[HN Gopher] Launch HN: Double (YC W24) - Index Investing with 0%...
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Launch HN: Double (YC W24) - Index Investing with 0% Expense Ratios
Hi HN, we're JJ and Mark, the founders of Double
(https://double.finance). Double lets you invest in 50+ broad stock
market indexes with 0% expense ratios. We handle all the
management, including rebalancing and tax-loss harvesting--
proactively selling losing stocks to potentially save on taxes--for
$1/month. Our goal is to bring the low fee trend pioneered by
Robinhood to ETFs and mutual funds. We posted a Show HN about 3
months ago (https://news.ycombinator.com/item?id=41246686) and
since then have crossed $10M in AUM (Assets Under Management) [1].
Here's a demo video:
https://www.loom.com/share/10c9150ce4114f278e8c249f211e7ec8. Please
note that none of this content should be treated as financial
advice. Everyone knows that fees eat into your investing returns.
Financial advisors generally charge 1% of AUM per year, and ETFs
have a weighted average expense ratio of about 0.17%, although some
go as low as 0.03% for VOO. Over a 30-year period on a $500k
portfolio with $2k invested monthly, the money lost to those fees
would be $1.30M for the financial advisor and $244k for the average
ETF and even $42,951 for the low fee VOO. Double lets you index
invest without paying any percentage-based fees - we charge just
$1/month. It works by buying the individual stocks that make up
popular indexes. By buying the individual positions, we can also
customize and tax-loss harvest your account, something ETFs or
Mutual Funds cannot do. Most ETFs and mutual funds today are not
that complicated - they can be expressed as a CSV file with 2
columns - a ticker and a share number. You can find these holding
csv files on most ETF pages (VOO[2], QQQ[3]). Right now there are
about $9.1T of assets in ETFs[4] and $20T in Mutual Funds[5] in the
US, with estimated revenue of $100B per year. We think this market
is ripe for disruption. We offer 50+ strategies that track popular
ETFs and are updated as stocks merge and indexes change. You can
customize these by weighting sectors or stocks differently, or even
build your own indexes from scratch using our stock/etf screening
tools. Once you've chosen your strategy, simply set your target
weights and deposit funds (we also support transferring existing
stocks). Our engine then checks your portfolio daily for potential
trades, optimizes for tax-loss harvesting, portfolio tracking, and
redeploys any generated cash. I (JJ) started working on this after
selling my last company. After using nearly every brokerage product
out there and working with a financial advisor, I noticed a huge
gap between the indexing capabilities of financial advisors and
what individual investors could access. We wanted to bridge that
gap and provide these powerful tools to everyone in a simple, low-
cost way. There are a number of robo-advisor products out there,
but none that we know of offer direct indexing without expense
ratios or AUM fees. One similar product is M1 Finance, but Double
is more powerful. We offer tax-loss harvesting, a wider range of
indexes, and greater customization. For example, when building your
own index, you can set weights down to 0.1% (compared to M1's 1%)
and even weight by market cap. We also compete with robo-advisors
like Wealthfront, but offer more control over your investments. And
did I mention we don't charge AUM fees? You can see our strategies
and play with the research page https://double.finance/p/explore
without creating an account. Over the past year we've learned a
lot about the guts of building portfolio software. For example,
stocks don't really have persistent identifiers that are easy to
model and pass around. We trade CUSIPs with our custodian Apex*,
but these change all the time for stock splits or re-org's that you
would not think would lead to a new "stock". We've also learned a
lot about how tax loss harvesting (TLH) is best implemented on
large direct index portfolios using a factor model as opposed to
pairs based replacements which I initially thought might be the way
to execute these. We do use a pairs strategy on smaller sized
strategies. And how TLH and portfolio optimization generally is
best expressed as a linear optimization problem with competing
objectives (tracking vs. tax alpha vs. trading costs for example).
If you have any thoughts on the product or our positioning as the
low fee alternative I'd love to hear it. I think Robinhood has
proved that you can build a strong business by getting rid of an
industry wide cost (in their case commissions, in our expense
ratios). We aim to do the same. [1]
https://www.axios.com/pro/fintech-deals/2024/12/10/direct-in... [2]
https://investor.vanguard.com/investment-products/etfs/profi... [3]
https://www.invesco.com/qqq-etf/en/about.html [4]
https://fred.stlouisfed.org/series/BOGZ1LM564090005Q [5]
https://fred.stlouisfed.org/series/BOGZ1LM654090000Q * Edit to add
a note on risk: If Double goes out of business, your assets are
safe and held in your name at Apex Clearing. They have processes in
place for these scenarios to help you access and transfer those
assets. See more at https://news.ycombinator.com/item?id=42379135
below.
Author : jjmaxwell4
Score : 267 points
Date : 2024-12-10 14:16 UTC (8 hours ago)
| presson wrote:
| Love this, fees add up!
| agsqwe wrote:
| How are you going to make money?
| ddulaney wrote:
| Presumably a combination of a flat-rate fee ($1/user/month) and
| payment for order flow.
|
| PFOF is a big moneymaker for Robinhood, but you get paid the
| more your users trade so people doing buy-and-hold index funds
| probably earn you less that way.
|
| If you can keep expenses super low maybe this can work. But my
| sense is that costs are pretty flat regardless of how many
| users you have, so this probably needs to get pretty big to
| finance itself.
| socks wrote:
| their pricing page states
|
| > We plan to make money by helping clients secure additional
| financial products like secured lines of credit, margin, and
| insurance, all in a fiduciary manner.
| jjmaxwell4 wrote:
| We charge $1/month.
|
| Longer term, we think there are additional revenue streams we
| can enable that are similar to existing broker-dealers like
| Robinhood, Fidelity and Schwab. That means things like cash
| float, margin lending, stock lending and payment for order
| flow. Currently we are not a broker-dealer.
| taway789aaa6 wrote:
| Ah yes, the old "we'll buy stocks for you and then turn
| around and lend them out to short sellers that actively want
| you to lose money. Promise we care about you!"
|
| I do not trust any institution that makes money off of
| lending MY shares out to predatory short-sellers who's sole
| purpose is to decrease the value of MY shares.
| ramon156 wrote:
| Sorry if this sounds uninformed, but what is the
| alternative? Even the bank and pensions gamble with your
| money, its how they move. I wish it wasn't the case either
| short_sells_poo wrote:
| The bigger issue is that it's basically just well hidden
| fees. You can add a decent amount of income to your
| portfolio by lending out the stocks to short sellers.
| Particularly in a market crash, the fees for borrowing
| stocks skyrocket (can easily be in high double digit %).
| Good firms allow you to lend out your stocks and give you
| the fees. Less good firms claim to give you a very cheap
| deal, but then basically shaft you by claiming these
| benefits for themselves.
|
| If this business proposes to be profitable by harvesting
| the borrow fees, then them being cheap is really
| disingenuous because they give you with one hand and take
| from you with the other.
| taway789aaa6 wrote:
| The alternative is to not fall for the "its basically
| free!" schtick.
|
| If its free, then you're the product.
|
| If its $1/month, then you're still probably the product.
| In the case of my investments, I do not want the firm
| that I invest with -- to whom I trust my assets -- to
| turn around and lend out my assets to other organizations
| that have no obligation to me to act in my best interest.
| Share lending is almost always to lend to short-sellers
| that are trying to decrease the price of the asset being
| borrowed.
|
| > Even the bank and pensions gamble with your money, its
| how they move
|
| I guess its not worth having an opinion that this is not
| a good thing then? Bring back Glass-Steagall to separate
| out banks and gamblers.
| semiquaver wrote:
| > separate out banks and gamblers.
|
| Banks are inherently in the business of gambling. Since
| time immemorial the defining characteristic of a bank is
| to convert short-term liabilities (deposits) to long-term
| assets (loans). To lend is to gamble that your borrower
| will pay you back. A bank that takes no risk cannot cover
| its expenses and will cease to exist.
| chii wrote:
| > Even the bank and pensions gamble with your money, its
| how they move. I wish it wasn't the case either
|
| banks don't gamble with your deposit - that's illegal.
| They use your deposit as a form of security when they
| loan money out (it takes similar position as equity).
|
| Pensions don't gamble, they buy investments which could
| have some risks (and it's calculated risks). These risks
| are such that they make a reasonable return for taking
| it, and therefore can service their obligations (as a
| pension fund).
| recursive wrote:
| So if the risk is calculated, it's not gambling? Lottery
| tickets publish their odds. And in that case, it's
| actually possible to be confident that the odds are
| correct. I don't understand.
| jprafael wrote:
| You can DRS (https://www.dtcc.com/asset-
| services/securities-processing/di...) your shares so that
| no one can lend them out from you. Some brokers have a
| setting (opt in or opt out) that disallows lending your
| shares (or that compensate you if they do).
| taway789aaa6 wrote:
| This is the way.
| dmoy wrote:
| Vanguard doesn't make money off of short term lending.
|
| They do it, but the proceeds go back to the individual
| funds (helps boost index tracking performance).
|
| Fidelity and Schwab both take a cut. I forget beyond
| that, I guess IBKR does stuff.
| toast0 wrote:
| Vanguard keeps sending me emails lately about enabling
| lending on my brokerage account[1]; although I only have
| classic mutual funds in there, which I don't think can be
| lent. I imagine their brokerage lending will include a
| cut for the brokerage, although maybe it will be closer
| to cost than at other brokerages. I don't really know
| where the Vanguard brokerage net revenue ends up.
|
| [1] And frankly a lot of other 'opportunities' I'm not
| interested in, that seem outside the John Bogle model of
| Vanguard helping normal people invest in the public
| market at low cost. I don't want to invest in off market
| opportunities, thanks, and it makes me lower my opinion
| of the company that they push it.
| dmoy wrote:
| Most vanguard classical mutual funds are share classes of
| an underlying ETF, and can be lent.
|
| Last I checked (which to be fair was like a year or so
| ago), vanguard didn't take a cut for securities lending.
| It does however boost the fund's performance
|
| https://corporate.vanguard.com/content/corporatesite/us/e
| n/c...
| toast0 wrote:
| That page is from Vanguard the funds.
|
| Vanguard the brokerage also has a share lending program,
| advertisement here
| https://investor.vanguard.com/campaign/earn-additional-
| incom...
|
| > Vanguard Brokerage maintains an economic interest in
| Fully Paid Lending program loans and earns revenue in
| connection with such loans.
|
| Vanguard the brokerage wants me to enable lending, but my
| mutual fund shares in Vanguard the brokerage can't be
| lent, because mutual funds are not lendable. If I
| converted it to an ETF, then the ETF could be lent, but I
| don't know how much interest there is in borrowing ETFs
| to short.
|
| The underlying holdings in the mutual fund can be lent by
| Vanguard the funds. Vanguard says all the proceeds from
| lending (net of expenses) go to the funds. I think Schwab
| and Fidelity take a cut of lending proceeds on funds
| beyond their program expenses, but then they take a 'zero
| expense ratio'. It doesn't necessarily matter to me where
| specifically the Fund administrator takes their fees,
| it's the end of the day net investment value. And
| honestly, inertia is a big part of it, I have too much
| unrealized capital gains to really consider changing my
| stock funds, but I could be convinced to switch to a
| different brokerage.
| gruez wrote:
| >I do not trust any institution that makes money off of
| lending MY shares out to predatory short-sellers who's sole
| purpose is to decrease the value of MY shares.
|
| 1. You realize that short sellers have to buy the stock
| back, which basically has the opposite effect? Unless
| you're planning to dump the stock in a few months, this
| isn't worth worrying about.
|
| 2. You know what's worse than short sellers driving down
| the price of your stocks? Corporate malfeasance going
| undetected and blowing up (eg. Enron), causing you to lose
| everything. Short sellers might get a lot of flak by
| profiting off people's losses, but they provide a useful
| service by exposing misconduct and putting a wet towel on
| irrational exuberance.
| ac29 wrote:
| > lending MY shares out to predatory short-sellers who's
| sole purpose is to decrease the value of MY shares.
|
| Sure, that is their goal. But, shorting equities is a tough
| game, because most years the market goes up. An investor
| who is broadly short the market would therefore lose money
| more often than not, and has to pay borrow fees on top of
| that.
|
| If you hold shares that you think are going to go up, you
| absolutely should be willing to lend out your shares
| because it will enhance your return.
| cjonas wrote:
| I previously used wisebanyan which was a robo advisor with zero
| fees (their model was to charge more for add-ons like tax loss
| harvesting). Then they added small portfolio management fees...
| Then they sold to another institution and my fees are now inline
| with every other roboadvisor.
|
| What would you say to someone who is skeptical about the long
| term viablity of your low fee promise?
| carbocation wrote:
| 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.
| jansen wrote:
| Every shop is a small shop when it starts out. Maybe give these
| guys a break?
| hn_throwaway_99 wrote:
| 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.
| Invictus0 wrote:
| Please recall this is the website that discusses startups.
| It is absolutely not fair to use "you are not a big
| company" as a point of criticism
| koolba wrote:
| 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.
| Invictus0 wrote:
| > 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.
|
| https://www.justice.gov/opa/pr/wells-fargo-agrees-
| pay-3-bill...
|
| > 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.
|
| https://www.justice.gov/opa/pr/hsbc-holdings-plc-and-
| hsbc-ba...
|
| Madoff had $65B AUM.
|
| You must be living under a rock (or a democrat) if you
| trust an institution just because it's large.
| hn_throwaway_99 wrote:
| 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.
| freeone3000 wrote:
| 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?
| windexh8er wrote:
| 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.
| hn_throwaway_99 wrote:
| OK, you roll the dice with your money then.
|
| 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.
| tschwimmer wrote:
| 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.
| ryandrake wrote:
| 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.
| short_sells_poo wrote:
| 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.
| chii wrote:
| > Maybe give these guys a break?
