SoFi Investing Review
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Social Finance, Inc., aka SoFi, aka SoFi Lending Corp., aka SoFi Wealth, aka SoFi Money, aka SoFi Invest, aka SoFi Automatic Investing, has had a substantially rocky time of late.
Over the last two years alone, the company has gotten hit from all sides with a variety of lawsuits that span the gamut from workplace sexual harassment in an alleged “frat-house work environment” to FTC-Act violations.
In the midst of it all, CEO/co-founder Mike Cagney resigned and SoFi spent several months in limbo before the board brought in a new CEO, Anthony Noto (formerly with Twitter), to help re-orient the corporation and get it moving forward again.
Here are the highlights of what has transpired over the last couple of years:
- In 2018, the Federal Trade Commission (FTC) opened an investigation into SoFi for allegedly violating the Federal Trade Commission Act over the prior three years. The complaint specifically highlighted SoFi’s student loan refinancing product.
- In 2019, that complaint was settled.
- Now it is 2020 and the company is moving forward with a new CEO and several new executive team members and garnering some positive reviews for its newly expanded robo adviser services.
But for many customers who chose SoFi to refinance their student loans, the damage is done and cannot be undone.
Luckily, student loan refinancing is not the only service on this discount brokerage firm’s menu.
SoFi continues earning high marks for its other products, including these:
- High-yield digital checking and savings accounts
- Automated online investing
- Free stock and EFT trading
- Digital account services
- BitCoin trading
- Mortgage loans
- Personal loans
- Financial-centric networking for millennials, including job finding opportunities.
- Wealth management robo advisor services that includes free access to human advisors
Should you trust SoFi for your finance, investing and lending needs? Let’s find out!
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What You Need to Know About SoFi’s FTC-A Student Loan Complaint
- SoFi was cited for Federal Trade Commission Act (FTC-A) violations for the period of time from 2016 to 2019. FTC-A citations related directly to their student loan refinancing product and how the product was repeatedly misrepresented in advertisements and marketing.
- The complaint was settled on February 22, 2019.
- The resolution mandated that SoFi cease and desist from all false advertising and misrepresentation activities relating to “average savings” provided by the corporation’s student loan refinancing product.
- SoFi Corp. is now required to further submit to stringent compliance documentation for a period of 10 years.
- The resolution will remain in force for the next 20 years or until such time as any further complaints are filed against SoFi Corp.
Here’s hoping that SoFi’s FTC-A violations are in the corporation’s rearview mirror from here forward.
3 Key Learnings from the SoFi Complaint to Help You Invest Wisely
The Federal Trade Commission released these three key learning points from the SoFi complaint resolution process:
- Truth in advertising is truth, period. In other words, you should always do your own research before taking any type of corporate advertising or marketing at its word.
- Fine print can be a red flag. When it comes to explaining the methodology behind calculating “average savings,” the simpler the explanation, the better for you, the consumer.
- Steer clear of ads with too many disclosures. Look for big print ad claims at the top that match up with the small print disclosures at the bottom.
Bright Lights Up Ahead for SoFi Corp.’s Expansion
The departure of Mike Cagney and onboarding of new CEO and former Twitter executive Anthony Noto may have put the corporation’s intention to apply for a bank license on hold, but as what you are about to read clearly shows, it hasn’t slowed down the corporation’s ambitions or future plans any.
While there is every reason to view SoFi’s past shady dealings from beneath raised eyebrows, the changing of the guard at the highest level already bodes well for the corporation’s future.
SoFi is Granted a Coveted BitLicense
At the end of 2019, the New York Department of Financial Services (NYDFS) granted Sofi’s application for a BitLicense.
Shiny new BitLicense in hand, SoFi now offers customers the option to trade crytocurrency within its SoFiInvest product.
Why is the NYDFS license so important for SoFi’s public/customer reputation? Only applicants that can demonstrate commitment to uphold a particularly stringent set of security, fraud protection and consumer prevention are approved for a BitLicense. SoFi passed the test with flying colors.
SoFi Secures Naming Rights for New Stadium
As of January 2020, SoFi excitedly announced landing naming rights for the new stadium.
