Our background is in computer science (we’re ex-Googlers), but we also love modern portfolio theory, and long-term investment in low-cost, broadly diversified index funds (we’re big Bogleheads fans). Annoyed by our checking account’s low returns, we asked ourselves if there was a way to invest our checking account balances, but still keep the checking account features.
Financial Choice (FC) is our answer. When a user deposits money with FC, like a paycheck, FC automatically invests that money according to our user’s investment preference. When a user withdraws money, e.g. for rent/mortgage or at the ATM, they get money instantly, while FC automatically triggers a sale of their investments to cover the withdrawal. In many cases, investments sell in time to directly cover the withdrawal, while other times, the withdrawal is made on margin until the investments’ sale completes.
Users choose what they want to invest in based on what risk they are comfortable with. Many invest in stock index funds (e.g. S&P500 with 10.3% average annual return, -43.1% worst year [1]). Some users invest in bond index funds (e.g. 6.1% average annual return, -8.1% worst year [1]). Some choose socially responsible investments. Those with the lowest risk tolerance invest in US treasuries.
On a macroeconomic scale, we believe that our approach can solve major problems of the current banking system. Today, banks invest customers' deposits and keep the returns mostly for themselves (the national average interest rate is just 0.03% [2]). When there are losses, FDIC guarantees that customer deposits never lose money, but when the losses become significant enough (like they did in 2008 [3]), the taxpayer ends up paying with bailouts. With FC, users invest their money directly, so returns are transparent and there’s no need for bailouts.
Beyond giving people a choice, there’s also a couple other cool features that we’re excited about. Naturally there are funds flowing in and out of a checking account (paycheck, rent, bills, etc), and we can use these to automatically rebalance a portfolio. Similarly, we can optimize our users’ tax burden by being smart about which investments get sold and performing tax-loss harvesting.
Financial Choice is currently free to use and available in the US. We build on top of Fidelity that provides all checking and investing features. Building on top of an existing financial institution has been hugely helpful to get a full-featured product to our customers quickly (but it does mean that users have to share their credentials with us, similar to Plaid).
We’d love for you to try it out (sign up at https://financialchoice.com/signup), and give us feedback. We would also love to hear what you do with your checking account balance, and what you think the major problems with today’s banking system are (and how they can be fixed).
[1] https://investor.vanguard.com/investing/how-to-invest/model-...
[2] https://www.fdic.gov/regulations/resources/rates/historical/...
[3] https://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80...
"Please don't fulminate."
"When disagreeing, please reply to the argument instead of calling names. 'That is idiotic; 1 + 1 is 2, not 3' can be shortened to '1 + 1 is 2, not 3."
"Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith."
I'm sure you can make your substantive points thoughtfully, so please do that instead.
Also banks are investing all of your money in highly illiquid risky assets (aka mortgages) so I don't see how this would ruin the economy or even meaningfully change the risk profile if adopted at a large scale.
Isn't it $250,000 per customer?
It wouldn't be enough to save the bank if there was a run (because of accounts with huge balances), but it'd be enough to save most of the customers that need saving.
https://tolusnotes.com/the-true-cost-of-fdic-stability-broke...
I would love to be able to set a "surplus" threshold as part of this solution, say $5k (just an example - it should be set by the user), such that any amount above that in the account is invested, while the rest is kept in cash. That would solve the "emergency" funds issue for some people.
I think framing this is a checking account is what people are having trouble with. It really seems like an investment account with easy liquidity. If you add a section that is kept in cash, then it's checking + investment with automatic rebalancing.
Also, the fact that not many of them have this feature is kind of a red-flag. But then I am not the expert and I might be absolutely wrong.
I had the same thought at first. But at the end of the day the competitive edge a company like Financial Choice has might simply come down to marketing and UI/UX.
Wealthfront, Betterment, Robinhood, etc are very narrowly targeted at investors (e.g. if I send a link to Wealthfront to my cousin who wants to earn a return on a $5000 checking account she set up for her young child, or even her own checking account, she's very unlikely to convert)
But I also think for others, this is quite a mental shift on how to look at checking and investing accounts. There are some investment companies like Wealthfront and Betterment who are starting to move into checking accounts, but it feels very much like a afterthought to a customer.
We are hoping to truly unite the two account types.
Yes exactly. Checking account is the safest thing you can do online especially with FDIC backing. It is misleading to say that it is like a checking account. It is not. People can lose money with this product and I think that needs to be clarified which is the opposite of a Checking Account.
Fidelity has a Cash Management Account [1] that functions as a checking account as well as hold securities. (It also sweeps into FDIC-insured accounts overnight.) I find it useful for planning large expenses by e.g. buying a Treasury or other bond that matures around when that expense will be due, thereby earning a bit more yield while making the available cash actually represent unencumbered cash.
The UI isn't super modern, though. That may be worth giving up some of the securities features one will never use and the FDIC insurance.
[1] https://www.fidelity.com/cash-management/fidelity-cash-manag...
We can't really help you if we end up losing all of your money... but our page looks way better than the alternative!
This is absolutely the case. This isn't a checking account. This is liquidity management for those who are comfortably operating aggressively with their personal finances. With that said, definitely going to give it a spin side by side with my Fidelity Cash Management account.
My old investment account offers to watch my checking account and pull any "excess" money into investments. if i drop below a threshold? Sell and move to checking.
(The firm is "betterment" if you want this). Would not recommend for/against. I no longer use this firm.
As you know if you read enough about banking, and as the intro points out, banks already invest your balance in risky stuff. Namely they lend it out to small businesses, homeowners, and others at substantial risk for default. There are mitigations like collateral and sometimes securitization, but the risk is real and there and has blown up countless times in the past.
Yes, the stock market can "blow up" too. But at least you're capturing the upside of the risk with this model. Even interest bearing checking accounts share an infinitesimally small fraction of the return the bank can make on your money.
I'm not saying this is for everyone. When I was younger I would routinely deplete my balance and I do not think this is a good setup for people in that position. But at a more advanced age people tend to start carrying significant balances in their checking as a matter of course, and I actually think there is some strong if slightly counterintuitive logic here in this idea.
In the other account, based on the same history, I’ll stay well ahead of inflation most years, but lose far more in some.
Also, I think the point with the bailout is a bit disingenuous on their part. True, if your account is not FDIC insured, then the government wouldn't need to bail YOU out. However, if we experience a similar crisis like we did in 2008, they will bail EVERYONE ELSE out. You just happen to be the sucker who will have paid into it but not been covered. If the argument were for eliminating FDIC insurance altogether, I'd be super onboard.
Why
Not really. They invest primarily in mortgages which they package up and sell to Fannie Mae.
More importantly checking and saving deposits are insured by the FDIC so the risk of loss for the end consumer is zero below $250K (per account!).
Investment accounts would have SPIC insurance against insolvency but the actual risk of market loss is borne entirely by the end consumer. If you’re riding your mortgage payment on whether you don’t lose in any given month, things could get ugly. Ditto for the tax consequences of churning to cover bills.
When the bank screws up and loses 90% of my money, I'm guaranteed by the FDIC to get it all back (as long as it's under the insured amount).
When I screw up, I lose money.
Sure, that's the way investing works, but people generally separate "funds I can afford to invest/lose" from their day-to-day checking accounts.
These days, you can just electronically transfer your money to your broker and it's available "instantly". I am not really seeing an advantage.
But I'm also curious, what other steps could we take to make sure people use this in an appropriate way?
As it stands now, I need to consciously pick a fund, make a transfer, check it, withdraw, etc... But ultimately all I care about is broad definitions of how aggressive my portfolio looks and what I have in what is essentially cash. If you'd just modify all of those transactions into a simple slider for me, the value prop. would be super clear, and I'd also sleep well at night not fretting suddenly having less money than I need.
You're going to get users who sign up thinking this is just like a bank account, but with better returns. Then the market will drop 10% when their rent is due tomorrow. Bank rates are so low because the money is always there and insured. Anything without these features should not be called a checking account.
You call yourself Bogle fans, but passive index investing and instant cash access are fundamentally opposed from a time perspective. Finally, this is a tax nightmare. People will think they have huge gains in their account but get hit with a capital gains tax when they go to withdraw.
"passive index investing and instant cash access are fundamentally opposed": I agree, this is the case right now, but we want to change that, because there isn't any fundamental reason for this.