|
| 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".
| carbocation wrote:
| 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.
| mrbluecoat wrote:
| Same, M1 gives me similar options and protections for a nominal
| fee: https://help.m1.com/en/articles/9331969-how-much-does-it-
| cos...
| UncleMeat wrote:
| 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.
| dehrmann wrote:
| How does FZROX make money? Loss leader for Fidelity? Improved
| economies of scale?
| chis wrote:
| 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
| ddyulgerski wrote:
| Is the plan to make money from stock lending?
| rs999gti wrote:
| To be a middle man to the middle man at 1USD/month.
| dayone1 wrote:
| 1) are you going to sell your trade flow to Citadel / market
| makers like Robinhood and your competitors do? That's the dirty
| secret way of making money that you seem to have completely
| excluded. The reality is that adds up to substantial "invisible"
| fees that the investor has no transparency over because you sell
| your trade flows to them and they make a higher than normal
| spread. And the whole "doesn't matter if we sell your trade
| flows, the rules require you to get best execution" is a farce
| and everyone in the industry knows this - otherwise there is no
| reason why Citadel or Virtu would bid billions of dollars to just
| buy the trade flow.
|
| 2) Are you going to rebate your borrow fees back to investors?
| This is the other dirty secret way of making money. Many people
| don't realize that you can earn lending fees by lending your
| shares out for people looking to short stocks, and those add up
| to substantial amounts over time for a scaled asset manager. Do
| you keep this instead of rebating it fully back to your
| customers?
|
| 3) If the answer is no, you don't sell trade flows and yes, you
| will rebate your borrow fees, can you make a lifetime commitment
| that you won't go back on your word? Many people who start in
| this industry say they won't sell trade flows and then after they
| reach scale they change the footnotes and agreements and starting
| selling trade flows.
| shred45 wrote:
| > they make a higher than normal spread
|
| Is this known for sure? I thought the value of this order flow
| to them was the lack of adverse selection.
| rs999gti wrote:
| > sell trade flows
|
| This is the real reason for low/no broker fees. Don't believe
| any broker that says they will input orders without taking
| their cut otherwise they (automated or not) would not exist.
| ddulaney wrote:
| For 1 -- dude, please back off the "[the rules] are a farce".
|
| Citadel and friends pay to trade with you because they think
| you're dumb and they can make money off you. They're giving you
| or your broker a better deal because they think they're smarter
| than you. That's all it is. They'd rather trade with you than
| with the median person on the market. Because they think you're
| dumb.
|
| You're welcome to be insulted by that. It's an insulting thing.
| But it's not some grand conspiracy.
| shred45 wrote:
| Its not the median they are worried about, its the 99th
| percentile. They _dont_ want to trade with Optiver, 2 Sigma,
| etc, or some hedge fund thats working a massive trade.
|
| Trading with a highly sophisticated counterparty can be very
| costly and undo the small profit they have made from
| thousands of other trades.
| taway789aaa6 wrote:
| The "farce" is that when a market maker like Citadel purchase
| your order flow, the orders are typically not routed to the
| lit market (e.g. NYSE, IEX, etc) but instead routed to
| "alternative trading systems" (ATS) e.g. "dark pools" where
| your purchase has no effect on the price of the security.
|
| This breaks the whole idea of a "market" where every buy puts
| upward pressure on a price and sales put downward pressure.
| Thus, a "farce".
|
| That's not even getting started on the "farce" that is an ETF
| and how they are balanced/re-balanced.
|
| Gotta love brokers that don't have your best interest in
| mind. Who needs best execution? /s
| shred45 wrote:
| Order flow in dark pools does impact the price of a
| security. The market maker will eventually need to trade
| out of that position. If there is aggregate buying pressure
| in the dark pool, they will adjust their quotes in both
| dark and lit markets.
| taway789aaa6 wrote:
| > The market maker will eventually need to trade out of
| that position
|
| This is why Citadel has $60+ billion dollars of
| "securities sold not yet purchased" on their financial
| statements.
|
| They have sold $60+ BILLION of shares to investors and
| not yet bought the underlying securities.
|
| So when exactly will that $60 billion of buy pressure hit
| the market?
| shred45 wrote:
| I don't think this really tells you anything, and it also
| will impact the quotes they are making, even if they are
| holding the position for now.
| gruez wrote:
| >This is why Citadel has $60+ billion dollars of
| "securities sold not yet purchased" on their financial
| statements.
|
| 1. source?
|
| 2. supposing this is true, what's their daily turnover?
| "60+ billion" sounds like a lot, but if that's their
| daily turnover that shouldn't be anything out of the
| ordinary.
| Lionga wrote:
| 1. Just look at their financial statements they , nobody
| is allowed this naked shorting but Cidatel is because
| they are a market manipu ahhh sorry maker.
|
| Not that others won't naked short also, it is just they
| do not do it openly.
| gruez wrote:
| >nobody is allowed this naked shorting but Cidatel is
| because they are a market manipu ahhh sorry maker.
|
| That's... working as intended?
|
| > market makers provide a required amount of liquidity to
| the security's market, and take the other side of trades
| when there are short-term buy-and-sell-side imbalances in
| customer orders. In return, the specialist is granted
| various informational and trade execution advantages.
|
| You can argue such a system is inegalitarian or whatever,
| but if you want a reliable provider of liquidity that
| won't instantly vanish when there's market turmoil (ie.
| when you need it the most), there has to be some
| mechanism to compensate market makers.
| slt2021 wrote:
| Citadel is basically counterfeiting shares, just like the
| Fed is printing dollars.
|
| its a scam and is a reason how Citadel makes
| $30,000,000,000 profit per year
| gruez wrote:
| >its a scam and is a reason how Citadel makes
| $30,000,000,000 profit per year
|
| Where are you getting "$30,000,000,000" (billion) in
| profit? Wikipedia says they only made $6.3 billion in
| _revenue_ in 2023. Moreover, they were in existence for
| 22 years. Even if they only started "counterfeiting
| shares" in 2021, $30B in profit per year (so $90B in the
| past 3 years) seems absurd for only $60B worth of
| "counterfeiting shares" on their balance sheets.
| slt2021 wrote:
| Citadel gross trading profit totalled $28bn last year,
|
| https://www.hedgeweek.com/citadel-makes-record-16bn-
| profit/#....
|
| 60B is a balance at a specific date 12/31/2022, they trim
| the balance by the EOY and harvest losses.
|
| the average balance is much bigger and fluctuates heavily
| given market demand.
|
| UPD: I stand corrected, the market making arm only made
| meager $5,000,000,000 for the 6 months, so more like
| 10,000,000,000/year, not 28
|
| https://www.nasdaq.com/articles/citadel-and-jane-street-
| set-...
| gruez wrote:
| "Citadel Securities is a separate entity from the hedge
| fund Citadel LLC"
|
| https://en.wikipedia.org/wiki/Citadel_Securities
|
| The market maker boogeyman is Citadel Securities, not
| Citadel LLC.
| taway789aaa6 wrote:
| Assuming that they have a proper firewall between the two
| and there are no conflicts of interest..
| jkulubya wrote:
| Leaving aside the veracity of that figure, if they've
| sold $60B of shares they don't own then they must've sold
| shares they borrowed in some way, and that shows up in
| the demand/supply. Someone (or someones) in the market
| would know.
| Lionga wrote:
| As a market maker Citadel is allowed to do naked
| shorting.
| jkulubya wrote:
| A naked short on their own account would be illegal. A
| time-bound naked short to fulfill their role as market
| maker would be acceptable.
|
| But even then, all trades are either eventually settled
| at some time t, or fail to settle, e.g. if the seller is
| not good for the shares. Any of these 2 events happening
| is reported outside of a single broker-dealer, i.e.
| public info. And to settle a trade, you will need the
| actual shares, that you've either bought or borrowed.
|
| All this info, settlements, failures, stock buys & loans
| is visible to other parties in the market.
|
| If your point is that the Citadel is breaking the law,
| and not reporting what they should, when they should,
| then that's a problem. But there would be so many other
| parties discovering it way before their annual financials
| are published.
| taway789aaa6 wrote:
| Well we all know financial institutions never do anything
| illegal.
|
| https://www.sec.gov/newsroom/press-releases/2023-192
| https://www.sec.gov/newsroom/press-releases/2017-11
|
| > But there would be so many other parties discovering it
| way before their annual financials are published.
|
| Looking at Bernie Madoff I'm not sure this is really the
| case...
| wbl wrote:
| Bernie didn't trade. That's why no one has anything to
| report.
| slt2021 wrote:
| they kick the can down the road every day, until the
| market price returns to what they desire and only then
| they send order to a lit market.
|
| also heavy usage of synthetic shares and derivatives to
| hide naked shorts
| toast0 wrote:
| > They have sold $60+ BILLION of shares to investors and
| not yet bought the underlying securities.
|
| > So when exactly will that $60 billion of buy pressure
| hit the market?
|
| Citadel needs to deliver the stock they sold on T+1 as of
| May 28, 2024. There's some allowance for failure to
| deliver, but the data is out there, if Citadel is
| routinely failing to deliver, you should be complaining
| about that, not about their financial statements.
|
| Meanwhile, if Citadel wants to pay me fractional pennies
| more per share than a public exchange, and also my
| brokerage fractional pennies for the privilege, who am I
| to say no? Especially when the public exchange may charge
| me a fee to trade.
| slt2021 wrote:
| they can keep failure to deliver forever until the market
| moves in their desired position to actually send orders
| to lit market.
|
| they use derivatives and heavily recycle buy/sell shares
| to keep kicking the FTD can down the road for as long as
| the market returns to their desired position.
| wbl wrote:
| No they can't. They can keep a short position but that
| isn't failure to deliver.
| slt2021 wrote:
| the T+1 timer can be easily reset every day, until the
| market price reverts back to the Citadel's modeled price
| at which it is profitable/least losses for them to send
| order to lit market
| toast0 wrote:
| What are the mechanics of that?
|
| Let's say I buy a share of F on Monday, my brokerage
| routes it to Citadel, because PFOF.
|
| On Tuesday, I expect to get a share of F delivered at
| close of business, because T + 1.
|
| If Citadel doesn't deliver on Tuesday, what happens?
|
| Are you suggesting they would continue to not deliver the
| share I purchased for several days, by saying oh yeah,
| we'll get toast0 his shares tomorrow? That would be
| pretty upsetting, and I imagine I'd call my brokerage and
| ask them why they're dealing with Citadel if they never
| deliver shares on time.
| slt2021 wrote:
| you will receive share in your name in a database, but
| physically it will be stored "in the street name" in the
| depositary house, of which there is only one.
|
| plus even if there is only a single share authorized for
| stock exchange, there will be _more_ than one in the
| float, due to _synthetic shares_ : created when shares
| are borrowed and then reshorted, created to support
| derivative market (selling calls and buying puts). ALso
| borrow/rehypothecation mechanics is recursive, since
| shares are fungible, I can recursively re-borrow and re-
| short the same share, creating synthetic shares out of
| thin air, supported by nothing other than some bytes in
| the database somewhere, and not physical shares
|
| https://news.ycombinator.com/item?id=26011135
| wbl wrote:
| The prime broker has a lot of money and will cover their
| customer blowing up in a net short position. They manage
| that with margin agreements. That isn't nothing.
| snapcaster wrote:
| If you actually don't understand why that citadel
| statement said that you should read up on how market
| makers work. Any given snapshot in time for them would
| have enormous quantities of securities on both sides
| because they have to hedge all of their activities to
| remain neutral to any price movements.
|
| >So when exactly will that $60 billion of buy pressure
| hit the market?
|
| it probably did shortly after the statement, coupled with
| a likely similarly sized "sell pressure". They're
| constantly buying and selling things that's how the
| business model works
| gruez wrote:
| >but instead routed to "alternative trading systems" (ATS)
| e.g. "dark pools" where your purchase has no effect on the
| price of the security.
|
| 1. alternate trading systems are obligated to print their
| trades to the ticker, albeit at a slight delay compared to
| official exchanges
|
| 2. price is dictated by supply and demand, not the trade
| being publicly announced on exchanges. Trading volumes not
| being public probably has some non-zero effect on price
| discovery, but claiming that it has "no effect" is absurd.
| BobbyJo wrote:
| > That's not even getting started on the "farce" that is an
| ETF and how they are balanced/re-balanced.
|
| Have any pointers to info on this? I'm looking to buy into
| some ETFs but I've been unable to find much information on
| balancing (I'd like to selectively manage my exposure to
| some stocks that are heavy in indexes at the moment).
| taway789aaa6 wrote:
| Schwab has a pretty good explainer: https://www.schwabass
| etmanagement.com/content/understanding-...
|
| Ultimately the AP (authorized participant) is
| incentivized to make ETFs available because they get to
| use supply/demand imbalances as an arbitrage opportunity.
|
| > The creation and redemption mechanisms help ETF shares
| to trade at a price close to the market value of their
| underlying assets. When ETF shares begin to trade at a
| price that is higher than the market value of their
| underlying assets (at a "premium"), APs may find it
| profitable to create ETF shares by buying the underlying
| securities and exchanging them for ETF shares, and then
| sell those shares into the market. Similarly, when ETF
| shares begin to trade at a price lower than the market
| value of their underlying assets (at a "discount"), APs
| may find it profitable to buy ETF shares in the secondary
| market and redeem them to the ETF in exchange for the
| underlying securities. These actions by APs, commonly
| described as "arbitrage opportunities," help to keep the
| market-determined price of an ETF's shares close to the
| market value of their underlying assets.
|
| http://www.understandetfs.org/creation_redemption.html
|
| My understanding is that volatility is good for ETF APs
| because there are more arbitrage opportunities.
