Social Finance plans no-fee ETFs

Social Finance plans no-fee ETFs
Online lender SocialFinance will waive management fees on two stock funds for at least the first year
FEB 25, 2019
The first free exchange-traded fund is on its way. Social Finance Inc., the online lender known as SoFi, is helping start two new ETFs that won't charge a management fee, according to regulatory filings. The funds, which plan to waive charges for at least the first year, will focus on U.S. stocks. With more than 97% of cash flowing to ETFs going to those that charge $2 or less for every $1,000 invested, issuers are under pressure to keep costs to a minimum. SoFi is a new contender in the fee war, after Fidelity Investments made waves when it started the first free mutual funds last year and saw assets in those products quickly grow to $1 billion. Free funds are loss leaders for issuers, which are betting customers attracted by the low-cost offerings will eventually buy more expensive funds or services. Investors currently pay 30 cents for every $1,000 invested in the cheapest ETFs from BlackRock Inc., State Street Corp. and Charles Schwab Corp. Together these three issuers control 60% of the $3.7 trillion market in U.S. ETFs. Vanguard Group, which runs funds that charge 40 cents, manages another 26%. While the cheapest funds all track broad indexes of U.S. stocks weighted by market capitalization, SoFi's offerings come with a twist. The SoFi 500 ETF (SFY) and the SoFi Next 500 ETF (SFYX) will be weighted using a proprietary mix of market cap and fundamental factors. SoFi provided "support in developing the methodology used by the index to determine the securities included," the filing said. The funds are free until at least March 27, 2020, according to the filing, which lists the waived management fee as 0.19%. Although the funds are branded by SoFi, the ETFs are being issued through a trust. Toroso Investments, the investment adviser responsible for the two funds, has hired Exponential ETFs to run them day to day. Solactive created the benchmarks. (More: The race to zero fees may be reaching its natural limits)

Latest News

Federal judge dismisses Eltek manipulation lawsuit against Morgan Stanley Smith Barney
Federal judge dismisses Eltek manipulation lawsuit against Morgan Stanley Smith Barney

Nine-month electronic trading freeze and share lending program at the center of dismissed claim.

RIA wrap: Dynamic strikes South Carolina deal to reach $7B AUM milestone
RIA wrap: Dynamic strikes South Carolina deal to reach $7B AUM milestone

Meanwhile, Rossby Financial's leadership buildout rolls on with a new COO appointment as Balefire Wealth welcomes a distinguished retirement specialist to its national network.

Rethinking diversification amid a concentrated S&P 500
Rethinking diversification amid a concentrated S&P 500

With a smaller group of companies driving stock market performance, advisors must work more intentionally to manage concentration risks within client portfolios.

Merrill pays second settlement to former Miami Dolphins player, client of ex-broker
Merrill pays second settlement to former Miami Dolphins player, client of ex-broker

Professional athletes are often targets of scam artists and are particularly vulnerable to fraud.

Schwab touts AI as its biggest growth lever at investor day
Schwab touts AI as its biggest growth lever at investor day

The brokerage giant tells Wall Street it will use artificial intelligence to reach clients it has never been able to serve — and turn the technology's perceived threat into a competitive edge.

SPONSORED Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management

SPONSORED Durability over scale: What actually defines a great advisory firm

Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline