From the Office of Steven Wallman, CEO

I’d like to provide you Folio’s perspective on this week’s announcements by Charles Schwab, TD Ameritrade and E*Trade to move to limited [1] commission-free trading. 

Since our inception, Folio has offered commission-free trading as a cornerstone of our mission: “To deliver innovation that benefits investors and those who serve them.” We started with the key investing principles of diversification, personalization, consistent investing and tax optimization.  Empowering and encouraging investors and their advisors to embrace these principles required eliminating the barrier of trade commissions. We believed, then, that going commission-free was the right move – not to encourage active trading that’s often bad for investors but good for brokers – but to encourage the thoughtful application of these principles that we knew were hallmarks of smarter investing. Today, twenty years later, we remain certain that offering investing without trade commissions is the best way for clients, and those who advise and serve them, to invest.

We are committed to pushing the boundaries of technology innovation to advance our mission and to offering simple, transparent pricing to all who use our platform. For advisors, Folio offers a unique, end-to-end, state-of-the-art, technology platform combined with fully integrated brokerage, trading, clearing and custody services delivered with quality and responsiveness.  And, we do all that for one low, asset-based fee. We have no plans to change that approach. 

Our comprehensive platform provides advisors, and their clients, a suite of unmatched tools and services that other custodians in the market simply do not offer, including:

  • Fractional-share trading and dollar-based investing
  • Seamless model management SMA/UMA and TAMP capabilities, with sub-accounts and folios with one-click smart rebalancing across hundreds, thousands and tens of thousands of accounts
  • A newly available, state of the art, advanced robo-type advisor, robo-TAMP and hybrid digital wealth technology platform that leapfrogs what’s currently available in the marketplace and that facilitates advisors’ digital engagement, practice expansion and further reduces advisor cost
  • Direct indexing, theme investing, and Ready-to-Go FoliosTM
  • Third-party model manager exchange, with hundreds of unique models and strategies from some of the industry’s most iconic brands
  • Individual client portfolio filters for specific industries, sectors, geographies, values-based preferences, and more, including increasingly important SRI/ESG overlays
  • State-of-the-art, automated tax optimization tools, including our patented Tax FootballTM and ten different tax lot relief methodologies
  • Real-time, paperless account opening and client onboarding
  • A full client portal with online compliance items for attention and other means for needed client approvals and authorizations, and statement, tax and proxy document delivery
  • Robust practice management tools to improve advisor productivity
    • customizable dashboards and reports,
    • proposal generation,
    • online proxy voting, and
    • automated billing covering a vast variety of billing types, including providing required advanced billing notices to clients
  • Built-in RegTech that automates compliance and regulatory processes, replacing costly trade order blocking and reconciliation systems, and eliminating round robin or other allocation requirements
  • Comprehensive performance reporting and in-depth portfolio analytics (with, coming soon, the ability to integrate data from accounts held at other custodians)
  • Multi-bank, FDIC cash sweep program with multiple millions of dollars of FDIC insurance per account
  • Private and alternative investing integrated seamlessly within a traditional brokerage account
  • Margin lending that automatically supports the varied and changing model, allocation and folio level securities positions in an account with different investing and trading strategies
  • And, all the above is available directly as hosted or white-labelled or co-branded applications and, for those advisor firms who wish it, through hundreds of APIs for deeper integration allowing for complete customization and control of the advisor and investor experience

Our all-in pricing model is designed to make it straightforward for advisors to manage and grow their practice, without the considerable time, expenses and third-party resources needed to build, integrate, and maintain the multitude of complicated systems needed to run a practice at other custodians. The cost of the trade was never the expensive part of running a brokerage or the primary cost for advisors to consider – it’s everything else that adds up, and for which clients ultimately bear the cost, that makes the difference.

It should also be noted that custodians who relied significantly on commissions and who are now forgoing that explicit revenue will likely adjust services and pricing in other areas, either by passing on charges for other services, by increasing reliance on products and practices that contain many of the hidden fees that permeate the industry or by cutting back on other services. In reality, “free” is rarely truly free.

Innovation, creativity, and a commitment to benefitting investors and those that serve them are the touchstones that have guided us, and will continue to guide us. We’re excited to see some firms begin to remove barriers to cost effective diversification, customization and consistent investing. I know some, perhaps many, believe eliminating commissions will once again entice retail investors to trade actively in an effort to time the market, ultimately to their disadvantage. We know that advisors and clients who have taken advantage of our decades long commission-free trading windows, have and continue to do the right thing. However, in the event other custodians continue to encourage active trading, instead of investing, by retail investors, then the need for advisors to help ensure that clients are invested in a smarter way will only grow.

We look forward to what the future of investing holds, whether that is fractional-sharing trading for all, mass market customization and direct indexing or goal-based, highly personalized, values and SRI/ESG technology-facilitated investing. We will continue to lead, and welcome the opportunity to support your growth!

 

Sincerely,

SW signature JPEG

Steven Wallman
CEO
Folio Financial, Inc.

 

[1] Some firms have retained ticket and other charges on various mutual funds (including, for example, ticket charges on Vanguard and apparently DFA funds), limited the commission-free trading to certain asset classes (excluding for example, fixed income securities) and, in some cases, retaining per contract charges for options, etc.

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