Hacker News Reader

Comment by dsg42 | Hacker News Reader

So you built a financial product to convince people to forgo FDIC insurance on their primary checking account? What an evil premise for a company. That's despicable. I'm sure almost none of your customers will understand their inherent cost of repeatedly moving money in and out of a volatile asset, not to mention that this concept would ruin the economy if widely adopted, because the FDIC was invented for a reason. I hope the SEC destroys you.

View on HN

You've broken the site guidelines with this comment. Would you please review https://news.ycombinator.com/newsguidelines.html and stick to the rules? They include:

"Please don't fulminate."

"When disagreeing, please reply to the argument instead of calling names. 'That is idiotic; 1 + 1 is 2, not 3' can be shortened to '1 + 1 is 2, not 3."

"Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith."

I'm sure you can make your substantive points thoughtfully, so please do that instead.

I do agree that this should be positioned as a brokerage account with a debit/credit card for spending.

Interactive Brokers already offers this, so I'm wondering what the actual innovation is here.

Am I the only person who read this comment in Kevin O’Leary’s voice?

I think your criticism is a bit misguided. The FDIC insurance fund only covers a tiny fraction of bank deposits and if a single small bank had a run the fund would be insufficient to cover it's customer base. It also covers derivative losses before balance losses, so it's really more of a psychological tool then anything else.

Also banks are investing all of your money in highly illiquid risky assets (aka mortgages) so I don't see how this would ruin the economy or even meaningfully change the risk profile if adopted at a large scale.

> The FDIC insurance fund only covers a tiny fraction of bank deposits

Isn't it $250,000 per customer?

It wouldn't be enough to save the bank if there was a run (because of accounts with huge balances), but it'd be enough to save most of the customers that need saving.

It is a per-signator per-bank per-type per-POD

I wouldn’t say 250k per person per bank per account type is a tiny amount. Moving money from a bank account to the market is a significant increase in risk for all but the most wealthy.

I wish I had so much money that $250k was a tiny fraction of it.

I completely agree that our product could be used the wrong way, and we want to make sure we guide our customers to the investments that will have the best risk profile for them. In particular, we are currently seeking to become a registered investment adviser, so we can make suggestions based on our customers' individual situation (e.g. so we can recommend that people without significant savings invest in lower risk securities like US Treasuries and Bonds).

It's shocking to see the similarity to how you talk about this product compared to the founders of Robinhood. They've been very successful at tricking people into gambling away their money in the name of "investing." This is essentially the same thing at a smaller scale. This is a bad product for most people, who will silently lose money over time by moving money in and out of the stock market. Perhaps you're initial, wealthier customer base will be able to make use of such a service, but if you end up achieving any amount of scale, you will invariably end up wrecking someone financially. I hope you enjoy the moment when someone can't make rent because the stock market had an off week.

I completely agree that we don't want to end up being the next Robinhood. One interesting technical aspect there is that our customers don't manually trade securities, instead they provide us with a strategy that we then execute when we need to automatically buy/sell their investment. I think this will implicitly guide our users toward choosing a long term investment strategy (like mutual funds) instead of doing day trading.

I'd be very careful with that. If you suggest something to a customer that causes them to loose money you can be sued and potentially held liable. Becoming an RIA would likely force your product to become hyper conservative in it's approach which perhaps is good if you're billing yourself as a bank account alternative, but also perhaps not your intention.

The standard investment risk questionnaire, in combination with risk-appropriate choices, is a safe harbor for advisors.

Isn't the risk profile of a checking account "don't lose money"?

wow. what a comment. I think there's a place for this product. sure it's not for everyone, but modern investing apps are already erasing the lines between risk on and risk off money.

https://tolusnotes.com/the-true-cost-of-fdic-stability-broke...

Reply on news.ycombinator.com