Author Topic: Automated Investing Campaign  (Read 6900 times)

gamassey

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Automated Investing Campaign
« on: July 15, 2014, 04:20:36 PM »
LC is sure pushing the Automated Investing feature.  They are sending me an email about it every two or three days.  There must be a substantial benefit to LC to have as many investors enrolled as possible. 

I would think that having lots of unallocated money in user accounts would be very advantageous to LC, so whatever benefit they are getting from Automated Investing must be better than the float from those unallocated funds.

Are they using it to allocate the loans that nobody wants?

rawraw

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Re: Automated Investing Campaign
« Reply #1 on: July 15, 2014, 05:52:09 PM »
LC is sure pushing the Automated Investing feature.  They are sending me an email about it every two or three days.  There must be a substantial benefit to LC to have as many investors enrolled as possible. 

I would think that having lots of unallocated money in user accounts would be very advantageous to LC, so whatever benefit they are getting from Automated Investing must be better than the float from those unallocated funds.

Are they using it to allocate the loans that nobody wants?
The 10-K says the cash is held in non-interest bearing accounts, so no float.  I think it's just a way to attract retail investors who don't want to worry about their investments.

gamassey

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Re: Automated Investing Campaign
« Reply #2 on: July 15, 2014, 11:57:07 PM »

Quote
The 10-K says the cash is held in non-interest bearing accounts, so no float.  I think it's just a way to attract retail investors who don't want to worry about their investments.

That may be a good way to attract new investors, but it seems they are focusing on converting existing account holders.  They must have a reason to want existing accounts to switch to Auto Invest.

brycemason

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Re: Automated Investing Campaign
« Reply #3 on: July 16, 2014, 02:57:16 AM »
I suspect there is a lot of idle cash that LC would like used to originate loans.

Fred93

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Re: Automated Investing Campaign
« Reply #4 on: July 16, 2014, 04:38:25 AM »
I would think that having lots of unallocated money in user accounts would be very advantageous to LC, so whatever benefit they are getting from Automated Investing must be better than the float from those unallocated funds.

Zero benefit to LC, because they can't use that money, and don't get any float.  The money is in a non-interest-bearing bank account.

That money is a disadvantage to LC, because lenders who are tired of playing with the web site, or don't understand that they need to keep visiting to reinvest, or whatever -- are seeing a lower return than they should/could, and therefore in the end doing less well than they could.

LC doesn't 'need' the investment.  LC is being overrun by institutional investors trying to put money in.  However, I do believe, and in fact RL has said, that they would like to keep both institutional and retail investment streams, as it is likely that on some turn of market events, the institutional guys could disappear, whereas the retail investors are more likely sticky.

Therefore, it is to their advantage to keep the retail side robust.  If the novelty has worn off for many retail investors, and they aren't reinvesting, then that's not exactly a robust situation.

BruiserB

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Automated Investing Campaign
« Reply #5 on: July 16, 2014, 07:16:48 AM »
Having money in a non interest bearing account isn't exactly like having dollar bills piled up in a vault.  It might not be earning Lending Club any interest, but somebody, namely the bank holding the deposit (WebBank?), is able to gain from the float.  And perhaps LC gets some other advantage from this bank in return for maintaining a large balance in a non interest bearing account.


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hoggy1

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Re: Automated Investing Campaign
« Reply #6 on: July 16, 2014, 08:11:45 AM »
...perhaps LC gets some other advantage from this bank in return for maintaining a large balance in a non interest bearing account.


But that would just make the initial question more puzzling. I think Fred and Bryce provide good insight.
Steve

BruiserB

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Automated Investing Campaign
« Reply #7 on: July 16, 2014, 12:53:53 PM »

...perhaps LC gets some other advantage from this bank in return for maintaining a large balance in a non interest bearing account.


But that would just make the initial question more puzzling. I think Fred and Bryce provide good insight.

Agreed. I do think it's in Lending Club's interest to make sure there's plenty of funds available for funding loans....and having people signed up for AutoInvest helps with this.

