3% new fintech checking product @ Robinhood!

3% new fintech checking product @ Robinhood!
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#1

Any downside, other then app sign up only?

Looks like they go live in 2019 and have a wait-list. use this link to sign up to jump the line 10k spots http://share.robinhood.com/vivekh21


#2

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#3

What are the terms? 3% on overnight deposits is pretty good if it’s uncapped.


#4

That’s more than the yield on BND. I’m sure they’ll get tons of assets coming in. This is for s new fintech checking product, not the brokerage, apparently.


#5

I agree. I hope the others like Ally match. Joint accts should work for the 250K SIPC limit like FDIC right?

Looks like they go live in 2019 and have a wait-list. use this link to sign up to jump the line http://share.robinhood.com/vivekh21


#6

I think we’re going to see some major caveats once this thing really rolls out. I don’t think there’s any way it’s going to be a 3% checking account without any other requirements. That would beat a 10 year treasury note right now, so I don’t know what they would be investing the money in that’s safe that can generate that kind of yield. They’re going to have to invest in some bonds with default risk or have some other requirements that will generate revenue to make up the difference. SIPC is of no help to mitigate the interest rate or default risk of whatever bonds they invest in. It might end up being a safe account … but it’s not equivalent to FDIC insurance and we really have no idea right now what the risks will be.


#7

Apparently it’s treasuries plus a loss leader subsidy to get to 3% so don’t expect it to last unless rates rise a lot (and we’re looking like 0-1 rate hike in 2019 now so don’t count on it). Or alternatively, if they own long dated treasuries to get closer, then you could lose money if rates rise and treasuries fall (unless they subsidize that loss).

Also, SIPC is very different insurance than FDIC. First, it’s in total with your equities, so if you have too many stocks your cash isn’t insured at all (nor are your excess equities). Second, it’s protection against the brokerage firm failing, stealing your stock, getting defrauded, etc, and not all at that your investment with them in this cash product is protected against losing money.

https://www.sipc.org/for-investors/what-sipc-protects

SIPC protection is limited. SIPC only protects the custody function of the broker dealer, which means that SIPC works to restore to customers their securities and cash that are in their accounts when the brokerage firm liquidation begins.

SIPC does not protect against the decline in value of your securities. SIPC does not protect individuals who are sold worthless stocks and other securities. SIPC does not protect claims against a broker for bad investment advice, or for recommending inappropriate investments.

If they decide to invest in some safe, investment grade corporate bonds to get closer to breakeven (think “fine Lehman paper” in 2007), your cash is going down with the ship regardless of the SIPC.

Lastly, the wait list is like 200k long.

https://www.bogleheads.org/forum/viewtopic.php?f=1&t=266276


#8

I agree that time will tell. Except Marcus and ally etc already pay 2%+ They’ll be paying less then 1% more in rising interest rates environment without branches etc. I’m tired of jumping thru hoops in rewards accts with puny maxes. This or MMA, BND @ 3% and I’m done…


#9

All the major brokers started offering similar “investor checking”-type accounts 10+ years ago. Then interested rates tanked, and they continue to offer next to nothing today. Maybe it’s coming back around, but as of now this is a concept that’s already burnt out it’s flame.

Frankly, I dont see this being a sustainable offering. Kasasa/Rewards checking has the hoops of monthly debit requirements and low balance caps to moderate the attention, this is going to flood them with massive numbers of 6-figure accounts almost overnight. These guys dont know what they’ve gotten themselves into.


#10

My coulee Kasasa/Rewards is actually lower @ 2.65 and I was thinking of moving to Ally, anyways. But I’m @ their FDIC max


#11

Thanks for the bump. I found money in the sofa cushions at RH.


#12

I think you’re right… I was number 430,000+ on the waiting list!


#13

definitely good marketing :slight_smile:

You moved up 10,000 spots.

Michael M just joined the Checking & Savings waitlist, and you moved up by 10,000 spots.

Invite more friends to Checking & Savings to get access even sooner.

If you want to learn more, feel free to check out our Help Center, or read our blog.


#14

looks like you were right on xerty,


#15

I did put myself on the waiting list early…but after doing a bit of reading up on this, if i were you guys, i wouldn’t get too enthusiastic about this…and read this latest article that appeared on CNN…These are NOT INSURED ACCOUNTS…


#16

The regulators didn’t like Robinhood calling this a savings or checking account when it wasn’t going to be FDIC insured. RH issued a “clarification” about some “confusion” over their proposed product, now calling it a cash management product.

https://www.bloomberg.com/news/articles/2018-12-15/robinhood-will-retool-checking-product-following-scrutiny

In short, NOT insured as we suspected.


#17

Aren’t cash management accounts FDIC insured? Fidelity’s is…


#18

Because Fidelity moves your money to an FDIC-insured bank. I don’t think RobinHood intends to do that.


#19

Cash sweep accounts at brokers are FDIC insured up to the FDIC limits. For example, Interactive Brokers will break up your cash into $250k chunks and farm it out behind the scenes to up to 10 banks while you still get the headline interest rate (currently ~1.7%). Most brokers offer something like this, although most of their cash rates are pretty bad.

However, this isn’t a banking product and won’t be FDIC insured. If there was a bank offering 3% for cash behind the RH product, you could just go to them for it.


#20

Yes I understand how it works, I just wasn’t sure if regulators might be concerned with the words “cash management” the same way they were concerned with “checking and savings” (because we have certain expectations of checking and savings accounts, and I have expectations of cash management or cash sweep accounts, because all the accounts of that type that I am familiar with are FDIC insured).