Yes, people will owe tax, but remember that only your gains are getting taxed. So if you get a tax bill, it's because you made money. That is still a net-positive. There are also a lot of things you can do to reduce (though not eliminate) the tax burdon, such as carefully selection what investments to sell, predicting money flow (e.g. not investing a paycheck if rent is due a day later), tax loss harvesting, etc.
They are opposed. Passive investing requires long waiting and holding, not lots of tx like a checking and cash access require.
Margin against the contents might be better, since you can keep the gains and not pay tax.
> e.g. not investing a paycheck if rent is due a day later
Yea, this is the problem! If you use this as a checking account, then you can't NOT invest it.
I can maybe get past the risk since I invest a lot anyways, and cap gains since interest bearing accounts are also taxed as ordinary income, but if every withdrawal causes a reportable sale, how is this not a IRS paperwork nightmare?
"You can aggregate all short-term and all long-term covered transactions and report them as single-line entries directly on Schedule D. A covered transaction is one where your broker provided a 1099-B Form to the IRS that: 1) Show acquisition date and basis and 2) Don’t require any adjustments or codes"
https://www.hrblock.com/tax-center/income/investments/report...
Very rich people have access to borrow against their investments so they don't have to sell (and trigger taxes).
I would never use FC as it is. BUT if you made a product where you never sell the underlying assets, and instead offer a 0% loan against them when i withdraw (and take a fee somewhere to cover), I would be very interested. Ideally, it might have protections so i can never get a margin call and be in debt during bad market times. Perhaps i can only borrow against the invested amount (or eg 75% of it), and any asset growth is profit, and not borrowed against.
The benefit to this is great. I can watch assets grow, and capture their growth and not deal with taxes, while still benefiting from liquidity. For people will large, regular income (eg. SDEs), you can usually rely on a continued income stream. I am fortunate that i usually invest a large % of my income (sde DINK yay), so being able to only "borrow" against a subset of it for faux-checking seems fine.
There may be an opportunity here for some sort of pattern recognition to keep cash equal to expected inflow/outflow.
Eg. "80% of the days, they make a $10 lunch purchase, and get paid weekly", so keep $40 a week in cash to avoid cash <-> asset conversions at all.
(I rather hate the IBKR app and don't like using it)
For most people (this is not financial advice for any one person) money in checking and savings should have a low rate of return and therefore low volatility because they need or may need that money to actually be there to pay bills or in times of crisis (emergency savings). Once you have these two pools of money, then you should invest in retirement and finally extra taxable investments. Most people should automate the money going into retirement and investments I agree but turning your entire checking account into a volatile/uninsured pool of money I think is the wrong direction.
Having that “emergency fund” be invested in the market means you will have “buy high/sell low” events.
For sure some people can afford this and just like to live dangerously, of course.
If that amount of money is significant to you and you think you are missing out, you should stay away from the stock market. You are basically on the verge of bankruptcy, especially if you live in a country without proper social security (e.g. the US).
I like the idea if you are saving for something you do not really need, e.g. your second yearly vacation or some vehicle.
1. Do you think there's an opportunity for you to obtain 3rd-party insurance on deposits, as a sort of middle ground between uninsured deposits and FDIC?
2. How/why did you choose to partner with Fidelity?
3. Have you launched on any other financially-focused websites? If so, how was your product received by those crowds?
4. Out of curiosity, what tech are y'all building with?
Best of luck!
1. It's a good question, I don't think we have really looked into this, so honestly I can say much. But worth of further investigation on our side!
2. It turns out that we need a number of features (investment account, checking account with debit card, etc, ability to spend money against your investments, and a few more), and there are not too many players left that we could build on top of. So it was process of elimination mostly.
3. We haven't, this is our first big public launch.
4. We are built on AWS using lambdas and DynamoDB. We are using Typescript as our main programming language, both in the front-end and backend, which is very convenient, especially since we are using a monorepo. Makes code-sharing very easy. Our frontend is built using React.
Pay X% to limit your maximum losses in a year to Y.
For example, right now you can buy yearlong puts on SPY at a strike price of $260 (58% of the current value) for 1% of the current price.
How are you managing financial numbers safely in TS? Any library to ensure its "safe"?
People who want to hold 0% of their assets in dollar?
I often debate with my friend on what percentage of ones assets one should hold in dollars. 0% seems a rather radical choice. I don't know anyone personally who does that.
I am not saying it isn't a rational choice. Only that I don't know anyone who does it.
