analyses in real-time across seven different asset classes and take our customers by the hand from the initial brainstorming to the end of the transaction. A kind of learning by doing in real-time.
Besides that, our customers can follow all analyses or co-invest directly automatically with the trading coaches. But of course, our customers can also act independently: they can trade over 7,000 shares and 1,300 ETFs free of charge on the stock exchange. Many instruments can also be traded with leverage. All seamlessly integrated into the order mask.
The second problem we see in the private investor market is still the matter of order fees. Many empirical studies show us that a positive gross return after deduction of order fees becomes a negative net return. The reduction of transaction fees towards zero input thus leads to a considerable improvement in the situation for private investors. Of course, on the other hand, the spread (i.e. the implied fees) mustn’t be increased at the same time.
A unique selling point for us is the combination of knowledge transfer and one of the largest offers on the market. Without proper money and risk management, no investor should trade on the stock market. That’s why we at nextmarkets rely on coaches who provide our customers with free analyses – up to 200 per month. We have a very extensive portfolio, as I’ve mentioned. In order to give people the opportunity to
participate in the performance of highly endowed companies such as Amazon or Tesla, we offer the option of trading portions of shares by way of so-called fractional trading.
In addition, and this is an important point, all values are also tradeable with leverage. As a currently safe investment alternative, we’re the only provider to offer our so-called money market CFD. This allows investors to participate in the difference between US and European interest rates and offers a good alternative to an MMA, or money market account, with its average return of 1.25% this year.
Just what is a neo-broker, and why do you place more emphasis on investment and trading education?
Many years ago, people paid up to €50 per order or transaction when buying shares. Then, at the beginning of the 2000s, along came brokers who introduced the so-called flat fee. At that time, it was, oh, usually about €5.90. But now we’re entering a whole new age. Because now, users can pay €0 per transaction. What many people don’t know is that brokers receive a payment for order flow from the marketplace where the transaction was executed. So here, it’s about trying to do without an order fee on the part of the customers through a high degree of technology. This is where the neo-broker comes into the game.
Just take a look – you’ll see that numerous scientific studies show that newcomers systematically take too much risk. Without proper money and risk management, no investor should trade on the stock market. Our innovation, if you will, is to provide our customers with a good number of coaches who fortify them with wide-reaching expertise – free of charge, of course. These coaches furnish our users with up to 200 analyses per month.
For me, however, a successful trader has three character traits: stress resistance, decisiveness and discipline. They must be able to consistently put their theoretical approaches into practice and react quickly to sudden changes in the previous analysis, sometimes even completely realigning themselves. At nextmarkets, we provide our customers with tools through our coaching programme and support them in dealing with them safely.
Think about it: what has the last decade of falling interest rates has shown us? That we need to look for new investment methods. In trading on the stock exchange with the right risk management, we see a future-proof investment. The times have changed. Unlike years ago, today we can manage and invest our money independently without a fund manager. In a way, this is an emancipation, surely not without its faults, but one which we believe is the right way forward in the long term. It’s crucial that people receive reputable and cost-neutral offers of help and upskill in this way. Education, acquiring new skills – this is one of the most important things for our society. Look at the current state of affairs and you’ll see it’s not yet sufficiently available, especially when it comes to finances. That’s something we aim to change.
How can it be that nextmarkets charges absolutely no fees for trading on its platform? How do you make a profit?
First of all, I think it’s important for retail investors to understand how online brokers make money. On the one hand, they take order fees from customers. With neo-brokers, these fees ultimately disappear – either partially or, in the case of nextmarkets, completely.
In addition, brokers receive from the marketplace or the market maker where the order is executed a so called payment for order flow. This reimbursement represents a line of revenue. If a customer decides to trade with leverage, nextmarkets itself is the market maker. Here, we earn on the bid/offer spread and on the financing costs for the leveraged order.
Elon Musk’s tweets regularly cause an uproar – and some anger – in the financial market community. What are the disadvantages of this uproar, and how can you protect users from this?
Since founding the company, we’ve placed a very strong focus on our own technology. The entire “tech stack”, from the banking back end to the apps and even the charting engine – these are all things we developed internally. In highly volatile phases such as during the infamous “GameStop” period, we therefore didn’t have any technical failures to chalk up. Trading continued without a hitch.
Our users are provided with two options: after seeing a coach’s real-time analysis and comments on profits or losses generated, I can either simply learn from it or co-invest with a single swipe. But, importantly, I can configure my risk in advance. If the coach changes their stop-loss level, mine is automatically changed, too. I can also choose to follow all transactions of my selected coaches. You have the choice between manual and automatic selection. The latter option has proven to be very popular with our more passive investors.
On the cryptomarket, the news that Tesla will no longer accept bitcoin as payment caused the share price to plummet. What are your views on this event?
I would say this is a reminder that share prices are not static. The important thing is to make considered moves, in our case, with coaches to support and guide you. Tesla is a giant whose actions will of course have a ripple effect, whether to a greater or lesser degree. But we also have to be aware that organised individuals can similarly stir up great waves, as we saw with GameStop recently.
On the GameStop turmoil, we understand a nextmarkets coach predicted this in his analysis. Can you tell us more?
GameStop is a fascinating case. A jump in share price from $18 to some $340 in a matter of days! In general, it’s institutional money that dominates the market – about two thirds of it. However, the collective action of communities like reddit can turn things around at times – the tail wagging the dog, so to speak. Analyses are instrumental in predicting such events. It’s not an exact science, of course, but your best bet to come out on top. Responding to the example of a coach is the layperson’s best strategy. Now, our eyes are open wider than ever.
Nextmarkets just recently closed a €30 million in a Series B funding led by, among others, such prominent investors as Peter Thiel and Christian Angermayer. How will this fund be used?
Essentially, we want to build a European counterpart to Robinhood. And I have to say, things are looking good. In the two and a half years since our go-live, we’ve grown at an average annual rate of 207%. We already carry out millions of transactions annually. And beyond Germany and Austria, we’ve just launched in six other European countries. As well, we’re expanding our offer in a non-geographical sense – for example, with the introduction of investing in ETF savings plans.
Nextmarkets was founded with your brother Dominic. Would you mind sharing your experience and success stories while building and leading a FinTech with your brother?
One thing’s for sure: no one knows you like a sibling. You grow up together; you know each other’s strengths and weaknesses. Over time, a strong bond develops. You learn that you can rely on each other. And so it is with Dominic and me.
Dominic’s two years older than me, and, as I mentioned, definitely the geek in the family. His affinity for IT feeds the technical side of nextmarkets’ development. I, on the other hand, have always been more the product and investment expert. This mixture of expertise has led to nextmarkets today.
So, how does it come together? Dominic takes care of the technical implementation of all these ideas. I think I can say our collaboration is a dynamic one. The result is a product that combines the best of IT and finance.
For more information, visit the website: nextmarkets.com