FZROX gives me 0% fees, can be bought in my retirement accounts, and is attached to a company with something like $1 trillion AUM. The latter gives me faith that it will still be around next year. I appreciate that the 0% fee options are limited, but personally I’d rather deal with 0.03% fees than entrust my money to a small shop. Especially when the reason to do so is not some trading edge, but saving a small amount on fees. I think this is going to be the main barrier to getting people to sign up.
Plus, index tracking error (which is ignored in the ad post) is going to be comparable to these fees anyway.
"Invest all your savings in our startup so after 30 years you'll have 1% more money in the absolute best case scenario" doesn't feel like a winning strategy.
I appreciate the sentiment, and I agree, but this really matters. There have been so many stories of fintechs collapsing recently, where people were really just trying to make an extra few percentage points of yield, and then people lost all of their savings.
I also like to root for the little guy, but the trust barrier will be the largest hurdle I think that this company needs to overcome, and so it's fair to discuss it.
Every possible angle is "fair" when it's your money. To look the other way because it's being discussed on HN is madness. For folks that aren't aware of the fintech failures the point being reiterated makes a statement and if the OP / founder doesn't address the issues in the thread then it doesn't seem like I should have a ton of faith in their service.
It's absolutely fair when you're evaluating a potential fiduciary. I personally don't consider small regional banks secure beyond the FDIC limits for the same reason. But one of the "big guys" is fine as they're too big to fail.
> As part of the agreements with the United States Attorney’s Offices for the Central District of California and the Western District of North Carolina, the Commercial Litigation Branch of the Civil Division, and the Securities and Exchange Commission, Wells Fargo admitted that it collected millions of dollars in fees and interest to which the Company was not entitled, harmed the credit ratings of certain customers, and unlawfully misused customers’ sensitive personal information, including customers’ means of identification.
> As a result of HSBC Bank USA’s AML failures, at least $881 million in drug trafficking proceeds – including proceeds of drug trafficking by the Sinaloa Cartel in Mexico and the Norte del Valle Cartel in Colombia – were laundered through HSBC Bank USA. HSBC Group admitted it did not inform HSBC Bank USA of significant AML deficiencies at HSBC Mexico, despite knowing of these problems and their effect on the potential flow of illicit funds through HSBC Bank USA.
You're misunderstanding what the benefit of being large is, and what the risk of being small is.
I totally accept and understand that large businesses do all sorts of shady and nefarious things. What I don't expect them to do is lose all my money with no recourse. And that's not just the case because they're big, but the regulatory regimes are set up to deal with these known entities. The reason I've personally become wary of fintechs recently is because many of them want to "move fast and break things", and think they can offload all of the regulatory responsibilities to partner institutions. Like, if you're such a great fintech, why not open as an actual bank or as an actual broker dealer (note, I'm not saying that's the case here, as they are an RIA, but I don't know the protection that is entailed by that designation).
When you say "Madoff had $65B AUM", he also had like 10 employees, which is why he was able to hide the fraud for so long.
RIA doesn’t have a guarantee as such — it’s a license to sell you securities and, also, give you advice on which securities to buy. Such a person or company doesn’t even necessarily keep an account: it’s a financial advisor certification. But this is the “actual broker-dealer” certification you’re asking for.
They keep your account at Apex Clearing, which is a very very large company that is not going anywhere anytime soon.
So, the key bit here is: do you trust them on that? They’ve got SEC filings and it’s as above-board as any other fintech.
And next, are you prepared to argue with Apex for your money when/if they fail? And is this worth it to you for the product offered?
More importantly, though, that's not what I'm saying. Getting over the consumer fear about their financial security absolutely has to be a primary priority of this company, and if they don't address it, then they have a shitty business plan.
why should anyone "give them a break"? Aint running a charity here - if they provide sufficient value for the risk, then they will get customers without having them to "give breaks".
I am going to give zero break to anyone who proposes to manage people's money. This is not the area where "move fast and break things" is an acceptable approach. You have to be on top of your game from day one, otherwise you need to stay away from people's life savings.
I think you misunderstand me. I’m not telling them to give up or expressing hope that they don’t succeed. I’m identifying what I see as a major barrier to adoption. I’d be interested in a response that addresses those points.
I mean, no. For many people the investments being handled may represent their life savings. It represents potentially decades of work. This isn't some SaaS where poor reliability means wasted time and maybe some money - the stakes are considerably higher.
I doubt they are expecting their customers to withdraw their life savings from Fidelity and hand it to them. I sure wouldn't. I could see maybe trying them out with, say, $20K of one's $2M savings. But, then at that level of investment, $1/mo becomes a significant fee. Not sure I understand who the market is.
In theory, it should be possible to run a break-even fund, where your expenses are offset by lending shares in the stock borrow lend (SBL) market. I assume this is how some fund managers can offer 0% fees. I have no idea if this is sustainable long-term (decades). In a very competitive, liquid market like the US, I guess that weighted-average SBL rates on basket of S&P 500 stocks might be 5-10bps. Can any SBL traders here give us more accurate numbers?
Edit:
Also, they can sell their order flow to a market maker (HFT?), as it is non-toxic retail flow. That is basically how Robin Hood keeps fees so low.
I believe it is a loss-leader. But these days companies get a pretty direct payout from people who accidentally hold cash in their investment account while on the way to buy ETFs
Loss leader. Fidelity and Schwab make a lot of money from Net Interest Margin on uninvested cash (or e.g. Fidelity's relatively high fee 0.42% money market funds).
