Patelco Targets Small Investors With New Investment Plan
Members who do not have the high minimums some providers require to invest have another outlet to turn to.
The $3.6 billion Patelco Credit Union has rolled out a new service that allows members to invest in mutual fund choices for as little as $5 at a time.
Through InvestDaily, members are able to designate the amount and frequency of their investments, which are then deducted from any number of accounts they choose–either accounts within the credit union or elsewhere. There is no penalty to redeem the shares and the fees are $5.95 per month plus an asset management fee, according to Patelco in Pleasanton, Calif.
Another feature is a registration process that requires the completion of suitability questions to help determine the member’s risk tolerance and investment goals. Patelco said since investments in mutual funds expose members to fluctuations in the stock market, this tool helps them determine how members feel about their ability to withstand these fluctuations.
InvestDaily is a partnership between Patelco’s investment and insurance subsidiary, Patelcorp Inc., and SaveDaily, a Seal Beach, Calif.-based company founded to provide people of all income levels the information and tools necessary to invest and self-manage their short- and long-term savings goals, according to the CU. Through this partnership, Patelcorp will help promote the SaveDaily platform to other credit unions.
"It is truly a mass market solution, and we’re excited about delivering it to the credit union industry," said Scott Waite, senior vice president and chief financial officer for Patelco and CEO of Patelcorp. "Until now, many members have felt that they were locked out of investing in mutual funds because of perceived high minimums."
Banks and brokerages have been slow to penetrate the low-income market because many have found it too costly to open and maintain the small-volume investment accounts appropriate for low-income consumers, according to SaveDaily. Providers have to cover the expenses of servicing these accounts through high fees and requiring minimum investments.
"The InvestDaily solution opens up the opportunity for everyone to earn a better return on their money and bridge the retirement income gap," Waite said. "It’s also a great way for young investors to start building their savings for that first home or auto purchase."
SaveDaily said at the heart of its transactional model is an omnibus account, which allows the pooling of multiple smaller investments into a single large aggregated transaction that is executed at the completion of the trading day when the mutual fund pricing or net asset value is established.
Transactions are settled utilizing the automated clearing house network, which allows clients to invest directly from existing checking accounts into their mutual fund accounts, according to SaveDaily. The platform also features systematic transfer capabilities, which allow for regularly scheduled deductions from payroll or other sources.
One thousand individuals providing $10 investments can be rolled into a single $10,000 transaction direct to the fund provider at the end of any given day, according to SaveDaily’s website. Since all 1,000 investments share a single transaction cost, the allotment for each of the 1,000 individual investments is minimal, the company said. It also eliminates the need for investment minimums.