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I wonder if there's a natural cost to operating a fund, that would make this kind of product unsustainable, long-term? In contrast, Robinhood can provide free

I wonder if there's a natural cost to operating a fund, that would make this kind of product unsustainable, long-term? In contrast, Robinhood can provide free trades, and M1 Finance can provide free portfolio-oriented management, but they also both have good explanations for their underlying business models. To be transparent, I work at M1 Finance, and I invest in a few Fidelity ETF's; still not sure how I feel about this one.

deleted 8y ago
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TuringNYC 8y ago
>> have good explanations for their underlying business models Where could I find this? I havent seen it anywhere and have been half-worried they will either jack up prices or sell-out customers hanging like CapitalOne/ShareBuilder did. What is their short term and long term revenue model that would make their [awesome] product sustainable? Aside: I love M1, especially after CapitalOne/ShareBuilder left their customers hanging.
- theautist 8y ago
  I think both Robinhood and M1 Finance collect interest on their customers' cash and securities. Robinhood also makes money by offering margin to its customers and I believe M1 Finance has a similar but more general offering called M1 Borrow where the money borrowed can be used anywhere instead of just trading.
philipodonnell 8y ago
I recently spec'd out an ETF based on the number of employees working in a given MSA with the management proceeds going to support entrepreneurship in that area. Fixed costs for operating a single ETF is about $250K, which means a minimum AUM of $50M with a 0.5% fee. Most platforms won't even list an ETF with < $40M because they know its not sustainable below that level. That said, for a manager of many ETFs, the fixed costs are much lower because they can be spread across multiple funds.
zjaffee 8y ago
I could be wrong about this, but many of these companies are selling their trading ledgers to market makers, which in addition to making money on interest allows them to make quite a bit.

deleted 8y ago

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TuringNYC 8y ago

>> have good explanations for their underlying business models Where could I find this? I havent seen it anywhere and have been half-worried they will either jack up prices or sell-out customers hanging like CapitalOne/ShareBuilder did. What is their short term and long term revenue model that would make their [awesome] product sustainable? Aside: I love M1, especially after CapitalOne/ShareBuilder left their customers hanging.

theautist 8y ago
I think both Robinhood and M1 Finance collect interest on their customers' cash and securities. Robinhood also makes money by offering margin to its customers and I believe M1 Finance has a similar but more general offering called M1 Borrow where the money borrowed can be used anywhere instead of just trading.

philipodonnell 8y ago

I recently spec'd out an ETF based on the number of employees working in a given MSA with the management proceeds going to support entrepreneurship in that area. Fixed costs for operating a single ETF is about $250K, which means a minimum AUM of $50M with a 0.5% fee. Most platforms won't even list an ETF with < $40M because they know its not sustainable below that level. That said, for a manager of many ETFs, the fixed costs are much lower because they can be spread across multiple funds.

zjaffee 8y ago

I could be wrong about this, but many of these companies are selling their trading ledgers to market makers, which in addition to making money on interest allows them to make quite a bit.