Sofi Wealth versus Vanguard ETF

Like many others here, I first came to Sofi to refinance my student debt and have generally been a pleased customer. I also have a Scottrade account and have invested modest sums on that over the past few years. I am interested in learning more about Sofi Wealth, particularly what the advantage would be relative to just investing in Vanguard funds on a platform like Scottrade.

From my (perhaps limited) understanding, I would pay the ETF fees on both, but with Scottrade I would only pay a one time transaction fee versus a monthly fee (after $10k) with Sofi. Beyond more active management, what advantages would Sofi offer?

Comments

  • Christina KChristina K Member, Administrator, Moderator, Sofi Team admin

    Hi Christopher,
    There are many advantages to a SoFi Wealth account, but the real question is: “is it right for you?”  I see two factors to consider. One is control and the other is fees and commissions.
     
    Let's discuss control first. If, like most people, you're not a professional investor, and you'd like to have an investment team make portfolio decisions for you – we recommend a managed account such as SoFi Wealth.  On the other hand, if you're an experienced investor, and you want to pick the funds in your account, you should go with a discount broker like the one you mentioned.

    Regarding fees: If you're a SoFi borrower already, you will not pay account management fees to SoFi over the life of your SoFi loan. If you're not a SoFi borrower, a Wealth account is still inexpensive - the first $10K in your portfolio is free of management fees.  Beyond that, there is a management fee of $5/month per $100K invested. There are fees charged by the ETFs, but they charge them in either case.

    Also, SoFi Wealth charges no commissions. If you're investing a lump sum in an ETF and plan to leave it there, paying a discount broker a one-time commission may be best for you. If you plan to contribute smaller amounts ($100 a month, for example) on a regular basis, you'll probably pay less overall by investing in with SoFi Wealth than paying commissions on every contribution. This technique, called dollar cost averaging, involves buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. The investor purchases more shares when prices are low and fewer shares when prices are high. Over time, this will usually result in a lower average cost per share than buying all at once. However, if you pay a commission on each trade, even a small one, it can really add up.

    I hope this helps you make the decision that's right for you. 
    Best
    Christina

  • Christina,

    It sounds like if you're something who is going to be investing small monthly amounts, SOFI wealth is a good fit, correct? Also, how easy is it to liquify your investments? Can you withdraw your cash at any time without penalty? If with penalty, what is the penalty?

  • Original poster here. Thanks Christina, that was a very helpful post. I am currently a Sofi borrower for student loans and probably will be for most of the next decade, so that cuts in favor of SoFi wealth.

    One final question, just to echo Leonela V - how easy is it to withdraw funds from a SoFi wealth account and what are the capital gains implications? With a traditional security there is different capital gains exposure depending on the length of time you have invested, but with a managed fund like this, if I am adding money monthly and withdrawing maybe once or twice a year to cover larger expenses, will I face higher tax exposure? Should funds only be withdrawn every few years to cover extremely large costs (i.e. buying a house)?

    Thanks,

    Chris

  • Christina KChristina K Member, Administrator, Moderator, Sofi Team admin

    Hi Leonela and Chris - You may withdraw money from SoFi Wealth at any time. There is no penalty or cost to do so. We usually will sell enough securities to fund your withdrawal the trading day after the request is placed. These trades settle in three trading days and we send your money to your bank electronically. Depending on timing and your bank, allow 4-6 days.

    If you are invested outside of an IRA, Roth, or SEP account, taxes apply. Dividend distributions will be subject to tax, any capital gains you take if you withdraw funds will be taxable, and losses will be deductible to the extent permitted by law. If you are investing in an IRA, Roth, or SEP account, the usual rules about the taxability of withdrawals apply as they would to any such account. All these tax rules are complicated and you should check with your tax advisor to see how they apply to your specific situation.

    Hope that helps!
    Christina

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