All of Us Financial is an online brokerage firm that pays you a percentage of its commission on order flow and securities lending.
Robinhood shook the online brokerage scene a few years ago by eliminating commission on trades; that was a game-changer.
Shortly thereafter, all the major retail brokerages slashed their trading commissions to $0 and proudly proclaimed they were making trading as democratic as possible by eliminating commissions.
But they left out their dirty little secret…
The majority of brokerages get payment for order flow. In other words, brokerages sell your trade to market makers who fill the transaction. The market maker kicks back part of their revenue on the transaction to the brokerage in what is commonly known as payment for order flow.
What is All Of Us Financial?
Founded in 2018, All of Us Financial is an online broker aiming to become the first fully transparent brokerage firm. Headquartered in the San Francisco Bay Area, the CEO is Al Grujic, a founder of a multi-million dollar hedge fund.
How To Get Paid For Your Trades
- The company gives you 10 percent of their payment for order flow.
- They give you 30% of the money they make from securities lending.
For example, A $25,000 portfolio could earn $250 from revenue share.*
*According to their website, “the amount of money you can earn depends on various factors such as: mix of holdings, trading activity and cash balance held. The example shown assumes shares loaned at average annual hard to borrow rate of approximately 6% across the portfolio.”
What Is Payment For Order Flow?
As explained by AOU, when you buy or sell securities, they are often routed to market makers instead of public exchanges.
A market maker quotes the buy (bid) and sell(ask) of a security. In turn, the market-maker earns revenue on the bid-ask spread of the transaction because the brokerage routes securities to the market maker. The market maker provides a “kickback” or a rebate to the brokerage, also known as payment for order flow.
And while this is pennies on each transaction, Robinhood earned $682 million from this activity and accounted for 40% – 55% of its total revenue in 2020.
How Does Securities Lending Work?
If you’re not familiar with security lending, please see the full description explaining how it works. Securities lending is commonly used during the short selling process, among other ways. Put simply, when you lend out your securities, you are paid an interest rate depending on how hard it is to borrow the security.
The company uses Apex for its clearing services. Apex will identify any securities lending eligible securities in your account and automatically lend the eligible securities to the securities lending market. While your stocks are loaned, interest accrues daily and is credited monthly, usually around the 10th of the month.
You can sell the shares at any time.
What Can You Trade
According to their website, you can trade stocks and ETFs and will add more products as time progresses.
AOU does not charge fees for account maintenance or inactivity i.e. commission-free trading.
The company does have fees for other standard banking services.
Full Disclosure Library can be found here:
Is All Of Us Financial Legit?
Yes. Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC), which protects securities customers of its members up to $500,000 (including $250,000 for claims for cash).
What Security Features Does The Company Offer?
The company’s technology platform with the most recent and up-to-date technology ensures that your money and investments are kept safe.
- 256-bit encryption
- Biometric authentication features (TouchID)
Earn $100 A Month With The SharpShooter Challenge
The SharpShooter Challenge is a monthly contest where the risk-adjusted account performance of all eligible accounts is tracked for 30 days ending on the last day of the month.
At the end of each calendar month, the top-performing customer, as evaluated by their proprietary risk-adjusted return metric, is awarded $100.
Fun Fact: SharpShooter Challenge is named after the Noble Prize winner William F. Sharpe created the Sharpe ratio, which measures a portfolio’s risk-adjusted return. Risk & Return, anyone?
The Bottom Line
All Of Us Financial is giving the “commission-free” brokerages a run for their money. Robinhood took it to the next level by offering commission-free trading. Now All Of Us Financial is picking up the metaphorical fumble and running into the endzone for a touchdown.
In the past couple of years, I have been reading more about companies with a more stakeholder-centric ethos instead of a purely shareholder-focused ethos. AOU seizes the stakeholder ethos by being as transparent as possible with its customers.
The company still has a little catching up by offering more than stocks and etfs, which I’m sure we’ll see as the company picks up steam. In addition, they do not offer fractional share trading which is ubiqutous among online-only brokerages.
Nonetheless, their business model is appealing and I think we’ll being hearing more from them in the near future.