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Updated on Tuesday, September 3, 2019
In a sea of micro-savings and investing apps, there’s another offering coming from Rize. The savings app hasn’t launched yet, but there’s plenty of information in the site’s FAQs to get a feel for how the app will work.
With Rize, customers can either save their money in an account that earns a set interest rate, or invest it in a mix of stock and bond exchange traded funds (ETFs). Users will be able to set goals with time horizons and then set up schedules for automated savings toward those goals.
Though the premise is simple, Rize is missing a basic component: FDIC insurance for its savings accounts. The company claims that because your account will be a brokerage account, all money will be covered with Securities Investor Protection Corporation (SIPC) insurance, though this raises some potential issues.
“In general, SIPC protection is determined on an asset-by-asset basis and extends only to cash in a customer’s account that is on deposit for the purchase of securities,” said Ken Tumin, founder of DepositAccounts.com.
If you’re interested in what the app will offer, here’s how it breaks down.
Rize savings account vs. Rize investing account
This app offers two distinct ways to save: You can choose to simply save money and earn 2.15% APY (as of August 30, 2019), or you can invest your cash. If you invest, your money will be put into stock and bond ETFs based on your time horizon. In general, the faster you need the cash, the more conservative the investment approach will be.
The site doesn’t discuss investment returns. The investment mix (stocks vs. bonds) will vary based on how quickly you plan on using the money you invest. You can’t adjust the mix, beyond tweaking your time horizon for a goal, and you can’t choose your investments. Rize uses just two ETFs for investing: Vanguard Total World Stock and Vanguard Total Bond Market.
Brokerage services for Rize are provided by Apex Clearing Corporation.
How does the Rize account work?
Although it’s not possible to test drive the savings app since it hasn’t launched yet, opening an account appears to be as simple as inputting your personal information and linking a bank account for funding. There is no account minimum requirement.
Once you’ve linked your bank, you can create and name your goals and then add a target date and/or an amount you’d like to save. You’ll then set your deposit schedule, and it will automatically save for you each month or week, or based on whatever schedule you set. Note that you can only set one deposit schedule overall.
For each goal, you can opt to either have the money saved or invested by toggling from “cash” to “invest.” The app will help you calculate how much you’ll need to save on a monthly basis to meet your goals. It also will suggest a “cash” or “invest” approach based on your time horizon, but you can choose to follow or ignore the advice.
If you choose “invest,” the app will put your money into ETFs —a mix of stocks and bonds and, if your time horizon is short, cash — based on when you need the money. Unlike many other robo advisors, the app doesn’t ask any questions about risk tolerance, since “research shows we as people aren’t all that great at judging our risk tolerance,” Rize states.
It takes five to seven business days to buy or sell investments.
Does the Rize app charge account maintenance fees?
It has an unusual fee structure. The savings aspect of the account operates on a kind of choose-your-own-adventure schedule where the end user decides how much to pay each month. You can contribute $3, $2 or even nothing at all. There are no other fees and no minimums.
On the investing side of the account, the app requires a minimum fee of $2 per month, plus an annual management fee of 0.25%. The site points out that this is a quarter of the 1% fee you’d pay with a traditional financial advisor, but it’s comparable to robo advisors that offer far more functionality, and even slightly higher if you’re investing a small amount because of the $2 additional monthly fee.
Is my money safe with Rize?
Rize deposits aren’t FDIC insured. This is troublesome, since FDIC insurance protects deposits in federal banking institutions up to $250,000 per depositor, and Rize bills itself as a “full bank replacement,” enabling customers to “manage spending through our Rize Checking Account,” according to Molly Moran Edling, head of marketing at Rize.
It states that user funds are SIPC-protected up to $200,000 for cash and $500,000 for invested assets. SIPC coverage protects cash and securities such as stocks, bonds or mutual funds in accounts at SIPC-member brokerage firms. And indeed, brokerage services for Rize are provided by Apex Clearing Corporation, which is an SIPC member.
That said, cash on deposit with a brokerage for the sole purpose of earning interest isn’t protected by the SIPC, according to Josephine Wang, SIPC president, “even if held at an SIPC member firm.” In other words, the money you have on the “save” side of the app would not be insured.
The company did not respond to questions about its SIPC coverage, but the folks at the SIPC were clear about the status. “SIPC has not been approached by Rize for confirmation of SIPC protection,” Wang said. “SIPC is not working with Rize prior to Rize’s account rollout nor would it be SIPC’s practice to do so.”
This means is that, unlike a traditional savings account, if you use Rize to save money (and not to invest), and the Rize operation goes under, you could potentially lose your nest egg with no recourse. That’s a decidedly risky proposition.
This is something that’s come up before, such as when stock trading app Robinhood offered checking and savings products and claimed they’d be insured by the SIPC — and then quietly withdrew its cash management offerings when it became clear that the SIPC wouldn’t cover them.
“Now it looks like Rize is going down that same road,” Tumin said. “I wouldn’t be surprised if they decide on a different model.”
Rize savings app noteworthy features
- Competitive interest with no fees: The app offers high-interest savings with the option to pay no fees, although the lack of FDIC protection takes a bit of the shine from this feature.
- Multiple savings goals: You have the freedom to save for anything you want, and you can create as many goals as you’d like.
- Built-in features to help you save more: Accelerate, one of the site’s two “Power Ups,” will automatically increase your savings contribution by 1% each month. Boost, another Power Up, will keep an eye on your checking account and transfer “a bit of spare change” once or twice a week, up to 5% of your monthly savings.
Alternatives to the Rize savings app
There are other options available for saving your money, although they have different pros and cons to consider as well.
Chime — FDIC-insured checking and savings accounts
Chime is essentially a no-fee checking and savings account, albeit one that earns almost no interest. (The savings account earns0.50%.) There is no option to invest your money. That said, Chime has partnered with The Bancorp Bank to provide FDIC insurance, so that’s a plus. If you’re looking for a no-frills place to stash your cash, Chime is an option, but you won’t earn much of anything in interest.
Simple — FDIC-insured cash management account
Simple offers a combination of a checking account (earning 0.50% APY on balances of $.01 or more) and budgeting tools, including a Safe-to-Spend feature that shows you how much of your balance is available after setting aside money for your spending categories and savings goals. Choose goals and elect to save over time, and Simple will move money automatically into your “goal” savings at preset intervals. Money in a Simple account is held by BBVA USA and is FDIC insured up to applicable limits. For people looking to earn a little on savings, this is a safer choice offering a similar interest rate.
Acorns — Micro-investing for beginners
Acorns is a micro-investing app that rounds up your purchases to the nearest dollar, deposits the spare change into your account and then invests in ETFs every time you’ve saved at least $5. You have the option of investing your money in a taxable investment account ($1 a month), a taxable investment account plus IRA accounts ($2 a month), or all of the above plus a checking account ($3 a month), which could get pricey for small balances.
You can choose from five different ETF-based portfolios ranging from conservative to aggressive, but it may take a while to amass much, since you’re saving in small amounts. While Acorns offers the option to earn cash back from selected retailers, there is no interest offered on the checking account. Acorns investments are SIPC-insured and its checking account is FDIC-insured.
Is the Rize savings app right for me?
Although it’s possible that the company will make material changes to its model before the app launches, in its current state, there are better (and safer) places to put your money. While it is offering a healthy interest rate on savings, with the option of no fees, experts have concerns about the safety of your money in an account that is not FDIC insured.
On the investment side, if you’re new to investing and you’re happy to let the algorithm manage your money, this may not be a bad place to start. But fees here are comparable to other robo-advisors with vastly more functionality, more investments to choose from and more control over your investment mix.