| gruez wrote:
| >Citadel and friends pay to trade with you because they think
| you're dumb and they can make money off you. They're giving
| you or your broker a better deal because they think they're
| smarter than you. That's all it is.
|
| More to the point, just because they're smarter than you,
| doesn't mean you're taking a loss by trading with them. The
| public markets are shark tanks, and it's better for both
| sides to avoid it. Market makers can make money off the
| spread (eg. buying at $3.14 and selling at $3.16 and
| pocketing the difference) without the risk of getting run
| over by a hedge fund, and retail traders benefit through
| tighter spreads, which the market makers can offer because
| they know the typical retail trader isn't a shark.
| chii wrote:
| > because they know the typical retail trader isn't a
| shark.
|
| so why don't the sharks use robinhood, which then they can
| do their shark thing there, but at a better price than
| before?
| gruez wrote:
| 1. "sharks" in this case doesn't mean some guy trading
| out of his house with 6 monitors. They are institutional
| investors. They can't exactly open a robinhood account,
| which only serves actual people. Professional traders
| also value other niceties, like being able to trade on
| their desktops (rather than having to type in their
| orders on their phones), which is worth the 1-2 cents per
| share in potential savings.
|
| 2. It doesn't have to be 100% effective. For every day
| trader that's beating the market and running over market
| makers with $1M orders, there's a 100 that's losing
| everything in ill timed trades on meme stocks. As long as
| there's less sharks than the public markets, they'll come
| out ahead.
| GenerWork wrote:
| >Professional traders also value other niceties, like
| being able to trade on their desktops
|
| In fairness to Robinhood, they did just release a desktop
| version[0].
|
| [0] https://robinhood.com/us/en/legend/
| gruez wrote:
| I stand corrected, thanks!
| n2d4 wrote:
| Robinhood doesn't want the sharks because that would cut
| into their monetization strategy. So they specifically
| don't build features that sharks would need, some just
| convenient (eg. trading interfaces), some very important
| (eg. tax statements).
| wrsh07 wrote:
| Pfof is woefully misunderstood
|
| In general, citadel wants to pay to trade with retail investors
| because it knows it isn't going to face adverse selection. So
| it will give them tighter bid/ask ratios (this is better for
| the customer) than they would get if they were trading in the
| open market, citadel isn't going to get hosed by one of them
| (because there's no adverse selection)
|
| It's win win win
| wrsh07 wrote:
| Here's the money stuff excerpt: https://marginalrevolution.co
| m/marginalrevolution/2021/02/th...
|
| > I feel like most of what I read about payment for order
| flow is insane? Otherwise normal people will start out
| mainstream explainer articles by saying, like, "Robinhood
| sells your order to Citadel so Citadel can front-run it." No!
| First of all, it is illegal to front-run your order, and the
| Securities and Exchange Commission does, you know, keep an
| eye on this stuff. Second, the wholesaler is ordinarily
| filling your order at a price that is better than what's
| available in the public market, so "front-running"--going out
| and buying on the stock exchange and then turning around and
| selling to you at a profit--doesn't work. Third, because
| retail orders are generally uninformative, the wholesaler is
| not rubbing its hands together being like "bwahahaha now I
| know that Matt Levine is buying GameStop, it will definitely
| go up, I must buy a ton of it before he gets any!" The whole
| story is widely accepted but also completely transparent
| nonsense.
| 1oooqooq wrote:
| it's already public that frontrunning is perfectly legal if
| you can do it with large volume as to not show intent of
| frontrunning one single person.
| slt2021 wrote:
| yeah, Citadel's annual $30,000,000,000 profit is not
| coming out of thin air or just from bid-ask spread.
| Customers are being taken for a ride definitely
| taway789aaa6 wrote:
| > PFOF and excessive off-exchange trading persist because so
| many trading platforms rely on the revenue it generates,
| essentially productizing their clients. Defenders of PFOF
| have claimed that retail brokers who route to high-speed
| traders (in exchange for PFOF) provide better price execution
| for investors and that it's a net positive, despite creating
| an inherent misalignment between these platforms and their
| customers, and despite public evidence to the contrary.
| Leaning on the flawed argument that they categorically
| provide retail customers with best price execution quality,
| there is little by way of self-regulation to foment change or
| prevent applications designed to optimize transaction volume
| (i.e. speculation and day trading) and risky activity (i.e.
| margin and options trading). Further, their ability to claim
| best execution is part of the flaw of the system, as even
| within the current structure better outcomes are possible on
| an order-by-order, and aggregated basis.
|
| https://advocacy.urvin.finance/advocacy/we-the-investors-
| pfo...
|
| Not a win win.
| gruez wrote:
| >and despite public evidence to the contrary
|
| Sounds serious, I wonder what it is...
|
| >"410 The author deleted this Medium story".
|
| doesn't look promising. The rest of the paragraph fails to
| state any concrete harm, instead focusing on abstract
| issues like "misalignment between these platforms and their
| customers", and "little by way of self-regulation ".
| highwaylights wrote:
| This.
|
| It seems very much like that bogus stat that HR departments
| were peddling 20 years ago about how they only hire the top
| X% of people because they reject (100-X)% applicants - it
| tells you nothing about the quality in the gap.
|
| These systems don't have to actively attempt to front-run
| you or pro-actively make bad trades, they can just optimize
| for deal flow, which is enough to cause the customer to get
| a sub-optimal price.
| freeone3000 wrote:
| You're getting a price as good or better than if you had
| routed it through the backing exchange directly. National
| Bid or Best Offer continues to be the rule.
| wrsh07 wrote:
| I think you're only highlighting my point that it's
| woefully misunderstood
|
| The fact that 70k people signed a statement making a bunch
| of strong but vapid claims is umm telling
|
| Let's take a longer money stuff excerpt:
|
| >>> Some retail brokerages seem to make a lot of their
| money from payment for order flow. Others make less. Some
| big retail brokerages do not accept any payment for order
| flow at all: They still use this system (routing their
| orders to market makers), but they take 100% of the value
| in the form of price improvement for their customers
| instead of payments for themselves. Intuitively, you might
| think that the brokerages that get a lot of PFOF would get
| worse price improvement.
|
| But, nope! Here is Bill Alpert in Barron's:
|
| Critics of retail brokers like Robinhood Markets condemn
| those companies for routing customers' orders to market
| makers like Citadel Securities in exchange for payments.
| ...
|
| The suspicion is that greater payments to brokers must be
| offset by less favorable execution prices. But that isn't
| what a new study finds.
|
| In an Aug. 13 working paper, five finance professors
| analyzed 85,000 stock trades they made through five leading
| retail brokers. They did get significantly different
| pricing through different brokers for identical orders to
| buy or sell at the current market price.
|
| But their best pricing came from a broker that takes
| payment for order flow, namely TD Ameritrade, now a unit of
| Charles Schwab. Fidelity, which takes no order payments,
| got worse prices on the professors' trades than did TD
| Ameritrade. And its prices were no better than those from
| the E*Trade unit of Morgan Stanley, which does take
| payments. Robinhood, which used revenue from order-flow
| payments to subsidize the industry's first commission-free
| trading, delivered middle-of-the-pack pricing. Interactive
| Brokers ranked last in the execution pricing of the
| professors' orders.
|
| That's from https://news.bloomberglaw.com/mergers-and-
| acquisitions/matt-...
|
| Excerpted Barron's:
| https://www.barrons.com/articles/payment-for-order-flow-
| sec-...
|
| Paper:
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4189239
| Anon1096 wrote:
| There is nothing in that statement that actually shows
| negative effects of PFOF.
|
| > creating an inherent misalignment between these platforms
| and their customers
|
| is just speculative harm, and as to the other part about
| preventing risky trading - this is literally what Robinhood
| et al customers want!
|
| Meanwhile PFOF actually does have proven benefits in that
| it reduces spread for retail investors.
| throwacomment wrote:
| Yes, PFOF is woefully misunderstood but its very much not win
| win win.
|
| The reason its bad is because its anti-competive and gives
| them information that no-one else has access to.
|
| By trading against you, Citadel prevents any other potential
| market maker from trading with you. With less competition,
| the spread widens and even after price improvement, you're
| paying more.
|
| PFOF also tells them who they are trading against but anyone
| else who just sees a quote doesn't know that.
|
| Generally, things are very zero sum so wins all around are
| very unlikely. But some thinking is needed to track where the
| value loss and gains are.
| wrsh07 wrote:
| Please see my other comment that provides links to a study
| that shows: yes you get the best price from a broker using
| pfof
|
| Your argument seems reasonable but isn't borne out
| empirically
|
| https://news.ycombinator.com/item?id=42378516
| wbl wrote:
| Dude, I want the market to see I'm a moron! I'm not buying
| BH because I've observed private jets between Omaha and
| Washington but because I'm saving after having been paid.
| lldb wrote:
| It is not a win. In a recent study, Robinhood with Citadel
| has the worst price improvement (execution quality) of any
| brokerage on the market. I've personally observed this -
| Robinhood might "improve" by 1/10 of a cent from NBBO while
| Fidelity is frequently closer to the mid.
| neximo64 wrote:
| Distorted incentives
| WiSaGaN wrote:
| It's not. Centralization of liquidity is better for everyone.
| HFT thrives on fragmentation of liquidity. HFT is not wrong,
| but fragmentation of liquidity is.
| rancar2 wrote:
| 1 and 2 are volume based hence 3 once the volume is there.
|
| To the OP dayone1: What's your concerns with 3 exactly?
| Double's structure is innovating on the fee front like an
| extreme Vanguard 2.0, so overall the structure (even if 3 takes
| place like Vanguard) is still the best deal on the market for
| an individual.
| nick3443 wrote:
| Be careful lending out your shares (for example on ibkr) you
| can lose your qualified dividend status.
| shmatt wrote:
| I dont know the reasoning behind this comment, but YC isn't a
| charity. The investment was made with the hopes of making 100x
| return without customers paying fees. Obviously there are other
| cashflows in play
| is_true wrote:
| Maybe they are expecting for an exit from a company buying
| them and then raising fees
| mguerville wrote:
| Or the investment was made under the assumption the business
| model to gain traction isn't the same as the future one that
| generates cash flow. Plenty of company start with a free or
| cheap product then up their pricing once the value is proven
| and there's a percentage of their users that fears the
| switching costs
| hn_throwaway_99 wrote:
| > If the answer is no, you don't sell trade flows and yes, you
| will rebate your borrow fees, can you make a lifetime
| commitment that you won't go back on your word?
|
| To be honest, why would you even ask that? "Lifetime
| commitments" are ridiculous. It's simply not a promise that any
| founder or business owner could ever make. Businesses get sold,
| circumstances change, etc. It's better to just accept that as a
| risk factor and decide whether or not you'd be comfortable
| taking on that risk.
| rcMgD2BwE72F wrote:
| >Businesses get sold, circumstances change, etc.
|
| More importantly, founders also lie about their intent.
|
| It's easier to trust owners when they commit and are ready to
| go to court over their promises. Ever heard of Lavabit?
| https://en.wikipedia.org/wiki/Lavabit
|
| It's never ridiculous to ask. What's ridiculous is for
| founders to make their customers believe they're ethical when
| they're not. Let's ask then, and you don't have too high
| expectations.
| BobaFloutist wrote:
| >Businesses get sold, circumstances change
|
| Is there really no way to put a binding bylaw in
| incorporation papers that will survive a sale? Something like
| a land-use covenant, but for a corporation?
|
| I'm not sure that's necessary for this particular case, but
| for something like private data exposure I've been playing
| with the idea that it's the only way to actually trust a
| company with your data.
| hn_throwaway_99 wrote:
| In the US, not that I'm aware of. I suppose it would be
| possible to add a "poison pill" ("If we change this, we'll
| pay everyone $X dollars") to then just make it a normal
| contract, but again essentially no company would be willing
| to do that because it extremely limits their options. Also,
| "forever" is a lot shorter than people think, it's only as
| long as the powers-that-be are in a position to enforce a
| contractual position.
| 1oooqooq wrote:
| nonsense. there's millions of ways.
|
| one is to be upfront about it on every advertisement and
| service description... can't get any easier than this.
| and is as effective as the complicated canary
| shenanigans.
| hn_throwaway_99 wrote:
| > one is to be upfront about it on every advertisement
| and service description
|
| Did you even bother reading the thread? What happens when
| your company gets sold, and all the old promises are
| thrown out the window? This has happened many times
| before (just ask Palmer Lucky about Facebook logins for
| Oculus), and that is what people are asking is
| preventable, and your suggestion does nothing to solve
| that problem.
| wbl wrote:
| The reason people pay for trade flow is the same reason they
| sit at the table of drunks when playing poker.
| dehrmann wrote:
| It's slightly different. With poker, you play with drunks
| because they make mistakes. With order flow, you want trades
| from small fish who don't have any special knowledge so you
| market make and not be taken advantage of, yourself.
| slt2021 wrote:
| Except that unlike in casino, in stock market a Designated
| Market Maker can go against the crowd and "wait it out" any
| negative downfall.
|
| Lets say customers bought GME and GME shoot up. Citadel
| just waited out until the movement fizzled out. They were
| able to hold naked short position for prolonged period of
| time (basically printing fake shares) to artificially
| increase the float
| TeaBrain wrote:
| It's more like paying for the privilege of operating a
| monopoly on poker tables, with the guarantee that the rake
| will be kept low, so that the operator is not competing with
| other entities for the customers' rake. A market maker's
| competition to collect the spread is with other market
| makers, just like a casino's main competition to collect the
| customer's rake would be a different casino.
| wbl wrote:
| Read Reg NMS before you opine on this. It's short!
| TeaBrain wrote:
| As long as the market maker is executing orders at the
| NBBO on their ATS, they shouldn't be in conflict with Reg
| NMS, even though they are the only operator with the
| ability to market make on their ATS. Paying for order
| flow allows market makers to avoid competition in
| capturing the spread at the NBBO, however small the
| spread may be, while also helping to guarantee liquidity
| to capture the spread on, by giving them the sole
| privilege to market make on those orders.
