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Comment by kohanz | Hacker News Reader

As a counterpoint to the nay-sayers, I personally see value here and would opt for this were it offered to me by my bank, for example. This is not for people who live paycheck to paycheck, of course. However, for people who often have (a sometimes large) surplus in their checking account that they don't have the time/effort to move and invest elsewhere, this would be great.

I would love to be able to set a "surplus" threshold as part of this solution, say $5k (just an example - it should be set by the user), such that any amount above that in the account is invested, while the rest is kept in cash. That would solve the "emergency" funds issue for some people.

I think framing this is a checking account is what people are having trouble with. It really seems like an investment account with easy liquidity. If you add a section that is kept in cash, then it's checking + investment with automatic rebalancing.

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To me it feels like a feature to existing trading/investing apps or platforms than a standalone product. Wouldn't it be quite easy for other established apps to do this? I mean, barrier seems to be pretty low for established players. Only way I see them creating barriers would be creating proprietary strategies.

Also, the fact that not many of them have this feature is kind of a red-flag. But then I am not the expert and I might be absolutely wrong.

The problem is incentives. Banks are required at least a 10% cash colateral (deposits) to issue new loans. If the funds are automatically invested into stocks/bonds/etfs, then the capital available for banks to issue new (profitable) loans decreases.

That's not a great premise for a company either. You are implying that this company is a risky investment.

It is a risk. It doesn't sound FDIC insured AND you can face market loss.

> feels like a feature to existing trading/investing apps

I had the same thought at first. But at the end of the day the competitive edge a company like Financial Choice has might simply come down to marketing and UI/UX.

Wealthfront, Betterment, Robinhood, etc are very narrowly targeted at investors (e.g. if I send a link to Wealthfront to my cousin who wants to earn a return on a $5000 checking account she set up for her young child, or even her own checking account, she's very unlikely to convert)

We have debated this question a fair bit at Financial Choice. I agree, the barrier does seem low, but also keep in mind that this is often the case for new companies, and the barrier is often higher than it seems for existing companies. For really established players, it's often hard to move fast (anyone who has worked at a big company probably knows this, there is often so much red tape).

But I also think for others, this is quite a mental shift on how to look at checking and investing accounts. There are some investment companies like Wealthfront and Betterment who are starting to move into checking accounts, but it feels very much like a afterthought to a customer.

We are hoping to truly unite the two account types.

My suspicion is the main reason is that the costs of providing checking account functionality are high (banks subsidise this with penalty fees and marketing loans/mortgages and credit cards to their checking account customers as well as earning significantly higher returns oj their investment portfolio than they pay depositors). As much as in theory I'd love to hold money I might need to spend in the near future in fungible, low-risk government bonds, the middleman provides quite a lot of value in convenience.

Presumably you have put some thought into how you're going to manage these costs (beyond not providing branches) or what checking account functionality you are uninterested in providing.

Yes, some (many?) brokers already offer similar services (i.e. debit card and checking). I think they typically only allow those to access cash on hand though and won't initiate any sales of any securities.

"I think framing this is a checking account is what people are having trouble with"

Yes exactly. Checking account is the safest thing you can do online especially with FDIC backing. It is misleading to say that it is like a checking account. It is not. People can lose money with this product and I think that needs to be clarified which is the opposite of a Checking Account.

> see value here and would opt for this were it offered to me by my bank

Fidelity has a Cash Management Account [1] that functions as a checking account as well as hold securities. (It also sweeps into FDIC-insured accounts overnight.) I find it useful for planning large expenses by e.g. buying a Treasury or other bond that matures around when that expense will be due, thereby earning a bit more yield while making the available cash actually represent unencumbered cash.

The UI isn't super modern, though. That may be worth giving up some of the securities features one will never use and the FDIC insurance.

[1] https://www.fidelity.com/cash-management/fidelity-cash-manag...

Lol! That is one heck of a value proposition:

We can't really help you if we end up losing all of your money... but our page looks way better than the alternative!

> our page looks way better than the alternative

They're built on Fidelity. Sweep will come. And there is value in being able to e.g. have an easy interface that says "I want this cash to be liquid around this date with about this confidence" and let the system work for you. Or designate cash as a rainy-day fund, or as buffer cash that can be invested in risky, marginable securities, et cetera.

> I think framing this is a checking account is what people are having trouble with. It really seems like an investment account with easy liquidity. If you add a section that is kept in cash, then it's checking + investment with automatic rebalancing.

This is absolutely the case. This isn't a checking account. This is liquidity management for those who are comfortably operating aggressively with their personal finances. With that said, definitely going to give it a spin side by side with my Fidelity Cash Management account.

Good point about the "checking account" phrasing. I agree we should be more careful here. In my mind, traditional checking accounts are characterized by two orthogonal features. 1) They offer money management features (debit cards, ATM, bill pay, check writing, scanning checks etc), and 2) they provide low volatility investing. Financial Choice offers 1) but gives you more choices with 2).

> I would love to be able to set a "surplus" threshold as part of this solution, say $5k (just an example - it should be set by the user), such that any amount above that in the account is invested

My old investment account offers to watch my checking account and pull any "excess" money into investments. if i drop below a threshold? Sell and move to checking.

(The firm is "betterment" if you want this). Would not recommend for/against. I no longer use this firm.

We've heard from a few users that they would like to keep some of the money in cash. I think that's a reasonable feature which we should add support for. In a sense, keeping a fixed amount of cash in your portfolio is really just investing in a mix of securities (similar to how people invest in bonds & stocks), which seems like a perfectly reasonable choice for people with a certain risk/reward profile.

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