This is the stadium that will house the Los Angeles Chargers and Los Angeles Rams, host the 2022 Super Bowl and host the 2028 Olympic Games opening and closing ceremonies.
SoFi’s Automated Investing Robo Advisor Product: Pros & Cons
Of all the products in SoFi’s continually expanding customer portfolio, one of the freshest and most exciting is SoFi Automated Investing (formerly named SoFi Wealth). SoFi Automated Investing is among the new breed of so-called “robo advisor” digital automated investing platforms.
What does all that even mean, anyway?
A robo advisor platform makes use of two key elements to drive consumer investing success.
1. Digital algorithm
Digital algorithms are a key facet of any robo advisor platform’s viability in this rapidly expanding segment of the fin-tech marketplace.
Each investment platform has its own proprietary in-house algorithm. The algorithm works quietly, continuously, in the background, issuing predictions and probabilities based on past averages and up to real-time market movements.
The digital algorithm is a big part of how a digital online automated investing product can help investors meet their profitability goals even if they are brand-new to investing.
2. Human advisors
The second key facet of any robo advisor investing product is still good old-fashioned human beings with advanced financial and brokerage knowledge.
After all, even if you have learned a ton about investing basics, portfolio building, retirement options and diversification of assets, there is always more to learn.
As well, as you move through different life stages, your investing needs and goals may (and often do) change.
This is where having access to human financial and investing advisors at no additional charge to you can really come in handy. It is a huge selling point for any robo advisor investment product worth participating in.
How does SoFi compare to the competition? See our SoFi vs Betterment in-depth comparison.
Goal Planning Features are a Major Plus
SoFi Automated Investing is reaping seriously high marks for goal planning.
With an ultra-low barrier to entry (you can open an investment account with a deposit of just $1) and an encouraging assortment of zero-fee investment options, SoFi’s robo advisor hits the bulls-eye when appealing to younger capital-poor investors.
This is a major win, especially when you factor in the rapid digital on-boarding process – you can have your account set up and activated in a few clicks and voila! You are an investor! This limits new-investor anxiety and back-tracking. Before you know it, the algorithm will go to work to set up your portfolio and allocate your assets. Overall, this is a good thing.
However, because of the self-directed nature of the platform, it will be up to you to reach out to the human advisors who are there to serve you and answer your questions.
Rather than sitting back and scratching your forehead while wondering “why is that asset in my portfolio?” you will need to remind yourself to take action if you want to see changes in your portfolio allocations.
Feature-Rich, Hands-Off Investing Platform
Truthfully, there is little not to love about SoFi’s new robo advisor platform, even going so far as to say it beats out its more established competitors.
Here again, SoFi’s robo advisor gets top marks for appealing to younger, less savvy and capital-poor investor segment. They may not have plush funds as of yet, but with a little hand-holding and encouragement, they someday will.
SoFi’s platform also scores a win in terms of investors seeking a truly automated (i.e. hands-off) investing option. After all, not everyone loves to sit and stare at portfolio projections, but everyone wants to retire with a nest egg someday.
With a nice selection of no-fee and low-fee assets, zero management fees and a team of crack financial advisors available for fee-free investment guidance, it is hard not to appreciate what SoFi has put together with this platform.
One key drawback that is mentioned again and again, however, is the lack of tax loss harvesting. If you are not familiar with tax-loss harvesting, this is a term that refers to the practice of selling securities that are posting a loss to help offset potential capital gains at tax time.
While many robo advisor platforms automatically include tax-loss harvesting in their services packages, SoFi is not yet one of them.
This may be due to SoFi’s focus on appealing to younger investors with lower-value portfolios, who may not see the immediate impact such a service can provide at tax time. However, it will likely represent a continued barrier to entry for more seasoned investors who will expect automated tax loss harvesting assistance.
Easy Setup and Account Activation Process
One of the most interesting aspects of studying how SoFi’s new automated investment platform is received is to witness the disparity between how different independent reviewers perceive the same features.
Take, for example, account opening. SoFi’s robo advisor account opening process has been simultaneously praised and criticized for the rapidity with which you can be up and running and on to investing.
What is the key takeaway here?
Ultimately, what works perfectly well for one investor may be the wrong fit for another investor. Here, it is vital to remember that along with ease of on-boarding may come a glossing-over of certain finer points of asset allocation.
