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.
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.
> 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.
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.
OTOH, some users seem able to talk to Apex about their shares that had been via an "app", and are still frustrated… with Apex:
> My own personal experience with Apex - I transferred measly GME positions out of Stash app (Apex) to Fidelity in June. My Apex/Stash account is still locked from this transfer. My CS requests have been escalated to the broker (Apex) repeatedly. Finally today, Apex confirmed they will unlock my account in 4 business days. That’s 34-36 calendar days after share transfer. All this DD is much smarter than me, but even in little ways these big explanations offer a simple reason for these shenanigans. I have NEVER had my account locked for share transfer past the confirmed transfer date for any other position. They had the gall to tell me today that they needed to speak with Fidelity directly to confirm receipt and Fidelity “received” my shares 3 weeks ago, which was 3 weeks after I initiated it. Why all the runaround?
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.
Yep. The bank has to require reconciliation of the accounts that are active in the FBO. Oddly enough, there is zero standardization in banking regulations and recon is an afterthought and rarely done. Doubly so if you are talking B2B.
Reconciliation costs a lot of money. They typically just watch the balance and and bark at the fintech for more money when it runs out. There are people at every bank calling partners every day demanding wires for overdrawn FBO accounts. Buyer beware.
>> 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.
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...
Just wanted to comment and say that I'm happy you / Apex offer this. My concern (similar to others in this thread) is that Double might say they are depositing the money into Apex, but it's possible they actually are not, and being able to verify this myself is crucial.
"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"
> 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
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.
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..."
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.
> Swiss banks are notoriously expensive and have terrible investment products that hold trillions because of their obsession with protecting capital.
What? Their second largest bank, Credit Suisse, imploded only last year. They hold trillions because of their nominal neutrality (though their cooperation with western sanctions against Russians appears to be hurting this significantly) and banking secrecy laws that serve as shelter for proceeds for all sorts of crimes.
Typically, when referring to “Swiss banks” people in the industry refer to the likes of Pictet/Lombard/Baer. Credit Suisse was closer to Bank of America than a Swiss bank.
Nomenculture aside, depositors did not lose a single cent in that implosion, and it went smoother than the SVB one.
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.
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".)
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.
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.
i do two tiers of banks. direct deposit into a chase checking account. i pay down everything from here. then i transfer what’s left (minus $500) to an ally savings/invest account. lets me use ATMs and branch services with chase while having a higher savings rate with ally. if i need to pull a wad of cash out, i generally know more than a couple days ahead of time for a transfer to clear. if i wanted i could chase savings account interest rates and move from ally to somewhere else, but what a hassle. 0.5% on 100k is $500, and not worth it to me. ally’s rates are generally fine imo for me not to worry about it.
i’ve only ever hit debit card limits when trying to buy like a car. if you’re hitting cc limits, i dunno, maybe you have more liquid cash where smaller interest rate increases are worth the squeeze.
edit: ok i totally forgot i moved the bulk of my ally savings into an ally invest account holding a vanguard money market fund bc the rate was higher. this is a little less work than opening an account with another bank at least. the rate was 5.4 and is now 4.5. ally savings account is at 3.8. cds, ibonds, money market funds, these are all vehicles i never used prior to covid but have since. chasing it all around is annoying, but i only take stock maybe every 6 months. there’s diminishing returns here since everything past the efund gets invested in an index fund anyway.
> the decent-interest-rate accounts are only available from online-only banks
One does need to look around, whether for national or local, and for instance not all local credit unions which can get close to the rate you would pay on a mortgage advertise on the web.
Sure, but you’re back to moving to a brokerage who gives a good rate. If someone doesn’t already have a brokerage then IBKR is a fine choice. SGOV works with any brokerage and is mostly state tax free as a nice bonus.
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?
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.
>> 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.
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.