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Wealthfront is not going to be loaning out money from their sweeps product to margin borrowing. Instead they will have a larger partner bank which offers then m
by Danieru 7y ago
Wealthfront is not going to be loaning out money from their sweeps product to margin borrowing. Instead they will have a larger partner bank which offers then margin loans, they then mark up the interest rate and pass it on.
They do not have the accreditation to be issuing loans based on deposites. Thus why their banking product is a sweeps account.
- URSpider94 7y agoI fully realize that. However, it's entirely possible that they are using the same banking partners to issue the margin loans and handle their deposit accounts. Even if they are not, the larger point is that there's a nice spread between what they are paying on the savings account and what they are making in margin interest -- and the margin account is extremely well-collateralized with liquid assets deposited in the borrower's Wealthfront account. The GP poster intimated that WF had to be losing money on their savings rate, and I'm just pointing out that it's entirely sustainable.