SoFi waives ETF fees for a second year

Digital finance platform and fledgling fund manager SoFi is digging in on its commitment to low fees by extending for another year the zero-fee policy for two of its exchange traded funds.

According to regulatory filings this week by Social Finance Inc., SoFi Select 500 (SFY) and SoFi Next 500 (SFYX) will be operating with a zero-expense ratio until at least June 30, 2021.

Representatives for the company that launched in 2011 as a platform to refinance student loans were not available for comment, but the latest zero-fee extension is seen as a commitment to discount pricing.

“It shows that SoFi did not enter the ETF market with zero fee offerings as a gimmick but appears committed to offering low-cost products for the longer term,” said Todd Rosenbluth, director of ETF and mutual fund research at CFRA.

The zero-fee strategy, although rare for obvious reasons, is not completely isolated to rebel upstarts using loss-leader products to attract younger investors.

Earlier this month, BNY Mellon launched a U.S. Large Cap Core Equity ETF (BKLC) and a Core Bond ETF (BKAG) with zero expense ratios.

Then there’s the Salt Low truBeta US Market ETF (LSLT), which launched a year ago with a negative fee that pays investors 5 basis point, or 50 cents for every $1,000 invested in the fund.

But since financial advisers are still the largest allocators to ETFs, the low- and no-fee bait is still having only limited success when pitted against funds from brand-name providers.

The Salt fund has attracted just $10.2 million in 12 months.

Of the two free SoFi Funds, the Select version that tracks an index focused on the growth potential of the 500 largest U.S. companies has grown to more than $77 million.

SoFi’s Next fund, which focuses on mid-cap stocks, has less than $10 million.

At SoFi the ETFs are clearly designed as loss-leaders to enable the platform to get its foot in the door of asset management, a space it first entered in 2017 with an automated robo-advice platform promoted as the cheapest anywhere.

With no transaction fees and no management fees beyond those of the underlying funds, the five model portfolios ranging from aggressive to conservative charge all-in fees that run from 3 to 8 basis points.

SoFi claims to have more than a million members, most of whom are in their late 20s and are drawn to the one-stop-shop platform model.

But the business model suggests aspirations for growth. Earlier this month, Social Finance agreed to pay $1.2 billion in cash and stock for Galileo Financial Technologies, a startup that creates applications for card issuers and payments platforms.

SoFi also bought the naming rights for the National Football League stadium currently under construction in Los Angeles.