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Ready to start investing? While you’re free to DIY an investment portfolio with a broker of your choosing, online investment apps like Social Finance (SoFi) make it a breeze to start investing, too.
It’s no wonder why 79% of Minority Mindset readers use 1-3 apps for investing!
But investing can feel risky, and it’s nerve-wracking to trust your money with a new fintech startup like SoFi.
So, is SoFi legit, or is it a scam masquerading as a fintech company? Let’s look at how SoFi Invest works, and whether it’s a legitimate way to grow your money.
How Does SoFi Invest Work?
Although plenty of folks invest through SoFi today, it actually got its start in 2011 as a lender. From student loan refinancing to personal loans, SoFi made a name for itself in the lending space.
But in 2018, the company decided to branch out and offer investments and even banking options. Called SoFi Invest, you can do either active or automated investing with their app—making SoFi a decent choice for both newbies and more experienced investors.
With SoFi Invest, you can:
- Invest in stocks, ETFs, and cryptocurrencies.
- Use automation tools to pick and manage your investments.
- Get help from SoFi’s robo-advisory or its Certified Financial Planners.
- Invest for retirement with a Traditional, Roth, or SEP IRA.
- Buy fractional shares for as little as $5.
Investors love SoFi because the app is simple to use—oh, and did I mention that they don’t charge you any fees? There’s a $0 account minimum and zero management fees. The transfer fees are kinda pricey (starting at $75), but if you’re doing bare-bones investing with SoFi, you won’t pay very many fees at all.
Does that sound too good to be true? In my opinion, SoFi Invest’s fees are in line with its competitor, Robinhood, but it’s good to be skeptical. After all, you don’t want to put thousands of dollars into a fintech app if it’s going to take off with your money!
Is SoFi Legit?
Yes, SoFi is a legitimate investing platform.
As of 2021, SoFi has over 2.5 million users in the United States. It’s listed on the US stock exchange and is regulated by bodies such as the FINRA, the SIPC, and the SEC.
But like any fintech app, it’s going to have its pros and cons. You’ve got to read the fine print, especially when you’re dealing with a financial institution.
Let’s take a closer look at SoFi’s legitimacy, including its certifications and potential safety issues.
If you’re worried that SoFi is a make-believe company that will make off with your money—rejoice! It’s a legitimate, registered business.
- Better Business Bureau: Although SoFi isn’t accredited by the BBB, it has an A+ score nonetheless. BBB rates businesses based on their financial health and customer service, which means that SoFi is a reasonably reliable place to invest your money. Nobody’s perfect, though, and SoFi does have 380 BBB complaints over the last 3 years, with 226 of them closed in the last 12 months. But hey, every business is going to have complaints, and this shows that SoFi diligently works with customers to solve their problems.
- SEC: The Securities and Exchange Commission (SEC) regulates the US stock market. If a company wants to offer investments, they have to be SEC-approved. The good news is that SoFi is regulated by the SEC, so if they make any mistakes, Uncle Sam will hold them accountable.
- FINRA: Unlike the SEC, the Financial Industry Regulatory Authority (FINRA) isn’t a government agency. It’s a private company that holds brokerage firms accountable for protecting investors. Again, SoFi is a member of FINRA, so you can rest assured that there’s plenty of oversight on the app.
- SIPC: But what happens if SoFi goes away overnight? Do you lose all of your money? Fear not: SoFi is also backed by the Securities Investor Protection Corporation (SIPC). SoFi is required by the government to be part of the SIPC, which guarantees up to $250,000 in cash and $500,000 of your money total. As long as you invested in registered securities with SoFi, you’ll get your money back if the platform magically disappears.
Keep in mind that, if you invest in cryptocurrencies through SoFi, you have significantly fewer protections. These investments aren’t FDIC-insured and SoFi doesn’t guarantee them, so invest at your own risk.
SoFi Customer Service
Even if a business is certified, it’s good to see how it treats its customers.
Again, nobody’s perfect, but it looks like SoFi offers some great customer service, especially for a low-cost investment platform.
With SoFi, you won’t get 24/7 support, but that isn’t particularly surprising. You can still do live chat with a chatbot or call their customer service folks during business hours. If you need more hands-on help, SoFi will route you to either an Investment Specialist or a Certified Financial Planner.
The good news here is that you aren’t on your own when you invest via SoFi. If you have a problem with your account or just want guidance on how to grow your money, the platform has good customer service (as well as a decent resource center) to help you out.
I really do like SoFi, but like I said, it isn’t a perfect business. SoFi has actually been involved in several lawsuits since its founding in 2011, mostly over the lending arm of its business:
- 2014 class-action lawsuit: The lawsuit alleged that SoFi’s board of directors breached their fiduciary duty by approving the company’s investment fund. The lawsuit was eventually settled for $20 million. Ouch.
- 2018 FTC penalty: In 2018, the FTC alleged that SoFi used misleading information in its marketing about loan refinancing.
- 2020 class-action lawsuit: Right now, SoFi is fighting a lawsuit that claims its lending products discriminate against non-US citizens and DACA recipients.
I’m not here to say who’s right and who’s wrong, but it’s good to know what other consumers are saying about SoFi.
The silver lining is that most of the lawsuits come from SoFi’s lending products, and not its investment offerings. Even so, learn about the company’s history to make sure you’re comfortable investing with them, before you actually do.
Is SoFi Legit? – Yes, A Trustworthy Option
Is SoFi legit? Yes, it’s a legal way to invest your money, do online banking, and even take out a loan for school. Keep in mind that SoFi Invest is a relatively new offering, so we don’t have a lot of data on its track record yet. As always, it’s important to be an educated investor, so learn how SoFi works before putting your money into the platform.