On the question of how much money you should keep in cash, I think it really depends on how much savings you have. Most experts recommend a rainy day/emergency fund worth 3-6 months of normal expenses. If you invest that rainy day/emergency funds in a Financial Choice account, it is important to choose an investment strategy with an appropriate risk/reward profile, and adjust the savings target to account for the additional risk from the investments. Betterment has a pretty good writeup on this idea https://www.betterment.com/resources/safety-net-funds-why-tr....
* People for whom this product matters ( those who don't have much money and hence should welcome the earning upside no matter how small the interest is, should not use this product because it is an investment account masquerading as a DDA account and could lose value. Having living expenses in an unstable account is just a plain bad financial advice.
* People who have a pile of money want their cash to be cash and cash only. They already have exposure to the market via investment accounts with checks/debit cards against them provided by the likes of Schwab, Fidelity, BOA, Chase and their immediate liquidity needs are addressed via revolving credit lines.
I don’t know why nay-sayers are freaking out about this aside from calling it a checking account. Most HSAs (like Health Equity which I use) have a threshold cash balance (say $500), and then allow you to invest the rest, even in equities. No one seems to yell at them for being irresponsible because a medical emergency may coincide with a market downturn.
Maybe this is inappropriate for a Launch HN, but do you see a path to profitability for this that isn’t based on selling advertising / marketing data? Is there sufficient income or a sufficiently large addressable market here to make this work on just cash management / tax planning?
It’s not just coincidence for a checking account, people often need access to cash during market downturns as unemployment generally increases.
In some sense this is a form of self-insurance rather than paying a “premium” in opportunity cost to the bank each month / year.
Also: I know recommending options to novice investors is considered heresy, but in my experience 1 year puts insuring 50 or even 70% of market value via strike price are often considerably less costly than a 6-8% assumed annual opportunity cost between SPX and some 0/1% saving’s account.
Something that’s automated like this could easily just buy puts with a 1 year window on deposit and paired sell them with equities on withdrawal.
Long term, you could imagine that our automation could buy and sell securities that are slightly different, so that you would get the full tax loss harvesting benefits.
If I withdraw $10,000 with that Charles Schwab margin debt, and let's say I repay it 3 months later, how much interest will I have paid to Charles Schwab? (Napkin calculation, I'm not quite sure what the interest rates is on those margin debt.)
With your product, indeed no margin debt, but if those 10k are obtained from an investment were originally a 5k investment from many years ago, then, assuming 20% ltcg + niit, I suddenly owe around $1200 to the IRS, and some other $$$ to the state maybe.
In which situations do you see this being a better money move than the margin debt way?
2 additional questions :
- when selling do you minimize tax (i.e. attempt to sell the lot with the least amount of gain)
- do you attempt to "cover" taxes? (i.e. withdraw actually ~$12k, so that i roughly have $10k actual cash, and the rest to pay the IRS bills - assuming your users can indicate which marginal tax bracket they fall in after W2s)
I would be very interested if you could find a way to provide me with a short term(net 30 days) low cost(<2%) margin loan. I wouldn't even really mind giving up some price execution (i.e payment for order flow) so you can make money.
Yes, you can. Every single one of my investment accounts comes with a debit card that can access both uninvested cash and take a loan against the value of my securities, which I can either repay by selling the securities or by transferring cash.
I'd prefer my checking account to have 0% returns to -6%.
It is simple for me to set up automatic deposits from my checking account to my brokerage account, and also include automated investment of those funds.
Perhaps I'm old fashioned, but I'm not really seeing the value prop. I have an investment account separate from my checking for a reason. Many reasons, actually.
and to close, referring to your interest in portfolio theory, there is an option value to holding cash. Not saying it should be a major portfolio allocation, but having a certain amount in cash makes sense from a financial engineering perspective.
Since 2016; I have more or less keep all of my cash, minus a small emergency fund, invested into equities at all times.
I have nearly twice as much wealth as I would otherwise have, if I didn't do this and kept cash.
I'm not worried whatsoever on what analysts predict. They are consistently as wrong as they are right, and I've been hearing calls for overvaluations and market crashes for years and years ever since 2013.
You can't time the market.