The more data that a robo advisor platform gathers from you up front during the account creation part of your on-boarding process, the longer the account creation itself will take.
However, on the flip side, this data can then be factored in to how and how well the in-house algorithm (and any human advisors you choose to work with) will invest on your behalf.
In other words, a more generic (i.e. quicker) account creation process is likely to generate more generic investing results. In contrast, a more detailed (i.e. lengthier) account creation process is likely to generate more personalized investing results.
Another example is customer service. SoFi’s robo advisor customer service team has garnered very low and very high reviews.
Here, it doesn’t take an algorithm to realize that a faster on-boarding process with lower investment minimums and zero management or advising fees is going to deliver less hand-holding from a human customer relations team.
With lower barriers to entry and a customer base of inexperienced investors seeking a hands-off investment experience, occasional customer service contact will likely still generate high satisfaction scores and high ratings.
Conversely, for more experienced investors seeking and expecting a highly individualized, hands-on experience, any lag time or lack of personalized contact (i.e. use of FAQ or email versus live chat and phone support) is going to attract low satisfaction scores and consequently lower satisfaction ratings.
Once again, the disparity in ratings is less about the service SoFi is offering and more about what each customer requires and whether SoFi is the right investing platform to deliver on your investing needs.
SoFi’s Hybrid Platform Beats Out Traditional Robo Advisor Competitors
Because SoFi’s Automated Investor robo advisor platform includes both automated (digital algorithm-based) investor guidance and the option for working with human financial advisors, some are calling it a “hybrid” robo advisor platform.
This is also part of the SoFi platform’s appeal and, it could be argued, a successful strategy by SoFi to diversify its own offerings to both newbie and experienced investors. As such, it exists in company with only a handful of similarly structured platforms.
Overall, however, the SoFi platform aims to draw in younger (millennial) investors with $10,000 or less to invest who are seeking a platform that will automatically optimize their investment results.
As such, it offers a fairly standard menu of investment options, each of which can be managed via the desktop portal or via an iOS/Android app along with the more traditional email, live chat and telephone assistance as needed.
Missing are certain higher-level features like tax-loss harvesting, 401k product support and options for Coverdell, custodial, non-profit and limited/partnerships.
As of August 15, 2019, SoFi did move to include 529 contributions as a part of its menu of investment offerings – a new and welcome offering for individuals and families in need of college savings and planning support.
Easy, Fast, Convenient Robo Advisor
If you are seeking an easy, fast, convenient and essentially free robo advisor platform, SoFi may just be the perfect fit.
Despite some of the not-insignificant hurdles the corporation has had to overcome in recent years, there is no doubt this reportedly $4.8 billion giant is sitting on some pretty stable financial ground.
In fact, SoFi’s position in the marketplace is such that competitor Charles Schwab even made a play to buy SoFi outright in mid-2019. While ultimately the deal failed to go through, this helped to whitewash some of the scandals in the corporation’s recent past.
With SoFi, you get two modes of investing operation to choose from, automated and active. This means you can be as hands-off or hands-on with your online portfolio as your time and interest permits.
As a side note: as SoFi’s platform continues its fast-paced evolution in a similarly-paced industry, it is worth committing to a more active role to avoid certain less-wanted automatic portfolio rebalancing actions.
As well, not all investment assets are completely fee-free – most notably certain EFT products (EFT stands for “exchange traded funds”). Here again, reading the fine print matters, however dull it may be while it lasts.
SoFi Robo Advisor: Should You or Shouldn’t You?
It says something when an up-and-coming fin-tech corporation powers through the types of high-profile scandals that rocked it to its core and comes out swinging.
As of December 2019, no less than Forbes profiled SoFi’s complaint-riddled student loan product and called the fin-tech giant a “leader” in the student loan refinancing industry.
And so we close as we opened, with a question: should you trust SoFi with your investment needs?
Perhaps here, the real answer lies in that old adage – let the one without sin be the first to cast stones. In other words, is there any finance industry giant that has remained completely immune from allegations of fraud, financial mishandling or even outright scandal?
We think not. Ultimately, no matter which direction you choose to take, there is no substitute for your own active involvement even when using a robo advisor platform.