Some Fintech Companies Aren’t Good For Investors

Tech media has become a political mess. Reporters think their mandate is to catch venture capitalists saying horrible words like “retard” (some now refer to it as “the r-slur“) so they can engage in public condemnation. Incompetent “AI ethicists” are now paraded around as martyrs. And during all of this, the necessary stories that provide value fall by the wayside, something that has done retail investors no favors.

Today’s manic markets are an absolute mess. People are literally willing to buy anything with the remote promise of future growth at any price. Israeli binary options scams are at an all-time high, and instead of tightening the reigns, there’s a move towards giving investors even more rope to hang themselves. Today, we’re going to talk about three fintech companies we’ve come across that aren’t doing retail investors any favors. We’re not just picking on these three startups, we’re suggesting that any fintech company with a similar value proposition should be avoided.

Avoid any fintech company that suggests retail investors should engage in trading. – AI and Stock Trading

Click for company website

No matter what someone tells you, there is no magical system for retail investors to generate alpha. Political commentary and tech news site TechCrunch published an article for paying subscribers where the CEO of talked about how machines are so much better than people when it comes to forecasting. No doubt, but trying to convince us that there are “trading signals with AI-insights” that will make Joe Retail Investor a better “trader” is just rubbish.


We’ve looked before at using machine learning for stock trading and showed you firsthand how the companies that sell these solutions do not have investors’ best interests in mind. “It’s time to upgrade your trading game,” says the promotional video which talks about sparking a revolution in trading. Similar to The King of SPACs, Samir Nagheenanajar, we see trying to convince us they’re democratizing Wall Street. We’re not buying it.

Sure, these are just tools to help you become a better trader, and therein lies the problem. Trying to convince the average retail investor that they’re going to master their emotions and do better than a market benchmark by becoming a successful “stock trader” is a dangerous message to peddle. You will do nothing but crash and burn if you start trying to time the markets, especially with all the volatility we’re seeing today. We think this company does a disservice to investors by implying otherwise.

Avoid any fintech company selling shares of equity in assets without any liquidity.

Republic – Selling Shares of Startups

Click for company website

Again, we see another appeal to the millennial lot with this notion of “democratizing wealth creation,” as if hard work has nothing to do with it. Republic talks about “providing investment opportunities to a wide range of individuals—the 97%—rather than just a handful of wealthy angel investors and VCs.” That person in the 97% who makes $100,000 a year shouldn’t really be throwing it into an “investment” that doesn’t actually represent anything. This is a platform that may provide some wealthy bored retirees with something to do with their afternoons, but it should not at all be used by anyone who is looking for a return on their money.

The Republic website talks about how they’ve offered shares of companies like SpaceX and Carta, and we would be up for that (provided the valuations were in check.) What we’re not up for are the dozens of startups on the platform selling everything from video games to cryptocurrency.

Credit: Republic

Most of these companies will never have an exit, which means you will lose your entire investment. Unless you have loads of money and you’ve run out of things to invest in, do not start dabbling in companies that don’t have their shares traded on a market, secondary or otherwise. Just ask investors in High Times how that’s going for them.

To make things even more complicated, Republic uses a financial mechanism called a “Crowd SAFE” that doesn’t actually result in equity being allocated unless there’s an exit and/or certain milestones are met. So, if Republic goes kaput, not sure where that leaves investors. Since each deal differs in terms of triggers and milestones, you’re dealing with a lot more complexities than just owning equity. Whether it’s a SAFE note or actual equity being offered up, the whole thing ought to be avoided. If you want to buy shares of exciting startups, go sign up at a secondary market. If you’re not an accredited investor, you probably have no business dabbling here in the first place. Consider other alternative assets that give you liquidity, which is a good segue into our next startup.

Avoid any fintech company that suggests you invest your retirement savings in crypto.

AltoIRA – Putting Your IRA in Crypto

Click for company website

For most people, their 401k or IRA account is the only savings they have on the way to retirement. It’s vitally important that the majority of your savings is held in conservative investment strategies while a single-digit percentage can be allocated in alternative investments such as gold, wine art, or even bitcoin. (If you absolutely have to invest in crypto because everyone is doing it, buying bitcoin on Coinbase is probably the least risky way.) We’ve talked before about startups like Betterment that offer passive investment products with extremely low fees that should constitute the majority of your savings. If you feel like taking on more risk, you can pursue strategies like dividend growth investing where your money sits for decades until you become wealthy like Warren Buffet did. Alto’s homepage seems to discourage such an approach while talking about “a simple way to maximize returns.”

Credit: Alto

Not Boring newsletter did a piece reviewing the Alto platform where the author talks about moving 20% of his IRA over to Alto. Says the review:

If you’re like me, you’ve read this far and you’re thinking, “Cool, I’m just going to move it all to Alto.” That’s probably not the move. I showed real restraint, and am doing 20% of my retirement account, which Eric said is in range with accepted wisdom on alternatives, and with what the average professional retirement investor does.

Credit: Not Boring Newsletter

Real restraint is 20%? The majority of prudent financial advisors would strongly discourage John Doe retail investor from investing 20% of their wealth in alternatives, especially when the menu includes the aforementioned startups with shares that aren’t traded or cryptocurrencies. These are not what asset allocation experts have in mind when they talk about “alternative assets.” We question the wisdom of letting some millennial investor plough their retirement savings in any one of the 30 cryptocurrencies offered on Alto via Coinbase, which you absolutely know they will do. If Alto wanted to act responsibly, they would limit the percentage of any given IRA that can be committed to their platform.

If you want to dabble in alternative assets, go right ahead. We’re using platforms such as Vinovest, Masterworks, and Coinbase to invest about 6% of our portfolio in alternatives. We’re not going to do it through Alto so we can get charged extra fees, we’re going right to the platform providers directly. We think Alto is not putting enough safeguards in place to prevent today’s risk-hungry investors from hanging themselves. The U.S. government doesn’t seem to be helping much either as they look to lax regulations and allow retail investors to take on more risky investments such as startups with no liquidity.

Update 04/22/2021: Alto Solutions has raised $17 million in Series A funding to accelerate the development of new products, further enhance its existing capabilities, and expand its product and engineering teams. This brings the company’s total funding to $30.3 million to date.


Fintech is being lauded as a way to democratize access to financial services offering a better future for mankind. Unfortunately, that progress is being retarded by fintech companies that don’t have the best interest of their customers in mind. What most would consider good advice – risk management, diversification, dollar-cost-averaging, being an emotionally aware investor – has been tossed aside in favor of whatever clickbait value proposition can attract the most assets. Becoming wealthy is a long and boring process, and these platforms won’t help Joe Retail Investor get there any quicker.

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2 thoughts on “Some Fintech Companies Aren’t Good For Investors
  1. Um,, plenty of us traders 20+ years have mastered charts in both a bull & bear market.

    In 10 years you will notice much of todays tech companies have to use a crypto platform or tool to as a means of showing honesty. – public wont trust corporate in house crypto.

    Biopharm & pharmaceutical companies will share their work uploaded on the designated blockchain & AI will sort the data, determine best combo & assign % of profits to companies based on their contribution. – meaning bribe the FDA is coming to an end.

    1. Pretty scattered comment, but we’re picking up what you’re putting down. There is potential in blockchain, but it’s not in the 10,000 or more crypto dumpster fires being “traded” by the masses.

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