Worrying about capital gains taxes is a head-fake - you're only paying tax on your gains, which would have otherwise been minimal interest, which btw is taxed higher than gains. The risk here is just that the amount of margin interest I pay is dependent on how quickly you're able to sell, although hopefully this shouldn't be a massive issue for VTI et al.
Your messaging on the website seems clear to me, I wouldn't worry about anyone living paycheck-to-paycheck mistaking your technical looking homepage for a regular checking account.
One of your mentioned use cases doesn't sound right though - if I'm saving up towards a short-term spending goal like a car or house downpayment, I probably want a predictable balance and not exposure to sudden price shocks.
Let me provide you with a bit more context about the house buying use case. When buying houses you need to keep a chunk of money (around $60k) available to wire next day for a "good faith deposit" in case you're the winning bid, and it's quite a waste to keep that money in a checking or savings account (since the house buying process can take months).
https://www.fidelity.com/cash-management/faqs-atm-debit-card
"The Fidelity debit card is available on youth accounts and nonretirement brokerage and cash management accounts with individual, joint tenant, and trust registrations"
If you withdraw money using a Financial Choice debit card, that withdraw will automatically trigger a sale of your stock in the appropriate amount, so that you won't be building up margin loans.
Business accounts have much higher cash drag - much harder / complex market but if you had the full package would be amazing (cash drag can be around $500K easily).
For larger uses of money (house purchase etc) how does that work in this system.
Also, I'd tag it a brokerage account with excellent cash management features - that's the normal way to call this.
Large purchases work pretty much the same way as small purchases (you get the money instantly, then we sell your investments to cover the withdraw), except that you may run against the $100,000/day limit on electronic funds transfers.
Completely agree on the phrasing, we can do a lot better there.
Or do a wire option with strong 2FA with callback - no SMS for authentication with a 90 day account age requirement and 15 day fund hold or similar on new funds prior to wire.
We normally have a fair bit I can't be bothered to shuffle to and from Vanguard and they've limited some of their cash management offerings. I do like having prompt access to funds so the wire option is appealing (even for a $25 - $50 fee) for me or make sure you are well integrated into same day ACH and have clear posted cutoffs (+ expedite fee if needed) for folks who need to move larger amounts.
Don't underestimate chance to move very large balances if you can solve brokerage + efficient access to cash.
Finally, if you are willing to do portfolio / margin lending (maybe very low leverage) you can often address most cap gains issues by smoothing spending.
Obviously this is opt in.
So if I write the $20K check to some contractor, you check for tax loss harvesting opportunities, if you find some great, sell and fund. If you find none then you carry that $20K on the margin account until my next deposits come in at end of month.
Yes, but banks aren't just turning around and investing deposits in the S&P 500. Right now, the marginal reserve requirement in the US is 10%. So the bank is keeping 10% of your deposit as cash.
This is pretty similar from the common advice to "keep 3 months' living expenses as an emergency fund." And thinking about that advice, I have to question the value of Financial Choice:
* If I'm a user with a reasonably high net worth--say, 10x my 3-month living expenses--I should probably just put the 3-month expenses into an FDIC-insured bank account and put the other 90% of my assets into a low-cost mutual fund or ETF.
* If I'm a user without 10x my 3-month living expenses, I definitely shouldn't be investing my emergency fund in speculative assets like equities!
So, like, who is this for? :)
Edit: Reading some of the other comments here, I get the impression there are some posters here in my first category who would like their 3-month living expenses to also be invested in equities. And yeah, if you are relatively high-net-worth-relative-to-expenses, you can risk it--someone in the "10x" category can suffer a 40% market downturn and still have a meaningful emergency fund.
On the flip side, consider that market downturns and the need to tap the emergency fund are not statistically independent; the emergency fund exists, in part, to avoid forcing you to reduce your market position to cover expenses when you lose your job in a downturn!
But I agree, not everyone is like this. Note though that you don't have to invest in the S&P500, there are many lower-risk (and lower-return) investments to choose from. For instance, bonds historically have seen 6% average return, with their worst year seeing a drop of 8.1% (source: https://investor.vanguard.com/investing/how-to-invest/model-...).
This is absolutely a painpoint for me and other individuals that prefer to hold as much of their assets as possible in the market. The amount held over in checking for day to day transactions feels like little more than "cash drag" once you have enough saved that you can weather a market downturn. Right now I do expense tracking and budgeting largely so I can figure out how much balance I should keep in my checking account, then transfer the rest to investing. Combining the accounts like you propose would save me substantial time and missed market returns.