|
| Returning to the earlier poker table analogy, I mentioned
| that the operator with a local monopoly on poker tables,
| would be required to keep their rake low to keep their
| local monopolistic privilege, as an analogy to how market
| makers also have to keep their spreads in line with the
| NBBO (due to Reg NMS), in order to keep their privilege
| of executing orders on an ATS.
| TuringNYC wrote:
| >> are you going to sell your trade flow to Citadel / market
| makers like Robinhood and your competitors do?
|
| Is that really a problem if you're still getting NBBO
| (https://en.wikipedia.org/wiki/National_best_bid_and_offer)
|
| Could you explain the downside of selling order flow if you're
| getting no worse than the current NBBO?
| throwacomment wrote:
| Does anyone rebates 100% of the borrow fee or did that
| initially?
| shred45 wrote:
| Do you manage the portfolio of each customer individually? How
| closely will this match the target portfolio for smaller
| investment sizes? I see that there are minimum investment sizes.
| Do I need to buy at least one share of each member of the SP500
| for instance?
|
| How do transaction fees compare with expense ratios of, say,
| Vanguard? I see that you account for them in your backtest, but
| it would be helpful to represent that in terms of an expense
| ratio.
| jjmaxwell4 wrote:
| We use fractional shares. But otherwise you are correct, our
| minimums are set to allow you to buy at least $5 of each member
| of the US 500.
|
| We do not charge trade commissions. There are some SEC fees
| charged for trading across most major brokerages. The national
| best bid offer (NBBO) means you will get executed at the
| current best price for a given security across all exchanges.
| shred45 wrote:
| Thanks, regarding transaction fees, I was referring to
| slippage (should have said transaction cost). This depends a
| lot on your customers rebalancing settings, but it would be
| good to be able to compare that directly to VOO.
| jjmaxwell4 wrote:
| Yeah it's an interesting point. Due to the redemption
| mechanism of ETFs, my understanding is that an ETF's bid-
| ask spread is basically the weighted average of the bid ask
| spread of it's underlying holdings. Which to answer your
| questions means that buying the individual stocks within an
| ETF would result in approximately the same slippage as
| buying the ETF itself.
|
| "Bid/ask spreads of the underlying securities directly
| impact the costs to market makers to trade ETFs" from this
| .pdf: https://www.ssga.com/library-
| content/pdfs/etf/au/spdr-au-etf...
| ddulaney wrote:
| How are you tied back into the financial markets? Are you
| yourself an exchange member? Or are you going through a
| traditional brokerage? Or are there other middlemen?
|
| I'm really worried about putting my money into any startup after
| the Synapse collapse, where a middleman for lots of tech-forward
| not-a-bank companies collapsed, stranding customer money.
| jjmaxwell4 wrote:
| Your account is in your name at Apex Clearing - they are our
| Custodian and Broker Dealer. They power a lot of modern
| brokerage products like WeBull, TastyTrade, Composer, SoFi.
|
| Robinhood and Wealthfront both started their business on Apex
| as well.
|
| https://apexfintechsolutions.com/
| hn_throwaway_99 wrote:
| I saw the "Your Money is Secure" section, but after things like
| the Synapse fiasco, I would like to get confirmation from you.
|
| It says my money would be SIPC insured, which means if _anything_
| goes missing (obviously not through loss of equity value, but
| through missing funds or a ledger bug), I get my money back, up
| to the SIPC limit, right? I just want to ensure this isn 't the
| same situation with fintechs that say your money is "FDIC
| insured", but that only protects you if the bank fails, not if
| the fintech goes bankrupt.
|
| I'm just really, really wary of new fintech products to save like
| .3% on fees when I hear all these horror stories of people
| trusting fintech startups with their money any then losing 95% of
| their deposits like the Yotta customers.
| don_neufeld wrote:
| Yup.
|
| Zero interest until there is a very clear answer here.
| stavros wrote:
| Zero interest, just like my bank account.
| arcticbull wrote:
| I get like 4% at my bank. Sounds like you need a new bank!
| I'd suggest starting with Nerdwallet. [1]
|
| [1] https://www.nerdwallet.com/h/category/banking
| deathanatos wrote:
| This is always the answer that gets posted. AIUI, though,
| the decent-interest-rate accounts are only available from
| online-only banks, and as recently as last year, I was
| _required_ to visit a branch (...3, as it was...) in
| order to conduct some transactions, largely due to credit
| cards having a daily limit.
|
| (I also sort of loathe the idea of needing to continually
| update a bunch of ACH information every year while I
| chase whatever bank is currently trying to draw customers
| with a temporarily decent rate.)
|
| (And honestly the whole thing is kinda stupid every time
| I hit it. Businesses tend to give you shocked-pikachu-
| face when you can't use a CC due to the limit -- like
| you've got to know these exist? And my limit is standard,
| as they go. And daily limits are trivially circumvented:
| you just spread the transaction across multiple payments
| spread out over time. In business, this hack^W method is
| called a "payment plan".)
| dmoy wrote:
| Fidelity can get you a better rate with their treasury
| money market, which works for Bill pay / etc.
|
| They have branches in most major US cities I think.
| camel_Snake wrote:
| seconding. Recently transitioned to fidelity's cash
| management account and have done a cash advance on the
| debit card at a local, non-affiliated bank with 0 fees
| involved.
|
| Checks the boxes for me, personally.
| dmoy wrote:
| You don't even need to use the official CMA, just a
| regular old brokerage account ticks basically all the
| boxes (debit card, checks, bill pay, etc)
|
| But yea there's a CMA too
|
| _ostensibly_ the CMA offers better atm reimbursement,
| but then the brokerage debit card also does, so that 's
| weird.
|
| The major difference:
|
| sweep in CMA is FDIC, the brokerage is SIPC (but held in
| treasuries). The underlying thing (US government ) is the
| same, but FDIC has way better turnaround. But because
| it's FDIC on the underlying bank (Fidelity has no banking
| charter), it's not clear to me how much benefit that even
| is.
|
| FDIC turnaround is faster, but only for failure of the
| underlying bank, not fidelity. If fidelity fails, you'll
| still have some SIPC latency to resolve things, instead
| of single-business-day FDIC awesomeness.
| neilv wrote:
| https://www.fidelity.com/spend-save/fidelity-cash-
| management...
|
| (Note that SPAXX was up to about 5% 7-day yield within
| the last few months, IIRC, but currently 4.25%.)
| matwood wrote:
| Open a brokerage account and buy SGOV with your cash
| savings. Done.
| chasebank wrote:
| IIRC, FDIC only covers the deposits if the underlying bank
| fails, not the fintec layer built on top of it. Please correct
| me if I'm wrong.
| hn_throwaway_99 wrote:
| That's literally exactly what I wrote in my comment.
| chasebank wrote:
| Either coffee hadn't kicked in yet or an edit on the
| parent? Not sure but I definitely missed it. Probably the
| coffee.
| jacobr1 wrote:
| So how does it work now with bank fraud or technical issues?
| Ignore the fintech layer for a moment, just consider a bank
| like Chase or Wells Fargo. If their mobile app causes an
| erroneous transfer, or the backend removes money from your
| account or maybe doesn't give you the expected interest
| amount your saving account due to a bug ... what is the
| recourse? For a reputable company, even if their support is a
| hassle, they'll probably make you whole eventually. But
| presume they don't address the issue or repeatedly have
| widespread issues, what then? Do banking regulators step in?
| Does the public just need to rely on torts and threat of a
| suit or bad press?
| freeone3000 wrote:
| The consumer finance protection bureau is your best bet.
| Banking regulators will also get involved for patterns of
| conduct, but this can take years.
| dboreham wrote:
| Isn't that getting deleted after January?
| freeone3000 wrote:
| Elections have consequences.
| JumpCrisscross wrote:
| > _consumer finance protection bureau is your best bet_
|
| Usually not. Your best bets are your state banking
| regulator and AG. After that, the FDIC and Fed.
| schmidtleonard wrote:
| One time a bank tried to stop me from moving my money to a
| new bank. It was reasonable for security to be high, of
| course, but not prohibitively so. After an in-person visit
| and a 30 day waiting period they "rejected my request," no
| reason given, no response to my request for a reason given,
| and told me to try again in 90 days.
|
| Someone on HN suggested getting the comptroller involved. I
| think I found a state office called the comptroller, but it
| might have been the federal one? In any case, the moment
| they showed up in a conference call the bank transferred me
| to someone important, stopped fooling around, and made the
| transfer happen. The person at the comptroller office never
| got past the asking questions stage, but the bank's
| behavior changed _immediately_ in a way that suggested they
| recognized the smell of authority. So that 's my keyword
| suggestion: comptroller.
| runako wrote:
| This from the site feels reassuring: "Your funds are held in
| your name at Apex Clearing, one of the largest US Custodians
| holding over $114B in funds."
|
| The "in your name" part is specifically what I was looking for.
| hn_throwaway_99 wrote:
| Yeah, FWIW I _think_ their disclosures look good, but I want
| some explicit reassurance. I want to ensure "in your name"
| is not the same thing as "for benefit of".
|
| The thing that actually gives me the most reassurance is that
| they say definitively that they are a Registered Investment
| Advisor. In the Synapse situation, all the regulatory
| agencies were essentially saying "not my problem" because
| Synapse itself wasn't covered under any explicit regulatory
| regime. That doesn't seem to be the case here, but I'd feel
| better if the founders said something along the lines of
| "This is how we're different from Synapse..."
| jjmaxwell4 wrote:
| The account is opened in your name and your securities are
| held in your name at Apex Clearing. Apex has more than 19M
| brokerage accounts opened.
|
| We are Registered Investment Advisor (RIA) regulated by the
| SEC.
| e1g wrote:
| If you want to hold people's _serious_ money and not
| _play_ money, understand that priority #1 is not growth
| or expense ratios - it 's risk mitigation. Swiss banks
| are notoriously expensive and have terrible investment
| products that hold trillions because of their obsession
| with protecting capital.
|
| As a startup, you must figure out how to convince
| ordinary people to change their family safety net. Full
| transparency, audits by a known firm, and an entire
| brochure/mini-site explaining every significant fintech
| failure, showing how my money would remain safe if that
| scenario happened again.
| tippytippytango wrote:
| Fintech needs a lot more regulation if people are having to
| worrying about this kind of nuance to engage with the
| business.
| drewbitt wrote:
| I lost thousands of dollars with Snyapse's collapse, and
| there's still no update on getting any money back. It is
| a real concern, and something many are pushing on to
| regulate + rule over, but so far there's no bite.
| bachmeier wrote:
| > I'm just really, really wary of new fintech products to save
| like .3% on fees when I hear all these horror stories of people
| trusting fintech startups with their money any then losing 95%
| of their deposits like the Yotta customers.
|
| That's immediately the scenario that comes to mind when I see
| any of these offerings (this one might be perfectly legit, but
| the reality is that I have no way to know). Then I remember
| George Costanza exploiting a loophole to save money by seeing a
| holistic healer: https://www.youtube.com/watch?v=8uVSKgMpnuo
| shmatt wrote:
| This would explain only $10M in AUM within 3 months. Id guess
| just the commenters on this thread hold 10x that in etfs and
| funds
|
| If a big bank launched this it would have $1B in AUM within
| less than an hour
| TuringNYC wrote:
| >> If a big bank launched this it would have $1B in AUM
| within less than an hour
|
| I love the M1 product (and while I am not a Double customer,
| I love the value proposition). Note that ShareBuilder
| (eventually Capital One), FolioFN have tried and didnt get
| traction.
|
| Fidelity has "Fidelity Basket Portfolios" and I'm assuming
| they have no traction -- the product is broken 3 of 5 days of
| the week, and almost nothing works. I could file a dozen Jira
| SEV-1 bug tickets "Fidelity Basket Portfolios" is so bad.
|
| Chase has a basket product but it is barely surfaced on their
| OneVest menus.
| jjmaxwell4 wrote:
| If Double goes out of business, your assets are safe and held
| in your name at Apex Clearing. They have processes in place for
| these scenarios to help you access and transfer those assets.
|
| SIPC protection covers against a brokerage firm failing, which
| in our case is Apex Clearing. We are not currently a brokerage
| so SIPC would not apply if Double goes bankrupt.
| TuringNYC wrote:
| >> If Double goes out of business, your assets are safe and
| held in your name at Apex Clearing. They have processes in
| place for these scenarios to help you access and transfer
| those assets. >> SIPC protection covers against a brokerage
| firm failing, which in our case is Apex Clearing. We are not
| currently a brokerage so SIPC would not apply if Double goes
| bankrupt.
|
| Dear @jjmaxwell4 -- I'm not really worried about your service
| given you're a layer atop Apex, however, this is a very
| common conversation happening right now on many forums --
| could you clarify a bit more, how one would "get comfortable"
| with a new product?
|
| I'm assuming the list is something like this, but that is an
| non-expert guess:
|
| - Is the institution i'm interacting with regulated (in your
| case, Yes, Double is regulated by The SEC)
|
| - Who holds my funds, and are they regulated (in your case,
| the funds are held by Apex Clearing, and if I understand
| correctly, Apex is a broker dealer regulated by The SEC)
|
| - Are the funds held in my name or pooled in with other
| money? (in your case, I think the funds are held by Apex only
| in my name)
|
| I think one of the problems with the Yotta/Synapse/Evolve
| collapse is -- its unclear how one even evaluates their level
| of risk.
|
| It is also unclear how one validates SIPC coverage, like
| could I go to SIPC and enter an account number and validate
| the funds are actually covered somewhere across the layers?
|
| Would be great for someone who knows this area to comment.
