You’ve heard of no-fee ETFs. But what about an ETF that pays you to invest in it? Sounds too good to be true, right? But it’s exactly what Salt Financial introduced last week.
Salt’s ETF waives its normal fee of 0.29% of a customer’s assets and also provides a rebate of 0.05% of the value of those assets (read: You get $5 for every $10,000 you invest). The offer is good for the first $100 million in assets that get invested in the fund over the next year, Quartz explained; at that point, the rebate ends and fees will return.
Why such a generous offer up front? Well, it’s business. I called Brent Weiss, a CFP and co-founder of Facet Wealth, to explain this newfangled ETF offer.
“They’re trying to drive new consumers to the product when people may not be ready,” Weiss said. By enticing people to buy in, Salt can show those assets in order to earn faster, wider distribution via big investing platforms (Vanguard, Fidelity, etc.). “They’re going to lose money getting started, but it’ll help them get to that critical mass of having enough clients.”
It’s a savvy business move, but Weiss likened it to the old model of offering a free toaster when you signed up for a bank account. Instant gratification is nice, but a promoted “free” or “we’ll pay you” ETF may not fit into your personal investing plan.
“How much risk do you want to take on by investing in this fund?” He advised potential investors to consider. “What happens if the fund doesn’t raise enough money? If the fund has to close? If the fund loses the money?”
Instead, he says, strive for low-cost investments (look for 0.25% or less) and don’t be blinded by promotional offers. “Good investing is boring,” he said. “A promotion says there’s probably too much risk in that investment.”