LOYAL3: an Alternative Online Brokerage Option for Beginners

Note: Loyal3 has shut down and is no longer accepting new accounts. For information on alternatives and our top picks for online brokerages, click here.

For new investors seeking to own shares of their favorite companies or brands, LOYAL3 offers a cost-efficient way to begin investing in stocks. However, if timely trades and investment choices are important factors, an investor may want to look at more traditional options for brokerage services, such as our favorite online brokers for new investors.

{#review}LOYAL3 is an online brokerage firm betting on a non-traditional service model that can be interesting to the beginning and casual investor. Investors can buy stocks with a $10 minimum and are charged no trading fees or any other fee. LOYAL3’s dollar-based structure allows for ownership of fractional shares of companies that may be beyond the reach of cash-constrained investors. LOYAL3 also offers casual investors a means to participate in a company’s initial public offering (IPO) at the same price as banks and other institutional investors, with individual purchase amounts starting at $100.

The no-fee structure is a big plus for novice investors, but comes with a couple of trade-offs:

  • There are only 65 companies offering stock on the LOYAL3 platform, and more than 70% of LOYAL3’s partner companies are in the consumer goods and services industry, which may lead to suboptimal portfolio diversification.
  • The stock price at which an investor places an order will likely be different from the executed price it is bought at or sold. Due to the batch-trading process in place at LOYAL3, orders from multiple customers are collected and combined before being placed in the market. Trade execution typically happens once each business day for sales and twice each business day for purchases.

At its core, LOYAL3 is simply a trading platform that allows its users to own fractional shares of a select group of companies with no fees on trades. You won't find the investment advice, or financial education or resources that other online brokerages may provide to enhance their service offering to consumers.

Pricing at LOYAL3

Fees LOYAL3 charges no fees to buy or sell stock or to transfer money to and from an investor’s bank account. LOYAL3 acts as a transfer agent for public companies to sell stocks directly to customers while companies cover the cost of trade.Instead of charging investors trading fees, the portfolio companies themselves cover the cost of trades on LOYAL3’s platform. They're betting on the theory that a customer who owns a stake in the business would be more loyal to the company’s product and act as the company’s or product’s advocate.

Account minimum

While the minimum investment is $10, there is a $20 minimum to deposit cash into a LOYAL3 account. An investor can choose to fund a LOYAL3 account or have funds pulled directly from a bank account. Cash balances in a LOYAL3 account are deposited in the Vanguard Prime Money Market Fund, a money market fund that is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency.

LOYAL3 Companies

Most of the 65 companies on the LOYAL3 platform are in the consumer goods and services industry, with easily recognizable logos. Clothing and apparel retailers make up the majority of companies, and span from Aeropostale to Kate Spade. Toy manufacturers and food conglomerates make up the next biggest categories with the likes of Electronic Arts and Herseys both participating. This could potentially lead to a positive bias towards recognizable icons, particularly if the investor is a novice.

Partner companies identified with a double-heart logo pay fees to LOYAL3 in exchange for offerings services like “Social Stock Plans”, IPOs and follow-on offerings, as well as for non-offering services such as “increasing brand engagement”. A Social Stock Plan is essentially a stock offering allocated for consumers, and for which the companies bear the costs related to the offering. It can be made available on the company's website or its Facebook page.

Shares of the following companies are currently available on LOYAL3:

Company

ExchangeTickerIndustryDouble Heart

21st Century Fox

NASDAQFOXAEntertainment ProductionNo

AMC Theatres

NYSEAMCMovie Theaters and ProductsYes

Abercrombie Fitch

NYSEANFApparel and Accessories RetailersNo

Aeropostale

NYSEAROApparel RetailersNo

Alibaba

NYSEBABAE-commerce and Auction ServicesNo

Amazon.com

NASDAQAMZNE-commerceNo

American Eagle Outfitters

NYSEAEOApparel and Accessories RetailersNo

Anheuser-Busch InBev

NYSEBUDBrewersNo

Apple

NASDAQAAPLComputer HardwareNo

Berkshire Hathaway

NYSEBRK.BProperty and Casualty InsuranceNo

Best Buy

NYSEBBYComputer and Electronics RetailersNo

Blizzard

NASDAQATVIToys and Juvenile ProductsNo

Buffalo Wild Wings

NASDAQBWLDCommercial Food ServicesNo

Coca-Cola

NASDAQCOKENon-Alcoholic BeveragesNo

Dave & Buster's

NASDAQPLAYRestaurants and BarsYes

Discovery Communications

NASDAQDISCATelevision BroadcastingNo

Disney

NYSEDISBroadcastingNo

Dr Pepper Snapple

NYSEDPSNon-Alcoholic BeveragesNo

Dunkin

NASDAQDNKNCafesNo

Electronic Arts

NASDAQEAToys and Juvenile ProductsNo

Endurance

NASDAQEIGIIT Services and ConsultingYes

Facebook

NASDAQFBSocial Media and NetworkingNo

Frontier Communications

NASDAQFTRIntegrated TelecommunicationsYes

Gap

NYSEGPSApparel and Accessories RetailersNo

Globant

NYSEGLOBIT Services and ConsultingYes

GoDaddy

NYSEGDDYInternet ServicesYes

GoPro

NASDAQGPROPhotographic EquipmentYes

Google

NASDAQGOOGKSearch EnginesNo

Hasbro

NASDAQHASToys and Juvenile ProductsNo

Hershey

NYSEHSYFood ProcessingNo

HubSpot

NYSEHUBSEnterprise SoftwareYes

Intel

NASDAQINTCSemiconductorsNo

Kate Spade

NYSEKATEApparel and Accessories RetailersYes

Kellogg's

NYSEKFood ProcessingNo

Kohl's

NYSEKSSRetail - Department StoresNo

Kraft

NASDAQKRFTFood ProcessingNo

L Brands

NYSELBApparel and Accessories RetailersNo

Macy's

NYSEMRetail - Department StoresNo

Mattel

NYSEMATToys and Juvenile ProductsNo

McDonald's

NYSEMCDQuick Service RestaurantsNo

Microsoft

NASDAQMSFTSoftwareNo

Mondelez

NASDAQMDLZFood ProcessingNo

Monster

NASDAQMNSTEnergy DrinksNo

Nike

NYSENKESports and Outdoor FootwearNo

Nokia

NYSENOKPhones and Smart PhonesNo

PVH

NYSEPVHApparel and Accessories RetailersNo

Pepsi

NYSEPEPCarbonated Soft DrinksNo

Quiksilver

NYSEZQKApparel and Accessories RetailersNo

Ralph Lauren

NYSERLApparel and Accessories RetailersNo

Restaurant Brands International

NYSEQSRRestaurants and BarsNo

STORE Capital

NYSESTORCommecial REITsYes

Santander Consumer USA

NYSESCPersonal and Car LoansYes

Starbucks

NASDAQSBUXRestaurants and BarsNo

Target

NYSETGTDiscount StoresNo

Time Warner

NYSETWXBroadcastingNo

Trupanion

NYSETRUPLife and Health InsuranceYes

Twitter

NYSETWTRSocial Media and NetworkingNo

Unilever

NYSEULPersonal ProductsNo
VF CorpNYSEVFCApparel and Accessories RetailersNo

Viacom

NASDAQVIABEntertainment ProductionNo

Virgin America

NASDAQVAAirlinesYes

Wal-Mart

NYSEWMTDiscount StoresNo

World Wrestling Entertainment

NYSEWWEEntertainment ProductionNo

YUM

NYSEYUMQuick Service RestaurantsNo

Yahoo

NASDAQYHOOSearch EnginesNo

Other Services Offered

In line with its focus on young, tech-friendly investors, LOYAL3 uses Facebook, Twitter and email to announce new partner companies. LOYAL3 also offers shares of Facebook and Twitter on their platform.

LOYAL3 users can also schedule monthly transactions that are automatically deducted from their bank accounts with a pre-set monthly investment amount - $10, $250 or $2,500 - or a custom monthly amount up to $10,000. The maximum amount of a stock that can be purchased per month is generally $20,000. There are no check-writing or debit card services currently with LOYAL3.

How LOYAL3 Compares To Similar Stock-Purchasing Platforms

In addition to traditional online brokerage services, Capital One ShareBuilder also offers an Automatic Investment Plan (AIP). The AIP is similar to LOYAL3, where a dollar-based purchasing system allows for trading of partial shares. Unlike LOYAL3, which executes trades daily, the ShareBuilder AIP executes trades weekly every Tuesday. Since ShareBuilder also offers ETFs with its Automated Investment Plan, an investor has a wider breadth of choice compared to LOYAL3. However, like most online brokerages, ShareBuilder still charges a fee for every transaction, which can quickly erode investable funds.

Ting is a ValuePenguin Co-Founder. She previously evaluated corporate mergers and acquisitions as a Financial Analyst at Citigroup.