| AznHisoka wrote:
| Ditto. I would really love to know if theres a site where
| you could enter the ID of a company and tell me if SPIC
| really backs them up..
| makrmark wrote:
| Appreciate diving into the details!
|
| You can sign up directly with Apex (completely separate
| login) and view your holdings in your name in their web
| portal, along with all documents that Double sends you on
| your account activity. The process requires a bit of
| verification so I've written up a help article here on how
| to get set up:
| https://help.double.finance/en/articles/10262406-how-can-
| i-v...
| bboygravity wrote:
| Search keywords: Apex clearing and trade 385.
|
| They're basically criminals. A guarantee by Apex is worthless
| IMO.
| eagleinparadise wrote:
| Alright, I did the google search based on your incendiary
| comment and whatever you're trying to suggest does not seem
| to be the case.
|
| pg 79: https://democrats-
| financialservices.house.gov/uploadedfiles/...
|
| "Apex provides these same clearing services to many other
| introducing brokers, including Ally Invest, Betterment
| Securities, M1 Finance, Marcus by Goldman Sachs & Co., SoFi
| Securities, Stash Capital, Tastyworks Inc., TradeZero
| America Inc, and hundreds more"
| fancyswimtime wrote:
| we gettin a fan made doco on it,
| https://www.youtube.com/watch?v=opDJq1fnoRM
| hn_throwaway_99 wrote:
| > SIPC protection covers against a brokerage firm failing,
| which in our case is Apex Clearing. We are not currently a
| brokerage so SIPC would not apply if Double goes bankrupt.
|
| I thank you for being upfront and honest about this. The
| tough spot you'll find yourself in, then, is that if any
| money goes missing between you and Apex, customers are
| completely SOL. This is not a theoretical risk, this is
| _exactly_ what happened in the Yotta /Synapse fiasco. Even if
| I trust that you guys are much better technologists than
| Synapse, would I be willing to take that risk for a teeny,
| teeny reduction in fees compared to an index ETF? Sorry, not
| for me.
|
| EDIT: Wanted to put an edit up here so that it doesn't get
| lost. Thanks for your response below - for me, that was the
| critical information I needed, that I can _directly_ verify
| that my SIPC-insured funds are held by the SIPC-insured
| entity. That was indeed _not_ the case with Yotta /Synapse
| (and, indeed, most fintechs who keep customer funds in an FBO
| account at a partner bank), so I really appreciate the
| clarification. FWIW, I think it might be worth it to add a
| small blurb in the "SIPC Insured" section saying that your
| insured funds can be verified at any time.
|
| Kudos, you guys have thought through a good deal of the
| important details, and sufficiently assuaged my concerns.
| jjmaxwell4 wrote:
| I'd argue the specifics are quite a bit different than
| Yotta/Synapse.
|
| We do not hold any funds ourselves. You connect your bank
| and ach/wire money to an Apex bank account. You can verify
| your holdings via apex anytime (see:
| https://help.double.finance/en/articles/10262406-how-can-
| i-v...)
| yottathrow wrote:
| Yotta does not hold any funds themselves. You connect
| your bank and ach/wire money into an Evolve bank account.
|
| The problem is that unbeknownst to users, Evolve had no
| record of what belonged to which user--it all came via
| Synapse on behalf of Yotta. And when Synapse went
| bankrupt, everyone pointed fingers about where the money
| is and who it belongs to.
| hn_throwaway_99 wrote:
| Will reply directly to your comment, as I started the
| concern in this thread, and I think it's important to
| point out that the situation _is_ materially different
| based on what jjmaxwell4 has responded.
|
| With Evolve, money was just pooled into an "FBO" ("for
| benefit of") account, and not ledgered directly to
| individual users. This is apparently not the case with
| Apex _since you can verify your balance with them
| directly_. They report your balance, so if any money goes
| missing, you should have an insurable case with them
| directly.
| FactKnower69 wrote:
| >I'm just really, really wary of new fintech products to save
| like .3% on fees
|
| off by an order of magnitude, you're saving 0.03% on fees
| pkkkzip wrote:
| in the long run its negative because order flows are sold to
| hedge funds who ultimately trade against the masses.
|
| I'm also not sure I would trust any fintech startup from YC
| after Yotta and Coinbase.
|
| Matter of fact, I increasingly find YC rewards unscrupulous
| and morally cavalier founders and products that does more
| harm to society than good.
|
| i find myself increasingly growing wary of YC affiliated
| founders not to mention the obvious CCP money involved.
| coldpie wrote:
| I'm not super well versed in how investing stuff works, so sorry
| if I get some words wrong. This isn't a fund I'd be able to
| purchase from my existing brokerage/retirement accounts, right? I
| would have to actually give my real money to you (via "Apex
| Clearing," who I've also never heard of & doesn't even have a
| Wikipedia page) to hold & manage? Even in the best of times, it'd
| take quite some convincing for me to give a significant amount of
| money to a brand new company, and the reputation of recent
| finance startups is uhhhhhh not fantastic. How are you going to
| convince me you won't take my money to go buy some property in
| the Bahamas?
| jjmaxwell4 wrote:
| You are correct in your understanding.
|
| Apex Clearing's website is here:
| https://apexfintechsolutions.com/ They have 19M brokerage
| accounts and a lot of brands you've heard of got their start
| with Apex (Robinhood, Wealthfront)
|
| We're US based and regulated a RIA by the SEC.
| coldpie wrote:
| I've never heard of Wealthfront, and I know Robinhood mostly
| for exploiting low-info customers & trying to make investing
| even more like gambling than it already is[1]. Pretty gross
| company to be keeping IMO.
|
| [1] https://www.velaw.com/insights/game-over-robinhood-
| pays-7-5-...
| Workaccount2 wrote:
| Investing is not the same as trading, which is what
| Robinhood primarily caters too.
|
| Also Apex is a big name in the brokerage world. They are a
| business to business company though, so most consumers
| never would have heard of them.
| coldpie wrote:
| > Apex is a big name in the brokerage world
|
| But not big enough to have a Wikipedia page? Are you sure
| they're not just a big name in the financial
| startup/casino/scam world?
| esses wrote:
| They have been around as a significant service provider
| for over a decade in a highly regulated industry. Ask
| anyone in the brokerage world and they will not care if
| there's a Wikipedia entry. They are a huge player and
| have been for a while.
| paxys wrote:
| You should in fact be worried if they were a fund, because then
| you are giving them your money to manage. They are instead a
| brokerage, so they money you deposit will simply be used to buy
| shares. If they go under, you still own the shares.
| recursive wrote:
| Thanks to this comment, I was finally able to comprehend what
| "brokerage" actually means. Thanks.
| tschwimmer wrote:
| I like the idea behind this business and like the value that you
| are providing. I'm a target customer because I'm sensitive to
| investment fees and have done lots of comparison shopping over my
| investing lifetime.
|
| Unfortunately, I won't use your product. While you do appear to
| be cheaper than Vanguard for a comparable product, I don't think
| the risk of switching is worth it. The primary risk I'd be
| worried about is your business model changing (or you getting
| acquired by legacy finance) and increasing fees down the line, at
| which point I'd feel like I'd want to switch back to Vanguard.
| I'm also worried about exposing myself to your organizational
| risk (e.g. your internal controls failing and an employe running
| off with the money, your accountant falling victim to a deepfake
| scam, etc.) which I suspect is going to be much higher than your
| competitors. For the additional .17%, I actually feel that
| Vanguard is a damn good bargain.
|
| I think your product actually does have a lot of value for folks
| invested in crappy mutual funds or with some advisor taking a
| massive AUM fee, but I don't really think those consumers are
| generally lacking the information required to understand that
| your product is superior, I think they're just going for
| something different.
|
| It's a tough spot. The market size is obviously tantalizing but I
| feel like the segments are all reasonably well served as it
| stands. For the folks that you're really targeting, I think it's
| very hard to beat Vanguard. Their corporate structure and huge
| size really gives them a massive advantage that seems hard to
| beat. Best of luck to you folks!
| jjmaxwell4 wrote:
| Appreciate the thoughtful response. I hear you on switching
| costs being quite high for a brokerage and its very much a
| considered purchase. I'd love for Double to be considered in
| the future.
| maerF0x0 wrote:
| This can be a real thing when companies are charging $25-$40
| for ACH Transfer fees (per account) meaning a switch can cost
| $100.
|
| One piece I'm curious about is spreading investments around
| simply for more FDIC / SIPC insurances? Is that something that
| rich people do?
| eithel wrote:
| > charging $25-$40 for ACH Transfer fees (per account)
|
| Do you mean ACAT fees? I haven't seen many accounts charging
| for ACH fees as those are basically free. Only Wise
| (Transferwise) charges for it from my experience.
|
| If it's ACAT fees, a lot of brokerages (not Vanguard) will
| reimburse you the fees if the account balance you are
| bringing in is big enough, I've noticed.
| LocalPCGuy wrote:
| Same sentiment here - I feel like this is the largest challenge
| for people that would otherwise be ideal candidates. I wasn't
| even willing to move off one of the largest brokerages for the
| semi-recent Robinhood 3% "transfer deal" just because even
| there I felt like it was too much risk (granted, that was for a
| retirement account).
|
| For someone that has quite a bit of my portfolio in very low
| cost index funds, something like $40k does seem like a
| relatively low "fee" for avoiding risk, especially considering
| it's spread over many years.
|
| That said, I do like the idea, and hopefully there are enough
| folks willing to tolerate the risk to provide a viable
| alternative to the big status quo brokerages.
| redrove wrote:
| I wish you had been more clear this is US only.
|
| I had to sign up, verify my email, tried opening an investment
| account, had to untick I'm a US citizen/resident and only then
| did your platform let me know I'm not welcome as a client.
|
| Oh and PS there's no way to delete an account is there?
| jjmaxwell4 wrote:
| Sorry about that - we will try and make this clearer. I am
| happy to delete your account for you. Please email us at
| support@double.finance.
| rinz wrote:
| Any plans to go beyond US? I am guessing it is a huge hassle
| though...
| otherjason wrote:
| If your roboadvisor is buying the individual stocks that make up
| the index in my personal account for me, do you have data that
| compares the slippage (bid/ask spread) paid across all of these
| transactions versus a single purchase of very liquid ETFs like
| SPY?
| short_sells_poo wrote:
| You can likely purchase the stocks in the closing auction which
| should give you the official settlement price that ETFs get
| benchmarked on.
|
| Stocks are not my area of expertise so I gloss over a lot of
| details... maybe and equity trading specialist can chime in?
| jjmaxwell4 wrote:
| Great question. The bid-ask spreads of the ETF itself already
| take into account the bid-ask spreads of the underlying
| securities, since there exists an arbitrage opportunity via the
| ETF redemption mechanism.
|
| I found this PDF from State Street quite informative on the
| topic. We are working on our own data here as well and aim to
| share that down the line.
|
| https://www.ssga.com/library-content/pdfs/etf/au/spdr-au-etf...
| taway789aaa6 wrote:
| > The Firm assesses fees monthly, in arrears. Fixed fees are
| $20/month, in arrears. Fees are debited directly from client
| accounts.
|
| If the fee is $1/month, why does your form ADV state that fixed
| fees are $20/month? https://double-
| disclosures.s3.amazonaws.com/Double+Finance+A...
| jjmaxwell4 wrote:
| This is an older version of our Form ADV - we're fixing this
| now. We've updated our ADV with the SEC but this link remains
| attached to our older one.
|
| This is our current latest filed with the SEC:
|
| https://files.adviserinfo.sec.gov/IAPD/Content/Common/crd_ia...
| taway789aaa6 wrote:
| What led to the 95% decrease in fixed fees?
| Kenbook wrote:
| Great idea, excited to watch you guys grow!
| short_sells_poo wrote:
| I'm unsure how you are proposing to build a sustainable business
| with such low fees. Assuming you need say 5 full time employees
| to run something like this somewhat robustly, and back of the
| envelope your expenses are say 2 million a year (which doesn't
| afford you to pay anyone particularly well), you'll need a 160k
| users (!) and you are only breaking even. And you have no chance
| in hell to provide decent support for that many users in an area
| as gnarly as finance. You'll be facing a firehose of support
| requests all the time.
|
| I'm sorry to sound negative, I really wish you all the best, but
| even from your post it looks like you had little to no idea what
| you are doing when you started this (you didn't know stock
| tickers are ephemeral?). And yet you are asking people to trust
| you with their money? With the only selling point being that you
| seem to be unsustainably cheap? What made you decide that you
| have the knowhow to do this well and safely?
| Workaccount2 wrote:
| I think by going only after people looking for long term buy
| and hold, the overhead drops dramatically.
|
| Dealing with traders is where all the nightmare stories come
| from.
| mitthrowaway2 wrote:
| Who controls the voting rights to the shares purchased through
| these investments?
| taway789aaa6 wrote:
| Great question! Keep in mind that ETFs in general are designed
| to NOT give you the rights to the underlying shares, or to vote
| as a shareholder. An ETF is a derivative, not an asset unto
| itself. It sounds like this product is mainly to allow people
| to invest in ETFs not into single tickers?
| makrmark wrote:
| You have the ability to vote as the underlying shares for your
| direct index on Double are all purchased in your name.
| mitthrowaway2 wrote:
| That's great news! Thanks for the answer!
| burkaman wrote:
| I'd consider this if you had some kind of "green" fund that
| excludes oil companies and other polluters. I don't want to
| invest in the oil industry, but funds like that tend to have
| pretty high fees and expense ratios.
| jjmaxwell4 wrote:
| You can do this quite easily with Double. If you pick the US
| 500, you and completely remove the Energy Sector.
|
| We are working on getting some more ESG focused portfolios
| directly live but it's very very do-able right now.
