Launch HN: Double (YC W24) – Index Investing with 0% Expense Ratios

Hacker News Discussion ↗

Business Model, Fees & Sustainability

  • Product charges a flat $1/month for direct indexing with 0% expense ratio; many question whether this can support engineering, compliance, and support.
  • Back-of-envelope math suggests needing well over 100k customers to break even; some suspect eventual fee hikes, sale to a larger institution, or reliance on less-visible revenue.
  • Comparisons to existing low-cost options (Vanguard, Schwab, Fidelity, FZROX, 0.03–0.05% ETFs) show savings are often measured in a few basis points, which many see as too small to justify switching and added risk.
  • Some argue they would gladly pay higher flat fees if that clearly funded a stable, independent business.

Revenue Sources: PFOF, Cash, Lending

  • Thread heavily debates potential secondary revenues: payment for order flow (PFOF), securities lending, margin interest, and cash spread.
  • Some see PFOF and stock lending as hidden fees and misaligned incentives; others (including market-making veterans) argue PFOF can improve execution for retail and is widely misunderstood.
  • There is concern that an incentive to churn accounts (for PFOF or borrow fees) could conflict with optimal rebalancing and tax-loss harvesting behavior.

Trust, Custody & Fintech Risk

  • Many are wary after recent fintech failures (Synapse/Yotta) and question what happens if the startup fails.
  • Founder states: client accounts and securities are held in each customer’s name at Apex Clearing (a large custodian/broker-dealer); Double is an SEC-registered RIA, not a broker.
  • Users can verify holdings directly via an Apex portal, which several view as materially safer than pooled “for benefit of” accounts.
  • SIPC covers failures of Apex, not the advisor; if Double fails, assets should remain at Apex, but some still see residual operational/coordination risk.

Direct Indexing vs ETFs (Tax, Trading, Portability)

  • Advantages discussed: granular customization (exclude employers, sectors, ESG filters, factor tilts), daily tax-loss harvesting, shareholder voting rights, and “index but except X” use cases.
  • Concerns:
    • Trading costs and bid/ask spreads across many stocks vs a single liquid ETF; some argue ETF market makers already compress these costs.
    • Complexity at tax time (many lots), though others note summary 1099-B reporting makes it manageable.
    • Portability: leaving the service could leave investors with hundreds of positions and embedded tax consequences, creating de facto lock-in.

Target Market & Competition

  • Existing direct-index and basket products from Fidelity, Schwab, M1, Wealthfront, etc. are cited; some note similar functionality at slightly higher but still low fees.
  • Many “Boglehead”-style investors prefer to stay with large, “too big to fail” firms for life-savings, seeing this as more suitable for smaller or experimental allocations.
  • Non-US users note it’s US-only; some argue EU-based US expats would greatly value compliant direct indexing.