Forget zero fees. This ETF is offering to pay investors

Salt Financial plans a low-volatility stock ETF that will give people 50 cents for every $1,000 they invest

Mar 12, 2019 @ 5:07 pm

By Bloomberg News

Free is no longer cheap enough in the ultra-competitive market for exchange-traded funds.

Salt Financial, which currently runs one $10 million ETF, plans to woo buyers with a fund that will temporarily pay them to invest, according to regulatory filings. During the first year, holders will receive 50 cents for every $1,000 in a new low-volatility stock ETF — until it grows to $100 million when the cash-back benefit will be capped and shared with all investors. The rebate is until at least April 2020, when a $2.90 management fee could kick in.

Asset managers are getting increasingly aggressive on price as they seek to stand out in an ETF marketplace with more than 2,000 options. Salt Financial plans to fast-track its growth by undercutting them all. If the move is successful and lures investments quickly, that could allow the company to overcome minimum-asset requirements enforced by some large broker-dealers that restrict which funds their advisers can buy.

(More: Are the economics of active management becoming unsustainable?)

"The distribution channel for newer products is inhospitable for new issuers," Salt Financial's Tony Barchetto wrote in a comment letter to the Federal Trade Commission in January. "The most common 'gates' that new funds face are based on assets under management, liquidity, or time since the fund launched."

The company will spend as much as $50,000 (on top of costs associated with running the fund) to encourage investors to move over.

The cheapest ETFs currently charge just 30 cents for every $1,000 invested, data compiled by Bloomberg show. Vanguard Group, BlackRock Inc., State Street Corp. and Charles Schwab Corp. all offer broad stock funds at this price. Factor-based equity funds, like low volatility, charge an average $4.40.

Costs have been falling fast. Social Finance Inc., the online lender known as SoFi, won't charge a management fee for at least a year on two funds it's helping start, regulatory documents showed last month. JPMorgan Chase & Co. meanwhile unveiled plans for the cheapest ETF yet this week.

(More: Vanguard using ETF portfolios to turn advisers into life coaches)


What do you think?

View comments

Most watched


Schwab's Jeff Kleintop: Prep for volatility given China trade uncertainties

China could be considered a developed market in five to seven years , according to Jeff Kleintop, chief global investment strategist, Charles Schwab.


Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

Latest news & opinion

Funding for Reg BI, other SEC advice reform efforts denied in Waters amendment

House likely to approve measure that effectively kills rule package, but it faces uphill battle in Senate

Wall Street lashes out at Sanders' plan to pay off student debt with a securities trading tax

Financial pros argue that a transaction levy will hurt mom-and-pop investors along with investment houses.

GPB paid B-Ds and reps steep commissions to sell troubled private placements

GPB paid commissions of 9.3%, or $167 million altogether, on the firm's private placements.

Give us a break, active managers say

Seven portfolio managers share their outlooks for the rest of the year, generally agreeing that it's been hard for active managers to stand out.

GPB Capital reports decline in value of two biggest funds

One has dropped by 25.4% and the other by 39%, according to the company.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print