| aquigley wrote:
| Cool product! But I would love for this to have a decentralized
| backend using tokenized assets as the securities. It would help
| me solve the trust issue with yet another new FinTech startup and
| then I wouldn't mind letting you collect the PFOF if I could swap
| out backends if needed. Or can let the community develop the best
| strategies/factor tilts/tax alpha for each individual's unique
| situation.
| vincefutr23 wrote:
| For the PFOF skeptics, there isn't that much money in pfof on
| liquid large cap stocks.
|
| For the founder, have you thought about doing away with the 1$
| for friction reduction while you scale given how tough the
| switching decision can be?
|
| For the founder, have you considered using ACAT in incentives as
| a differentiated acquisition tool?
|
| For the founder, are their "moments" people often switch their
| brokerage you could target aggressively? Ie I imagine Johnny
| software, 28 , is a hard sell to sit down and port their holding
| over from fidelity to save a couple of BPS, but maybe people
| starting their first job? Setting up a retirement plan? What's
| your target "moment"?
| koolba wrote:
| How do you intend to make enough money to stay a going concern?
| Charging $1/mo adds up to peanuts and peanuts will not paying the
| salaries needed for running a highly regulated industry like
| this.
|
| What are some examples for real world tax loss harvesting of this
| versus just rotating between things like VTI, SCHB, and ITOT?
|
| I can't imagine it's going to be meaningfully more tax savings
| versus the monumental pain in the ass of dealing with hundreds of
| lots of many different stocks.
| kccqzy wrote:
| Retail brokerages earn most of their money from uninvested cash
| from their customers. An easy strategy is to force customers to
| keep a few percent of AUM as cash.
| koolba wrote:
| And savvy investors avoid those platforms or manually move
| their cash holdings into money market funds.
|
| Requiring people hold some minimum cash amount is just
| charging a fee with more steps involved.
|
| And even the larger offenders of that approach are in the
| crosshairs: https://news.bloomberglaw.com/securities-
| law/wall-street-gia...
| kccqzy wrote:
| Yeah I'm in the latter camp where I manually move to money
| market funds. I don't avoid these platforms because I treat
| the uninvested cash as a checking account: my bills are
| paid through this account. I feel better comparing it
| against a regular checking account that pays zero interest.
|
| To be frank, I do not think it should _require_ people to
| hold some minimum cash amount. Rather, the brokerage can
| require that buying securities with this reserve cash
| should be manual, and not automatic. That still gives savvy
| investors a way to do it manually.
| ahstilde wrote:
| Where's the calculator that tells me if I save money with y'all
| vs with current legacy brokerages (schwab, fidelity, vanguard,
| etc)?
| tlombardozzi wrote:
| Excited to try this out JJ. Have wanted to build an
| infrastructure-focused portfolio for a few months now and am
| excited to have an actual tool to help me build it now!
| sumanyusharma wrote:
| I'm actually pretty interested in what you're building. Sure,
| Vanguard and Fidelity are well-established giants, but they've
| barely moved beyond standard ETFs for decades. Having the option
| to tweak weightings at a more granular level and do daily tax-
| loss harvesting at scale seems like a genuine step forward.
|
| I also like that you're transparent about how you might
| eventually introduce additional revenue streams like margin
| lending or maybe even PFOF. Knowing that upfront is better than a
| sudden terms-of-service surprise down the road. Still, I'd hope
| you'll consider giving users some say over how their shares are
| handled -- like opting out of lending -- so your incentives stay
| aligned over the long run.
|
| Congrats on hitting $10M AUM. I'm rooting for more low-fee
| alternatives that keep the user in the loop!
| soared wrote:
| Fidelity has innovated a ton and they have this exact product,
| though I don't know the fees.
|
| Fidelity is very much into new fintech ideas and products..
| they were mining crypto very early on.
| sumanyusharma wrote:
| Appreciate the info; I'll double-check Fidelity again!
| ac29 wrote:
| Fidelity has a few direct indexing products.
|
| Here is one that is $5/month:
| https://www.fidelity.com/direct-indexing/customized-
| investin...
|
| I'm curious if Double has any advantages over this offering
| other than price. While I'm not personally interested in
| direct indexing, if I was I would absolutely be willing to
| pay the extra $4/month to do it at Fidelity vs some unknown
| startup.
| TuringNYC wrote:
| >> Fidelity has innovated a ton and they have this exact
| product, though I don't know the fees. >> Fidelity is very
| much into new fintech ideas and products..
|
| Fidelity has a competitive product called Basket Portfolios
| and it is so buggy as to be almost unusable. The bugginess
| has existed for many months and they do not even seem to
| care.
| parsimo2010 wrote:
| So a "typical" ETF costs me about 0.15% year, or around $150 for
| every $100k I have invested. While $12 per year would certainly
| save some money, it's coffee money vs. life savings money. I
| think you're going to have a hard time convincing me to move from
| offerings from companies like Barclays, Schwab, or Vanguard.
| Plus, zero fees doesn't save me any money unless you can stay
| within 0.15% of the big index funds you're going to be compared
| too. If you're selling to harvest tax losses, I'll bet there are
| some deviations at the fractions of a percent level that might
| erase all my savings.
|
| Move fast and break things works great for computer startups, but
| if you want me to move my life savings over I need more
| confidence that you're going to be around in 40 years and still
| have my accounts intact. And if I'm not bringing my life savings
| over, then it's not worth the effort, because investments at the
| $10k level don't really save me money.
|
| Good luck finding early adopters who have money to throw at
| investment schemes.
| the_snooze wrote:
| >Move fast and break things works great for computer startups,
| but if you want me to move my life savings over I need more
| confidence that you're coming to be around in 40 years and
| still have my accounts intact.
|
| That's exactly my opinion of this. It's fine to innovate, but
| when you're dealing something like life savings, long-term
| stability is the most important requirement that comes to mind.
| Anyone building an investment firm on VC money is immediately
| suspect, because VCs don't particularly care about long-term
| viability.
| losvedir wrote:
| I think direct indexing with TLH is a useful tool particularly
| when you are looking to diversity out of a large existing holding
| (say a bunch of RSUs or something from a public company you've
| worked at for a while). The direct indexing piece is nice because
| you can build "around" your existing holding, which you can't do
| with, say, VOO. And the TLH is nice because you have a lot of
| capital gains in your position to offset.
|
| This is something you can do with, e.g. Fidelity's FidFolios, but
| those are paid for via an AUM fee.
|
| Can you do the same here? That is choose an index, but seed it
| with some amount of shares that you already hold?
|
| Another potential annoyance is filling out your tax return. Can
| you talk a bit about how that would work, with all the trades
| throughout the year you'll be doing?
|
| I'd also love any more info you can provide on how exactly you do
| TLH. A factor model linear optimization problem is interesting!
| When I talked to my Fidelity advisor she pitched it as the pair-
| wise solution you mentioned, and gave an example of "sell Pepsi
| to buy Coke". But while the drinks are interchangeable, I'm not
| convinced the companies are! So I'm still a little hesitant on
| the idea of TLH at all.
| jjmaxwell4 wrote:
| We can ACAT in existing positions to an Index yes, which would
| be "seeding" an index with shares you already own.
|
| As for taxes, we provide a yearly summary for realized gains
| and losses that most tax professional can plug into their
| software.
|
| And for TLH, yes for larger portfolios (above 20 tickers) we
| create a factor model of the portfolio using 4 factors -
| Momentum, Value, Quality and Min Volatility. When a stock is
| identified for TLH purposes, we will sell it and try and bring
| your overall portfolios factor exposure back in line. This
| provides for a much more flexible and robust way to do tax loss
| harvesting because not every stock has a relevant pair (for
| example a stock that just recently merged with another business
| might have no clear comparables)
| insane_dreamer wrote:
| Looks like a great product. In all honesty though it would take a
| lot to get me to switch from Wealthfront because they not only
| offer these funds but also various IRA funds, bonds, etc. I like
| having everything in one place, and I don't have the time, nor
| sufficient knowledge of the market (if I'm honest with myself),
| to micro-manage my investments, so I can put up with a 0.25% AUM
| fee to "set it and forget it". But for those want more control or
| who are trying to reduce fees as much as possible, this looks
| great. Good luck.
|
| Update: Having said that, the fact that you say stocks are held
| in an account at Apex in my own name (avoiding the Synapse
| problem), is attractive. I'm actually not sure whether
| Wealthfront does that. That would be an incentive to get me to
| switch (or at least partly).
| ahstilde wrote:
| I like the inclusion of a backtesting tool. However, I find it
| quite anemic.
|
| I was hoping to see something like portfoliovisualizer to create
| strategies that I could then invest into. Especially as we're
| seeing stuff like momentum strategies and dual momentum
| strategies come into play.
|
| I understand I can replicate SPY. Can I replicate MTUM? UPRO?
|
| Also, MIDU is missing.
| jjmaxwell4 wrote:
| Thanks - worked hard on the backtester despite it not being
| front and center product wise.
|
| We currently have 50+ strategies. About 30 of these replicate
| popular ETFs. MTUM is one of them
| (https://double.finance/p/explore/124). Here are our 4 factor
| focused portfolios (https://double.finance/p/explore/factor-
| thesis). If there are more you want to see please let us know
| as we can most likely add them.
|
| MIDU is unfortunately not eligible to be traded on a fractional
| basis by Apex. Main things missing are some new/low volume ETFs
| and ADRs (although we have some of them).
| ddgddg wrote:
| much hate here; but mostly it is transparent jealousy arising
| from frustration about the great global money game being unfair
| and many educated and deserving ppl having no hope of ever making
| it off the bottom rung.
|
| But jjmaxwell4 don't let any of that distract you
|
| 1. This problem (solid, simple, inexpensive) direct indexing is
| totally real 2. Congrats on identifying this and getting going on
| it 3. All your best customers are almost certainly _not_ posting
| on reddit. Again don 't let it distract you. This is a great idea
| 4. Pricing
|
| While you don't want to price on AUM, 1$ is going nowhere fast,
| and as someone who is jazzed to be an early customer, I would
| really appreciate it if I could pay more than 1$ (along with
| everyone else out there) to ensure that the lights stay on and
| you don't feel pressure to sell to a trash retail bank who will
| just pepper me with lame cross-sells
| mritchie712 wrote:
| same here, $1 makes me wonder how you'll stay alive.
|
| I don't want to wonder.
| giantg2 wrote:
| Makes me wonder how me as a customer will get fucked when
| things change in the future. Because you know the
| institutions they do business with won't accept getting
| fucked. It usually ends up on the customer. There is no end
| of financial providers with examples - start ups and
| established. The only real difference is the big guys get
| bailed out.
| htrp wrote:
| growth at a loss and ever increasing vc funding....
|
| think it'll be difficult for them to be around 3 years from
| now (in their current form)
| jjmaxwell4 wrote:
| Appreciate the kind words and feedback.
| giantg2 wrote:
| Some might say this already exists with stuff like VOO. When
| you're averaging 10-15bp, that should be a good deal. Concerns
| like you raise about keeping the lights on, change of
| ownership, or other's concerns about sub optimal execution are
| real. I'd pay $1K on $1M for the piece of mind.
| Workaccount2 wrote:
| I mean, $12/yr is not a lot, but if the platform is geared for
| long term investing and not trading, I'd imagine that in any
| given month 95%+ of accounts are doing nothing but sitting
| static and handing over $1.
| UncleMeat wrote:
| Even if there are no trading costs, 12/y gets you one modest
| developer salary for every 10,000 customers.
|
| How big is the addressable market here?
| gdudeman wrote:
| Wealthfront has struggled to grow with a 0.25% fee - so $25
| annually for every $10,000 deposited.
|
| Marketing and operations account for a lot!
| koolba wrote:
| $1/mo x 12 months x 10,000 customers = $120,000
|
| But that will not pay a modest developer salary. The
| corporate side of FICA is 7.62%. Also add in health
| insurance, a retirement plan, office space, a computer for
| the developer ... and that's just the human side. There's
| all the corporate costs (e.g., servers) and regulatory
| filings.
|
| The only play I can see with something like this is to ride
| it out and hope some established player buys you out for
| the tech.
| UncleMeat wrote:
| Sure, we can quibble. If they are intending on paying
| competitive bay area salaries they'll be paying much
| more. Or maybe they can build the bulk of their
| engineering team in Warsaw or whatever and pay less.
|
| I picked a number on the lower side to be generous.
| Whether this pays for one developer, half a developer, or
| a quarter of a developer doesn't fundamentally change the
| big problem: you need a lot of users to cover even a
| small team and the total addressable market here is
| small.
| aeyes wrote:
| They still have to rebalance all the time.
| ac29 wrote:
| Most indexes are capitalization weighted, so they don't
| ever need to be rebalanced.
| ikourtid wrote:
| _PAYMENT-FOR-ORDER-FLOW IS GOOD FOR YOU_. There, I said it.
| [Source: I have 10 years of HFT / market making experience]
|
| PFOF is misunderstood, as others pointed out here. However, it's
| not a 'win win win'; it's more like a 'win win lose'. This is
| something even media gets wrong _all_ the time. I 've only seen
| this mentioned as a footnote in Matt Levine.
|
| [Note: I don't know if Double is doing it, or if they plan to -
| this is just a general summary].
|
| So:
|
| * Win: Citadel (etc.) make money by trading against order flow
| that's more benign than the resting orders in public exchanges.
|
| * Win: The client gets a better execution price than the publicly
| displayed bid/ask. Back when I started (20+ years ago, yes, I'm
| old) this was 1/100 of a penny, the legal minimum (due to minimum
| tick print size). But recently, the market orders in my personal
| account have been getting price improvement of almost half the
| spread.
|
| Things are a bit different in some _options_ exchanges, where
| retail flow gets some priority, regardless of when you joined a
| given price point at the order book queue. But almost all equity
| exchanges use price-time priority, you 're almost guaranteed
| adverse selection.
