4 ms·

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 tha

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 2y ago
Every shop is a small shop when it starts out. Maybe give these guys a break?
- hn_throwaway_99 2y ago
  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 2y ago
    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 2y ago
      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 2y ago
        > 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-billion-resolve-criminal-and-civil-investigations-sales-practices 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-bank-usa-na-admit-anti-money-laundering-and-sanctions-violations 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 2y ago
        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.
    - windexh8er 2y ago
      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 2y ago
      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 2y ago
  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 2y ago
    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 2y ago
  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 2y ago
  > 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 2y ago
  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 2y ago
Same, M1 gives me similar options and protections for a nominal fee: https://help.m1.com/en/articles/9331969-how-much-does-it-cost-to-use-m1 https://help.m1.com/en/articles/9331969-how-much-does-it-cos...
UncleMeat 2y ago
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 2y ago
How does FZROX make money? Loss leader for Fidelity? Improved economies of scale?
- chis 2y ago
  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
- loeg 2y ago
  Loss leader. Fidelity and Schwab make a lot of money from Net Interest Margin on uninvested cash (or e.g. Fidelity's relatively high fee 0.42% money market funds).
- throwaway2037 2y ago
  In theory, it should be possible to run a break-even fund, where your expenses are offset by lending shares in the stock borrow lend (SBL) market. I assume this is how some fund managers can offer 0% fees. I have no idea if this is sustainable long-term (decades). In a very competitive, liquid market like the US, I guess that weighted-average SBL rates on basket of S&P 500 stocks might be 5-10bps. Can any SBL traders here give us more accurate numbers? Edit: Also, they can sell their order flow to a market maker (HFT?), as it is non-toxic retail flow. That is basically how Robin Hood keeps fees so low.

jansen 2y ago

Every shop is a small shop when it starts out. Maybe give these guys a break?

hn_throwaway_99 2y ago
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 2y ago
  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 2y ago
    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 2y ago
      > 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-billion-resolve-criminal-and-civil-investigations-sales-practices 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-bank-usa-na-admit-anti-money-laundering-and-sanctions-violations 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 2y ago
        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.
  - windexh8er 2y ago
    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 2y ago
    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 2y ago
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 2y ago
  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 2y ago
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 2y ago
> 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 2y ago
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 2y ago

Same, M1 gives me similar options and protections for a nominal fee: https://help.m1.com/en/articles/9331969-how-much-does-it-cost-to-use-m1 https://help.m1.com/en/articles/9331969-how-much-does-it-cos...

UncleMeat 2y ago

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 2y ago

How does FZROX make money? Loss leader for Fidelity? Improved economies of scale?

chis 2y ago
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
loeg 2y ago
Loss leader. Fidelity and Schwab make a lot of money from Net Interest Margin on uninvested cash (or e.g. Fidelity's relatively high fee 0.42% money market funds).
throwaway2037 2y ago
In theory, it should be possible to run a break-even fund, where your expenses are offset by lending shares in the stock borrow lend (SBL) market. I assume this is how some fund managers can offer 0% fees. I have no idea if this is sustainable long-term (decades). In a very competitive, liquid market like the US, I guess that weighted-average SBL rates on basket of S&P 500 stocks might be 5-10bps. Can any SBL traders here give us more accurate numbers? Edit: Also, they can sell their order flow to a market maker (HFT?), as it is non-toxic retail flow. That is basically how Robin Hood keeps fees so low.