5 signs you can't trust an investment app with your money (2024)

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• It's important to make sure you can trust an investment app before you start using it.
• The least trustworthy apps have limited fee transparency, customer support, and educational resources.
• Untrustworthy apps also don't act as fiduciaries or provide SIPC insurance on your investments.
• See Insider's guide to the best investment apps for beginners »

Investment apps including Robinhood, Webull, and E*TRADE (amongst others) recently came under fire for restricting trades of Gamestop (GME) and several other stocks whose prices skyrocketed amid a Reddit-fueled market frenzy.

Before you start placing trades, you should have a sense of whether you can trust an investment app with your money. In addition to ensuring that the app is secure and won't compromise your money, you'll want to pinpoint other potential warning signs.

In some cases, the least trustworthy investing apps won't check all of these boxes. An investment app may offer fee transparency, educational resources, customer support, and other attractive features, for instance, but it could have a low BBB rating.

Here are more details on the warning signs to look out for when searching for an investment app.

1. It's not transparent about how it makes money

Most investment apps offer fee transparency and/or disclosures that detail where their compensation comes from. For instance, both Charles Schwab and Fidelity offer fee disclosures and pricing documents on their websites. Both brokerages also provide publicly accessible documents that reveal how company representatives make money.

But whether or not an investment app is transparent about its fees doesn't necessarily have any connection to the security of your money. Your money generally isn't being held captive; brokerages are primarily responsible for facilitating trades and providing investment guidance.

2. It isn't registered with the SEC and/or FINRA

The US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) regulate brokerages and investment apps. Both SEC- and FINRA-registered investment apps typically have to meet certain financial requirements. For instance, all SEC-registered companies must act as fiduciaries and place your best interests first.

You can track down your investment app by doing a firm search on advisorinfo.sec.gov or brokercheck.finra.org.

In addition, most trustworthy brokerages and automated advisors offer insurance with the Securities Investor Protection Corporation (SIPC). The SIPC is like the FDIC, except it's solely for investment apps. It covers up to $500,000 in cash and securities, with a $250,000 limit for cash.

3. It doesn't help users make smart decisions

The best investment apps help you make smart decisions. You'll often find that brokerages and other platforms provide educational resources like online webinars, financial calculators, and newsletters.

If you're looking to improve your investing knowledge, it's wise to weed out the apps with only limited resources.

4. It doesn't offer customer support

This is another important thing to be on the lookout for when shopping for a new investment app. If you need any assistance with your account, it helps to know that you'll have multiple options for getting in touch with your app.

Flexible customer support is especially crucial for brokerage users. Unlike automated apps like Ellevest, brokerages require more of a DIY investing approach. In situations like power outages or specialty investment trades, representative-assisted trading can be especially useful.

If your app doesn't offer regular phone, email, or live chat support, it may be best to consider other options.

5. It has a low Better Business Bureau rating

You can gain more insight into a company by finding its profile on the Better Business Bureau's website. The BBB serves consumers in the US, Mexico, and Canada, and it aims to enhance trust between buyers and sellers.

The BBB assesses companies by looking at customer interaction history, advertising issues, licensing and government issues, customer complaint history, and more. And ratings range from A+ to F (e.g., Webull has an F rating, while Charles Schwab holds an A+ rating).

Though the bureau's ratings don't absolutely guarantee that a company will be reliable or perform well, it's generally best to exercise caution against investment apps that have low BBB ratings.

Can you trust an app that sells your data?

Multiple investment apps — such as Webull, Charles Schwab, E*TRADE, and Robinhood — earn money from an order routing process called payment for order flow (PFOF). Many commission-free brokerages use this compensation model to make money from market makers or other third parties who execute investment orders.

In other words, brokerages that receive PFOF typically direct stock and option orders to other firms. These firms then execute the orders and pay the brokerages in return for routing customer orders to them. This often impacts the final per-share cost retailers pay, and though it can improve the share price you pay, it doesn't always.

Though PFOF has recently received much public attention, it's worth noting that this fee arrangement generally doesn't sabotage the security of your investment account (s). It mainly influences the final price you'll pay for shares of a company.

Should you use an investment app?

Use what works best for you. You'll generally have three avenues for investing: online brokerages, automated advisors, and human financial advisors. But the fees, account requirements, and features tend to vary for each option.

For instance, brokerages like Firstrade and Webull solely offer commission-free brokerage accounts for active traders. However, automated investing apps like Betterment and Ellevest cater to hands-off investors who prefer professional guidance. And in some instances, both brokerages and automated advisors may offer access to human advisors.

It's also wise to consider your time horizon when weighing different investing options. Experts generally recommend long-term, passive investing strategies over day trading and market-timing tactics.

If you'd prefer professional assistance from human experts, the one-on-one guidance of a financial advisor may be best for you. However, some brokerages like Vanguard offer both DIY accounts and advisor-assisted accounts. So you can do both if you choose.

Rickie Houston is a wealth-building reporter at Personal Finance Insider who covers investing, brokerage, and wealth-building products.