|
| Example for those who may need it: if you place a buy limit @
| $1.07 in a 1.07 (bid) - 1.08 (ask) market. Then, the bids at 1.07
| slowly disappear, because firms such as "Shark Holdings, LLC"
| (the trading firm consisting solely of quants with
| unpronounceable foreign-sounding names) will cancel their bids if
| they sense the market is going down, e.g. if they observe a lot
| of trades at the bid. Then, the new market will be 1.06-1.07, and
| you will have sold at the ask.
|
| OK, so here's who _loses_ : any large orders that have to trade
| in the open markets (not 'dark pools', ATS, etc.) will be stuck
| with more 'toxic' orders, and get worse execution. The question
| is: do I gain more as an _individual_ from having my (quasi-
| entertainment-value, usually small) personal account orders get
| better execution? or do I lose more by having my _indirect_
| trading (possibly an index fund that I hold my retirement money
| in) get worse execution? I think it 's the latter. But nobody
| connects the dots and/or seems to care. [Of course, this is more
| complicated, because large institutional orders aren't 100% on
| behalf of small investors.]
|
| You may say this component of market structure is
| stupid/wrong/suboptimal. I personally think so. But this is the
| reality of it. It's encased in rules. There was some attempt to
| get rid of PFOF a couple of years ago, but it failed. So that's
| not going away.
|
| So this is a win-win-lose: it's globally suboptimal, but for the
| 2 first 'wins', it's locally optimal.
|
| Summary: although PFOF has bad optics and stimulates pitchfork-y
| instincts ("big bad evil companies are out to gitcha", etc.), if
| your broker doesn't do it, you're both leaving money on the table
| - and guess what, they'd have to charge you some other way.
| shenoybr wrote:
| For a large, highly liquid ETF like SPY, it's easy to rapidly
| unwind a position at a very tight spread. How does Double's
| approach--directly holding the individual underlying securities--
| compare in terms of market liquidity and transaction costs,
| especially if I need to quickly liquidate my portfolio or adjust
| my positions?
| xxpor wrote:
| Is that really a concern for anything in the S&P 500? The
| underlying concern is valid, but for this specific example it
| seems like a best case scenario for avoiding that problem.
| bityard wrote:
| > the low fee trend pioneered by Robinhood
|
| John Bogle would like a word
| jjmaxwell4 wrote:
| Very fair! Bogle is the true OG and our inspiration
| LAMike wrote:
| It's cool, but I'm wondering what the breakeven cost would have
| to be if you weren't planning on making money from PFOF?
|
| Can easily see this being $5-10 a month without a problem or even
| $500 lifetime pass for early supporters. Also if you add
| Lightning Network deposits to a portfolio I would be more likely
| to use it, you can make money off the spread too as long as it is
| under 1%
| elil17 wrote:
| I do think this is a great model for someone who wants to hold
| the S&P 500 (which many people do).
|
| However, educated index investors typically hold a total market
| index fund. Double's US small cap offering is severely under
| diversified and there is no international offering. 10 bps is
| absolutely worth it to get broader diversification and
| international exposure.
| jjmaxwell4 wrote:
| Complementing a Direct Index US 500 portfolio with Small Cap or
| International ETFs is very possible. You can exposure yourself
| to US Small Cap and International through ETFs - there is the
| related ETF expense ratio in that case.
| elil17 wrote:
| Sure - but now that's looking like a lot more work and you're
| not saving much money. VT is 7 bps but VXUS is 8 and VB is 5.
| So if I want to use double just for my US large caps, I've
| got maybe 40% of my money there, 20% in VB, and 40% in VXUS.
| Then I wind up with a blended expense ratio of 4.2 +
| $1/month. Okay, I've saved about 2.8 bps, which is $28/year
| on $100,000.
|
| In return I don't just have to do manual rebalancing - I have
| to move money in and out of a separate account every time I
| want to rebalance. I also have more tracking error.
|
| I don't think that's something anyone is actually going to do
| for less than 3 bps. But of course if you are able to use
| Double as a one-stop-shop, then it's great.
|
| I'll absolutely be keeping an eye on them and would seriously
| consider moving my money over if they could track MSCI ACWI.
| rafram wrote:
| Your site touts that you're "Technologists, not bankers". People
| entrusting you with thousands of dollars of their savings might
| want some actual bankers involved in the operation. Something
| like "Security first" might get the point across without raising
| as many red flags.
| jjmaxwell4 wrote:
| Appreciate that and its good feedback.
| toolz wrote:
| As far as marketing goes, I'm not so sure that bankers hold
| more public trust than techies. It's basically every day a big
| bank is getting fined as the "cost of doing business" and often
| for things like laundering money etc.. There's probably a case
| to be made that techies do more to harm their trust, but
| probably not from multinational organizations.
| giantg2 wrote:
| If you're handling rebalancing and holding stocks individually,
| how does the tax efficiency compare to ETFs?
| solaarphunk wrote:
| Are you paying yourself with securities lending revenue?
| danielmarkbruce wrote:
| >> Over a 30-year period on a $500k portfolio, the money lost to
| those fees would be $1.30M for the financial advisor and $244k
| for the average ETF and even $42,951 for the low fee VOO.
|
| How do you calculate $42,951 for VOO? Seems too high on 500k, or
| at very best you are conflating FV and PV and comparing apples to
| oranges.
|
| First year is going to be $150. Last year is going to be maybe
| 2^3 * 500k * 0.03 = $1200? I'm sure you are then FVing all those
| but even then it seems like you must be assuming pretty high
| returns. If that's what you are doing, surely calculate the FV
| compared to the FV of the portfolio (like $4 million or so). Or,
| do the PV of the fees which is going to be... $4500 or something.
| paxys wrote:
| The calculation is at https://double.finance/pricing
|
| They are assuming an additional $2000 contributed per month and
| a 7% return.
| danielmarkbruce wrote:
| So, future value of fees against PV of portfolio, then with
| an additional $24k added every year for 30 years...
|
| It's going to be difficult for them if right out of the gate
| they fudge numbers every time they talk about their company.
|
| Is it _that_ difficult to just shoot straight?
| dang wrote:
| I've added that to the text above. Thanks!
| chis wrote:
| Handy calculator. Comparing to VTSAX (.04% expense ratio),
| they show a 1% difference. Not nothing, but hard to justify
| switching when you consider the downside risk of this company
| going out of business or selling in the next 30 years.
|
| I think this is going to be a hard product to sell when your
| target market is exactly the sort of people who are well-
| informed enough to just buy vanguard mutual funds for a
| nearly identical result.
|
| Not to sound like a total hater but I'm always so surprised
| that VCs are willing to invest in these companies that just
| seem obviously flawed based on common sense. Similar to that
| web browser startup Mighty.
| danielmarkbruce wrote:
| 100%.
|
| The risk of them going out of business, fraud, changing
| strategy, being bought, vanguard fees going down even more,
| etc - it's not even close to being a sensible decision to
| move for what amounts to significantly less than 1% at the
| end.
| xur17 wrote:
| One thing I've always wondered about products like this: how is
| the portability between platforms?
|
| For example, if double.finance shuts down, are there other
| platforms that I can transfer my assets to inkind that will
| maintain the index fund tracking for me moving forward? I realize
| I can use ACATS to transfer the assets, but I want index tracking
| as well.
| ac29 wrote:
| There are a number of companies offering direct indexing, but
| you'd need to research them individually to see how they
| supported transferring in assets in kind.
|
| Ideally any direct indexing would be done in tax advantaged
| account so if you needed to liquidate your positions and start
| over from cash there are no tax implications. Otherwise, be
| prepared to eventually deal with hundreds of individual
| positions each composed of numerous tax lots.
| xur17 wrote:
| > Ideally any direct indexing would be done in tax advantaged
| account
|
| A lot of the benefit of direct indexing comes from the
| ability to tax loss harvest, which requires it not to be in a
| tax advantaged account.
| ac29 wrote:
| Just keep in mind that tax loss harvesting is a tax
| deferral method. It reduces your current taxes by
| increasing your future taxes (which will be at an
| unknowable rate).
|
| It is also only effective when an account is relatively
| young, or if new contributions are a substantial portion of
| the portfolio. As your portfolio matures, fewer and fewer
| positions will be at a loss, so there will be only very
| limited opportunities to loss harvest.
| xur17 wrote:
| Definitely a good point, and one of the reasons I have
| historically avoided services that offer tax loss
| harvesting. They get you in the door with solid tax
| losses for the first few years, and then just as the tax
| losses start to dissappear, you realize you own 500
| different securities, and switching anywhere else is
| basically impossible.
|
| Double has low fees, so if there is also a way to port
| out and still maintain the tracking via another service,
| it starts to become interesting.
| mitthrowaway2 wrote:
| Will this be available in Canada?
| esses wrote:
| This looks amazing. It's pretty clear from the comments how much
| skepticism and misunderstanding there is with financial products
| and markets, but you appear to be on the right track. Hoping for
| your success and to divert some funds to your platform.
|
| - When my former VP and I looked back on our fintech that went
| under we concluded we should have went with Apex instead of
| building our own brokerage backend years ago - As you have called
| out, Corporate Actions is one of the most annoying parts of
| dealing with the financial markets
| glitchc wrote:
| Are you registered with the SEC as an investment fund?
|
| Edit: Thanks, answered earlier in comments.
| arjunlol wrote:
| This looks great. I'm usually very much a DIY type of person when
| it comes to investing because of the typical fees mentioned, but
| excited to try this out!
| paxys wrote:
| I'm curious about how direct indexing impacts tax filing. You
| mentioned generating short term/long term capital gains numbers,
| which is fine, but what about all the different transactions?
| Won't someone using your service have to enter all of them
| manually on their return?
| dmoy wrote:
| So I have zero enthusiasm for direct indexing, and there's
| effectively no chance I'm gonna use this product (or any other
| direct indexing company)[1], but
|
| The tax filing thing should be a non-issue. Yes you'll probably
| get a 1099-B with like a gazillion entries. But, assuming this
| is done normally, all your holdings will be covered stocks, and
| all the trades will show up as reported to the IRS in box 12.
| Then you'll be able to just summary entry with IRS 8949 box
| A/D, entering like literally two lines, and you're set.
|
| It sounds bad but it won't (I'M GUESSING!) be bad for tax
| filing headaches - two lines, same as any other broker.
|
| Yea I don't like Apex and they've fucked up a couple things for
| me before, but they should get this part right.
|
| And even if they don't...
|
| Say they don't report basis to the IRS, you can still enter
| summary, and just physically mail the IRS your 1099-B (even if
| you efile), and it'll still be okay without _too_ much work.
|
| [1] my complaints stem mostly from portability. With a ~0.03%
| fee ETF, I can go to any broker in the future and still deal
| with it. If for whatever reason I want to stop working with
| <direct indexer X>, now I'm stuck dealing with thousands of
| individual holdings. If I was operating with large enough
| amounts that I could literally transfer to a different broker
| (IBKR) and hoist the remains into a creation unit of VTI or
| whatever, sure. But that's increments of $30M each, so ... lol
| not for people like me.
|
| Or maybe in the future there's enough direct indexer services
| that they solve portability at increments smaller than <huge
| ETF creation unit>. Then maybe yea, idk.
| Glyptodon wrote:
| Only works out easy if nothing ends up being a potential wash
| sale with something in your other brokerage accounts.
| dmoy wrote:
| Ha, fair
|
| If you're also using a other direct indexing service, or
| doing a bunch of manual stock trades yourself, then RIP
| your time :(
| Gh0stRAT wrote:
| IIRC if your brokerage reports everything to the IRS properly,
| you only need to fill out net short- and long-term capital
| gains on your schedule D rather than specifying every single
| transaction on a bunch of Form 8949 copies.
|
| Not sure if Double's underlying brokerage is reporting
| everything necessary for this to be the case though, as I
| believe some brokerages don't.
| TripleChecker wrote:
| Congrats on the $10M in AUM. I do really like how simple the
| website is to understand and the pricing is quite attractive
| (assuming it stays at $1/mo).
|
| A couple typos you might want to fix:
| https://triplechecker.com/s/840785/double.finance
| kyt wrote:
| Very interesting product!
|
| I consider myself pretty financially literate, but I had no idea
| what an "expense ratio" was for certain. I assumed it meant fees
| but I had to look it up.
| sergiotapia wrote:
| As a layman, how is this different from just buying FZROX
| automatically every week for the next 30 years? No snark, trying
| to learn for my financial future!
| ac29 wrote:
| Fidelity makes their own indexes for their zero-ER products,
| there arent any funds with the exact same holdings that I am
| aware of.
|
| That being said, FZROX should track the broad US equity market
| pretty closely, so some of double's offerings should have very
| similar performance.
|
| Double will let you do some additional things though. For
| example, lets say you wanted a US equity index with no exposure
| to the large tech company you work for. Double could do that,
| FZROX could not.
| dehrmann wrote:
| How do you manage the bid-ask spread not eating into gains when
| rebalancing? And what portion of the an index fund's 0.1% expense
| ratio "pays" for that?
|
| Also, how do you position yourself compared to Fidelity's Custom
| Investing product?
| sockaddr wrote:
| It's a red flag whenever I see an unclickable, unbrowsable,
| unverifiable "what people are saying" section. Even on the
| scammiest sites selling you trash on YouTube you'll see the same
| fake reviews. I immediately distrust places that do this.
| jjmaxwell4 wrote:
| Interesting - how can we make this more believable? Link to
| their LinkedIns?
| Hasz wrote:
| One of the things you can easily do with your approach is to
| offer "soft shorting". Essentially, one of the biggest issues
| with normal short positions is that downside is basically
| unlimited. Plenty of shorts have been wiped out in this very,
| very long bull market. Soft shorting, imo, is just discluding a
| particular stock from your index. No insane downside, less
| active, but still a bet against a company.