They also seem to have an interest in maintaining float....4 days to credit payments or deposits (I can understand a bit more on payments as there is a higher likelihood of a bad payment), and tying up committed money while they approve loans.

If the float is of no advantage to them, they could fully approve loans before releasing to investors. That would completely cut down on our cash being held up only to eventually be turned back to us to be reinvested and held up again until a loan does issue. It would also help ensure that more money is actually free for the approved loans rather than tied up waiting for approval that may not come. Since everything funds eventually these days, there's no reason to hold for funding first....especially since they are now giving the first 2-5 days of interest to WebBank!


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rawraw

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Re: Automated Investing Campaign
« Reply #8 on: July 19, 2014, 08:19:22 AM »
Having money in a non interest bearing account isn't exactly like having dollar bills piled up in a vault.  It might not be earning Lending Club any interest, but somebody, namely the bank holding the deposit (WebBank?), is able to gain from the float.  And perhaps LC gets some other advantage from this bank in return for maintaining a large balance in a non interest bearing account.


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It's in Wells Fargo. 

BruiserB

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Automated Investing Campaign
« Reply #9 on: July 19, 2014, 08:32:51 AM »
Having money in a non interest bearing account isn't exactly like having dollar bills piled up in a vault.  It might not be earning Lending Club any interest, but somebody, namely the bank holding the deposit (WebBank?), is able to gain from the float.  And perhaps LC gets some other advantage from this bank in return for maintaining a large balance in a non interest bearing account.


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It's in Wells Fargo.

Then Wells Fargo is benefiting from the float.  Ironic that it's the same bank that was prohibiting its employees from investing in Lending Club.


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« Last Edit: July 19, 2014, 08:35:00 AM by BruiserB »

rawraw

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Re: Automated Investing Campaign
« Reply #10 on: July 19, 2014, 05:45:03 PM »
Having money in a non interest bearing account isn't exactly like having dollar bills piled up in a vault.  It might not be earning Lending Club any interest, but somebody, namely the bank holding the deposit (WebBank?), is able to gain from the float.  And perhaps LC gets some other advantage from this bank in return for maintaining a large balance in a non interest bearing account.


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It's in Wells Fargo.

Then Wells Fargo is benefiting from the float.  Ironic that it's the same bank that was prohibiting its employees from investing in Lending Club.


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Depending on the size, Wells may be complaining about the size of deposits.  Banks just don't want more deposits to have them, especially right now.

gamassey

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Re: Automated Investing Campaign
« Reply #11 on: July 19, 2014, 07:07:37 PM »

Depending on the size, Wells may be complaining about the size of deposits.  Banks just don't want more deposits to have them, especially right now.

What?  Are you saying banks do not want cash?  I don't understand that logic at all.

hoggy1

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Re: Automated Investing Campaign
« Reply #12 on: July 20, 2014, 12:53:25 PM »
Deposit are bank liabilities. Loans are assets.
Steve

gamassey

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Re: Automated Investing Campaign
« Reply #13 on: July 20, 2014, 01:56:12 PM »
Deposit are bank liabilities. Loans are assets.

Banks use the deposits to make new loans, they are allowed to use 90% of deposits to underwrite new loans.  They will then earn interest on these new loans.  So more deposits,  more loans,  more interest, more profit for the bank. 

So why would they not want deposits? 

Are you saying the closer to zero deposits a bank has the happier a bank would be?  I think it is exactly the opposite.

Randawl

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Re: Automated Investing Campaign
« Reply #14 on: July 20, 2014, 04:17:49 PM »
Deposit are bank liabilities. Loans are assets.

Banks use the deposits to make new loans, they are allowed to use 90% of deposits to underwrite new loans.  They will then earn interest on these new loans.  So more deposits,  more loans,  more interest, more profit for the bank. 

So why would they not want deposits? 

Are you saying the closer to zero deposits a bank has the happier a bank would be?  I think it is exactly the opposite.

I think you left off a zero on that percentage there.    ;)