A problem you may run into in targeting bogleheads is that they like to see that you're well established before committing their life savings. Putting a substantial amount of money in a non-FDIC insured financial institution without a track record could be a non-starter. Advertising on your landing page that you base your services on top of Fidelity might lower that perception of risk.
Hypothetically let’s say everyone was using this already. Then something like Covid or another “worldwide bad event” occurs.
So people spend their money, which in this case means they’re liquidating their investments. This further drives down the price and increases volatility - in other words the people who need the money most in the most desperate times will lose the most as they will need to spend the largest percentage of their holdings.
To add insult to injury if enough liquidated then you could be in the bank run territory since there’s no FDIC insurance you could lose everything.
From your description, it sounds like this is not FDIC insured?
That's correct, because your money is invested, this is not FDIC insured.
We are buying and selling the stock in such a manner that you get instant access to cash (e.g. at the ATM), which would be impossible or very tedious if you did this manually :-)
So who are these people keeping so much money in their savings account that they want to invest it, but are not already being served by other offerings from traditional investment firms of high-yield savings accounts?
I live in a high cost of living area, so I used to keep ~20K in my checking account at all times to pay for rent etc. All the rest of my money I invested in a total market stock index fund. The checking account balance is just a small fraction of my overall balance, so the FDIC insurance really didn't help me.
Financial Choice has two benefits for me. 1) I now get to invest those ~20K which gives me a ~1-2K expected annual return without any hassle, and 2) I can just keep all my money in my Financial Choice account, so I don't need to bother moving money between a checking and brokerage account anymore.
One quick piece of feedback around the setup process (specifically "pick an investment strategy"). It would be great to see what the 1y & 5y ROI looks like for each of the ETFs you've listed. I'm currently going from your page to google to search for each symbol individually to gauge the ROI. It's taking a while!
Edit: Did not realize I would need to open a Fidelity account to make this work :(
[1] How do you handle capital gains tax, when the user withdraws the amount from their account?
[2] How is this different from marcus/ally and thousand others, that provide money market fund accounts and money there is insured by FDIC.
You can configure which of your shares we will sell first. If you set this to Tax-Sensitive, we will sell shares with a low tax burden first, so if you have a greater inflow into your account than outflow, all the shares with a high tax burden will never be touched and they will eventually be classified as long-term capital gains.
2) Money market funds only allow you to invest in low risk/low reward securities. We allow you to invest a much broader set of securities (including bonds, stock, ETFs, etc).
If so, how do you decide what securities to liquidate?
If not, what’s the margin rates and is there a spread atop Fidelity’s rack rates?
I’m in the skeptical camp as well as none of this seems that’s useful vs the potential fee structure and risk profile. Anybody that wants this now can setup a checking account alongside their brokerage and manually sweep cash as needed. That also has the advantage of being in explicit control of what monies get moved.
Yes, cash debits and checks lead to an automatic sales of securities.
You can configure the liquidation, e.g. to the Tax Efficient strategy, which minimizes capital gains taxes by selling shares with the lowest returns first.
We sometimes can't sell quickly enough, e.g. when you withdraw money at the ATM on the weekend, and then you would be paying for a margin loan until we sell your securities (usually the next trading day). It's just Fidelity's normal margin rate, we don't add any spread on top of that.
Manually moving money around is possible but it has some drawbacks. 1) Even with the best manual management, you do need to keep some buffer of money for unexpected withdrawals, and that money earns you essentially zero returns. 2) Fine grained manual management is pretty tedious.
Would this go through and the customer loses 10% of their account value or will you guys stop such a withdrawal.
Deceptive post.
Encourage “reinvestment” of income. The less income the schemer pays out, the longer the scheme will last.
Moderate the amount stolen each year. If he steals a smaller amount each year, the scheme will last longer and he will likely be able to steal more money overall.
Discourage redemptions. Paying out principal to investors at a high rate will crash the scheme quickly. Therefore institute a large penalty for early redemptions or promise an even higher Rate of Return if the principal is reinvested instead of withdrawn.
The Rate of Return promised should be higher than alternatives but not so high that paying out income will quickly bankrupt the scheme.
Recruit new money. New money is key to maintaining a scheme for an extended period
