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

Hacker News Discussion ↗

A new YC-backed fintech promises index-style investing with 0% fund expense ratios and a flat $1/month fee by using direct indexing, raising questions about how it can be sustainable and profitable. Commenters probe likely revenue streams such as payment for order flow, securities lending, and cash sweeps, and debate whether those practices align with investors’ interests or simply reintroduce hidden costs. Many compare the offer to established low-fee options from Vanguard, Fidelity, and Schwab, emphasizing concerns over trust, regulatory protection, and exit complexity if the startup changes its model or fails.

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.