A few months back, I shared a great new investing platform at Loyal3. Loyal3 offers retail investors (that means you and me, not super high volume traders) a way to buy stocks in companies we believe in and use every day with no trading fees. I thought it was too good to be true, so I tried it out and asked the great folks at Loyal3 some questions about how their platform works.
Real, 100% Free Trades
Before I get into the Q&A I had with Loyal3, I want to share a bit more about how it works. You can buy stocks (with either a bank account or credit/debit card) with zero trade fees. You can either make a one-time trade or a recurring investment.
When you invest, the trade doesn’t take place instantly. Loyal3 runs a couple of batch purchases every day, which also allows you to buy fractional shares (only a portion of a share that might cost hundreds of dollars if you are investing less).
With Loyal3, you don’t have to worry about your investment going up $20 before covering the costs of the trade fees. You just buy the stock at the market rate and own it in your Loyal3 account.
Q&A With Loyal3
I had the opportunity to meet someone from Loyal3 at the Financial Blogger Conference this year in Saint Louis, and she got back to me with great, detailed answers. Here is more on the future of Loyal3 and how the “too good to be true” free stock trading is available:
First, how does your company afford to operate? I see that you have relationships with two companies on your investments list. Is that your primary revenue stream?
Yes. LOYAL3’s revenue is generated by the partnerships we have with public and pre-IPO companies. By offering a way for people to invest in their favorite brands and IPOs fee-free, LOYAL3 helps companies increase loyalty and open a new shareholder base. We have a video on our site, where our CEO talks more about how we can operate fee-free. We charge companies fees to deepen brand engagement, lower shareholder support and management costs, as well as to raise capital.
How are stocks held? By buying/selling fractional shares, I assume that Loyal3 has a trading desk buying bulk lots of these shares and track the ownership shares by individual investors internally. Are investments safe in the event LOYAL3 were to cease operations?
LOYAL3 uses batch trading and executes orders about once or twice per day. Shares in LOYAL3 accounts are held at The Depository Trust Company (DTC) in an account in the name of LOYAL3 For Benefit of its Customers. Shares owned by LOYAL3 customers are accounted for in a way that ensures they are always available to the beneficial owners, our investors. LOYAL3 Securities, Inc., as a broker-dealer, has to comply with certain regulations regarding the requirement to have adequate net capital and asset protection. LOYAL3 segregates securities holdings and cash in accounts, meaning it keeps assets separate from the firm’s own assets. In addition, LOYAL3 Securities, Inc., is a member of SIPC, which protects securities of the customers of its members up to $500,000 (including $250,000 for claims for cash). An explanatory brochure is available at www.sipc.org.
If an investor were to slowly build a portfolio on LOYAL3 and decided to move their shares to another brokerage with a full lineup of stocks, is that possible? Or are all transactions inside of the Loyal3 ecosystem?
Yes, LOYAL3 users can transfer accounts at any time and we don’t charge fees for this transfer. If a LOYAL3 user holds both full and fractional shares they may only transfer whole shares. Fractional shares can be sold and the cash balance transferred to the user’s bank account at no cost.
What plans does LOYAL3 have to increase the number of companies offered? Does LOYAL3 plan to stay in the consumer-focused industries, or expand outward to include a more diverse set of industries and companies?
Adding more companies to the platform in a diverse range of industries is always a focus at LOYAL3. We have a dedicated client success team that is actively working with several pre-IPO and public companies in both consumer and B2B industries.
Try Loyal3 For Free, and Keep Using It For Free
I have a recurring stock order on Loyal3 and have been using it for a few months now. If you are a new investor and want to start with only a small amount, or if you are a seasoned investor looking for a new way to build on your portfolio without fees, this is a great option.