|
| I want the option for an index of SP500, minus exposure to
| $TICKER. You approach could very easily facilitate that with how
| you will buy.
|
| This can be an "active" component of an otherwise heavy bet on
| indexing.
| jjmaxwell4 wrote:
| Yes we allow this right now very easily, although we don't call
| it "soft shorting". You can remove or de-weight specific stocks
| or sectors quite easily.
| Hasz wrote:
| nice, idk exactly what to call it, but it's imo a much bigger
| value than a clear 0% vs 0.05% fee difference.
| gdudeman wrote:
| Services like this can be very, very difficult to leave.
|
| Be aware that if you are doing direct tax indexing with tax loss
| harvesting, you are increasing your tax liability in the future.
|
| If you invest in direct indexing here, you have three choices if
| they tack on fees or you are unhappy with their service: 1. Take
| a random assortment of 300+ stocks and watch your portfolio
| become unbalanced over time 2. Liquidate your portfolio and up
| worse off than you would have with an ETF 3. Stick with it and
| pay
|
| If they go out of business, you are stuck with the random
| assortment.
| recursive wrote:
| Under 2, why would you end up worse off? I'm decidedly
| unsophisticated in this domain.
| nicd wrote:
| Because liquidating / selling your shares is a taxable event.
| If you purchased a simple ETF to begin with, your tax burden
| would have been lower.
| gdudeman wrote:
| How do you expect to make enough money to have a venture-scale
| business? Wealthfront has struggled even with a 0.25% fee and
| Robinhood is successful because they have massive flow (not buy
| and hold), options, and other casino-like products.
| dehrmann wrote:
| > I think Robinhood has proved that you can build a strong
| business by getting rid of an industry wide cost
|
| Pushing legacy(?) discount brokers to zero fee trades is their
| greatest contribution to the industry, but their business and
| success has been positioning investment products more like
| gambling. I don't have the data, but I suspect _way_ more
| Robinhood users traded options than at Fidelity or Schwab.
| jnskender wrote:
| Any relation to Boldin Financial Planner? Your sites and logos
| are extremely similar.
| jjmaxwell4 wrote:
| No relation but I have shared some emails with the founder and
| we are both in SF I believe.
| oatsandsugar wrote:
| That's super! Do y'all have no petroleum etfs on offer?
| oatsandsugar wrote:
| As in ETFs that include no oil or oil processing companies
| ram_rar wrote:
| As much as I love to use your product, the challenge from my
| perspective is why switch for 0.03% in fees? Especially when you
| compare it to likes of fidelity, vanguard , schwab. Those 3 are
| too big to fail. The point I am accentuating is, that just
| lowering the fees to 0 is not a compelling reason anymore,
| especially when the fees are soo low already, its race to the
| bottom.
| jjmaxwell4 wrote:
| Fair point! We also let you build a pretty customized indexes,
| and migrate between positions easily over time. For example,
| you can diversify away from your employer or your employers
| sector, or over or under weight specific stocks you'd like.
| simantel wrote:
| Also, Fidelity already offers 0% expense ratio funds:
| https://www.fidelity.com/mutual-funds/investing-ideas/index-...
| brokensegue wrote:
| What if they offered negative expense funds
| mushufasa wrote:
| If you are making money from payment for order flow (based on
| transactions) with a direct indexing strategy, you may be
| incentivized to encourage customers to rebalance more frequently
| than they might otherwise in order to accrue fees from those
| trade transactions. For example, daily rebalancing/tax loss
| harvesting sounds neat, but how it is implemented can vary -- you
| would be incentivized to trade client accounts 'trigger happy'
| whenever possible to maximize fees. I could see that leading to
| the $1-10k annual revenue per customer that people on this thread
| are confused about relative to the $1 flat account fee.
|
| The potential negatives of this bias that I can see for
| customers:
|
| - tax loss harvesting is more a craft than a science. The goal of
| investing is primarily to have gains! And no one can predict the
| future fully. So it's really hard to know if selling a large
| position at a loss is a good move -- if that position goes up
| next year you may have missed out (like selling NVIDIA 3 years
| ago in a dip -- you would have been following the TLH playbook
| but you would be kicking yourself now).
|
| - If this is indeed your business model, this model only works
| for direct indexing portfolios with many stocks, so you will be
| biased to suggest portfolios with many companies instead of
| concentrated holdings, and biased against offering ETFs/funds.
|
| Not the end of the world in terms of negatives. But I just wanted
| to mention that 'churning stocks for fees' is a business model I
| haven't seen discussed on this thread.
| tmendez wrote:
| Does it rebalance daily? Wouldn't you pay short term cap gains if
| it does?
|
| Or is the strategy to buy an index, then only sell losers after
| an amount of time?
| jjmaxwell4 wrote:
| We optimize (look at the account) daily but only trade if the
| portfolio meaningfully improves.
|
| We take into account tax rates while optimizing your account.
| You can also chose to put your strategy in Buy & Hold which
| will never sell anything thus never realize any cap gains.
| didip wrote:
| One pain point I can see is during taxation. The 1099 will be
| long if your robo trader frequently trades.
| dboreham wrote:
| I might be interested in a broker that would split the kickbacks
| they get for submitting my trades, fully accounting for that
| revenue.
| mmmore wrote:
| > There are a number of robo-advisor products out there, but none
| that we know of offer direct indexing without expense ratios or
| AUM fees.
|
| Yeah, I'm a little confused at what you're offering over existing
| options (e.g. Wealth front, Betterment, M1). If the answer is
| just "it costs less" won't you raise prices when it comes time to
| make money? I suppose "the thing that already exists, but
| slightly better" is not necessarily bad.
| ac29 wrote:
| I posted elsewhere in the thread, but Fidelity does direct
| indexing for a flat $5/month fee.
| jjmaxwell4 wrote:
| Other than fees, we are also quite a bit more customizable than
| most other options you mentioned. We let you do things like
| rebalance between positions and pick your optimization type,
| and backtest a screened portfolio. More customizable than most
| robo-advisors out there and more powerful than brokerages like
| M1.
| Glyptodon wrote:
| Can you (is it okay to) TLH assets that you have separate
| holdings and purchases of in IRAs or 401ks?
| TuringNYC wrote:
| >> One similar product is M1 Finance, but Double is more
| powerful. We offer tax-loss harvesting, a wider range of indexes,
| and greater customization. For example, when building your own
| index, you can set weights down to 0.1% (compared to M1's 1%) and
| even weight by market cap.
|
| +1 on the comparison to M1, and congrats on your release @JJ and
| @Mark
| lazingabout wrote:
| Is this possible to move funds from a Roth IRA or 401k into these
| low cost ETF alternatives, without taking them out of the tax
| advantaged structure?
| jjmaxwell4 wrote:
| We don't currently offer Roth IRA or 401K accounts, but once we
| do then yes it would be possible to transfer the account
| without changing the tax-advantaged status.
| Glyptodon wrote:
| Looking through the surface level details of Double, I quite like
| what I'm seeing.
|
| That said, I use Schwab, Wealthfront, and M1 and am not entirely
| happy with any of them so I am probably a targeted type of
| customer.
|
| I haven't lookeded too deeply (no idea if implementing things
| like HFEA style leveraged portfolios in an efficient way is
| possible, for example, or if there are non-index means of
| handling hold-till-maturity bonds), and probably will later.
|
| That said, based on the comments here I'm curious:
|
| 1. I've always assumed % fees were related to the cost of risks
| being proportional to account AUM crossed with holding and
| transaction expenses. Fixed fees to me imply that you don't think
| any risks on your end are portfolio size or transaction size
| proportional. If this is really the case, why is this the case?
| (Or why am I wrong about the link?)
|
| 2. Lots of commentators seem interested in questions about how
| you loan holdings and if shareholders get cuts and if you accept
| payment for order flow. I'm less concerned with these exact
| things and more concerned with how the customer relationship is
| defined. Is there an equivalent to being a fiduciary when it
| comes to handling such things? Or would that force you to not
| permit as much self direction from account holders? Are the $1
| payers for sure the customer or is there a second side to your
| market/business model?
| maclagor wrote:
| I will just say, that as a user of both Robbinhood and Double,
| Robinhood feels more like gambling while Double feels like
| strategic management. Great product.
| Etheryte wrote:
| The pricing page is not really useful and I would even go as far
| as to say it's misleading. You compare the returns of your
| service to an advisor that costs $2000 an hour. The overlap
| between people who pay two grand per hour to an advisor and the
| people who use a $1 monthly subscription investment service is an
| empty set. What would be much more interesting would be if you
| showed a comparison of your service offering vs a cheap ETF. For
| example, how do your fees for rebalancing, buying, selling, etc
| add up when tracking the equivalent of VOO for a year, as opposed
| to just buying VOO? Right now it looks like you're trying to hide
| this comparison and that sounds like it doesn't look good for
| you.
| fairity wrote:
| There seems to already be significant competition in the low cost
| ETF space. For example, Schwab's broad based s&p ETF (SCHB) has
| $34b AUM.
|
| The fact that there exists a competitive market suggests that
| there's a good reason expense ratios can't drop much further than
| .03%. Presumably, once you reach a certain size, there are costs
| associated with managing a low cost etf strategy that the end
| investor actually wants to pay for.
|
| What makes you think you can beat these market rates in a way
| that is truly accretive to investors? Put another way, what is
| Schwab wasting money on that you won't?
|
| I doubt Schwab is just being greedy with their .03% fee. It's
| necessary to cover their costs.
| beryilma wrote:
| > We handle all the management, including rebalancing and tax-
| loss harvesting--proactively selling losing stocks to potentially
| save on taxes
|
| - For a non-retirement portfolio, isn't rebalancing is a taxable
| event? Rebalancing by selling stocks and buying others is not the
| best approach. Isn't it better to rebalance by shifting the focus
| of new investments based on a strategy?
|
| - I think it is misleading to present tax-loss harvesting as a
| way of saving on taxes. I don't know why people present it this
| way. In order to "save on taxes" you have to realize (i.e., sell
| stocks at) a loss first...
| DeRock wrote:
| This is the question I have too. The ability to create a
| "custom" ETF is highly desirable to me. I don't want to trade
| individual stocks, but instead would rather input some
| weightings on top of existing indexes (i.e buy less of stock A,
| more of stock B, etc.). However, my understanding of ETFs is
| that they are able to rebalance through "in-kind"
| creation/redemption in order to avoid creating a taxable event.
| I'm not sure how this is possible to scale to a custom one-off
| fund...
| jjmaxwell4 wrote:
| You are correct the in-kind creation/redemption pushes any
| taxable gains/losses to the trading of the ETF by the holder,
| not the ETF itself.
|
| But there are some benefits to doing what you refer to as a
| "custom one-off fund". Namely we can Tax Loss Harvest any
| losses and realize those to offset gains we realize in the
| name of rebalancing. The industry generally calls this direct
| indexing and wealth clients with $1M and above portfolios
| have been doing it for years.
|
| We also provide the option of entering a "Buy & Hold"
| optimization for strategies, which would not rebalance your
| winners into losers and realizing any gains or losses, but
| your portfolio will drift over time if you choose this.
| adv0r wrote:
| no european customers?
| WiSaGaN wrote:
| I don't really see the need to optimize on 0.03% fee of index ETF
| such as VOO or VTI. There are much more important things like
| liquidity, tracking error in whether a ETF is worth buying. Not
| paying reasonable fee on a service just guarantees some other
| nefarious ways to get back sooner or later.
| _benj wrote:
| Hi, and congrats on the launch!
|
| I'm curious about how this service compares to, say, the
| offerings of zero expense mutual funds from Fidelity of Schwab? I
| guess there's a lot more variety since I don't think those
| brokers have 50+ indexes.
|
| Have you found or might expect to find liquidity issues or spread
| costs with fractional shares? I imagine that if you have an
| account with, say, $3000 that is trying to implement S&P500, the
| portfolio will me mostly if not exclusively fractional shares.
|
| About positioning, I don't think I'd be the target audience since
| I just buy and hold $SPY, $VOO, $IVV. If you could convince me
| that I could implement, say, S&P 500 and be cheaper, more tax
| effective than holding those ETFs, that would be something
| interesting!
| divbzero wrote:
| > _If you could convince me that I could implement, say, S &P
| 500 and be cheaper, more tax effective than holding those ETFs,
| that would be something interesting!_
|
| The most cost-effective S&P 500 index funds nowadays have an
| expense ratio of around 0.015%. Assuming performance is similar
| (minimal tracking error) Double's fee of $12 per year would be
| cheaper for any portfolio over $80,000.
| modeless wrote:
| I would need to know where your revenue comes from before I would
| consider putting money with you. Clearly $1/mo is not going to be
| the only revenue opportunity you go for. It's good that my assets
| are safe if you go under, but with direct indexing I'd be left
| with a giant mess of thousands of individual stock positions that
| would be very difficult to unwind manually.
|
| I don't care that much about saving .03% over SCHB but tax loss
| harvesting sounds nice. It would also be cool to exclude certain
| stocks I dislike from my portfolio.
| jjmaxwell4 wrote:
| We choose to lead with the expense ratio savings in this
| marketing push, but I really think the platform allows for the
| best investment account out there with tax loss harvesting
| built in, dollar cost averaging between positions and stock or
| sector customization.
| psawaya wrote:
| Very cool :)
| fuddle wrote:
| How do you put together strategies such as "High Performance
| Small Cap"? Does your backtest include delisted stocks to avoid
| survivorship bias?
| mamcx wrote:
| Is this open for investors outside the USA? LLC?
| divbzero wrote:
| What revenue streams, if any, are you considering in addition to
| the $1/month fee?
|
| (If there are no other revenue streams, what scale do you need to
| attain to cover operational and regulatory costs?)
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