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 »

5 signs you can't trust an investment app with your money (1)


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5 signs you can't trust an investment app with your money (3)

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.

Rickie Houston

Senior Wealth-Building Reporter

Rickie Houston was a senior wealth-building reporter for Business Insider, tasked with covering brokerage products, investment apps, online advisor services, cryptocurrency exchanges, and other wealth-building financial products. Before Insider, Rickie worked as a personal finance writer at SmartAsset, focusing on retirement, investing, taxes, and banking topics. He's contributed to stories published in the Boston Globe, and his work has also been featured in Yahoo News. He graduated from Boston University, where he contributed as a staff writer and sports editor for Boston University News Service.

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


How to know if an investment app is legit? ›

Check if an investment professional or company is licensed or registered. Many investment scams start with unlicensed people or unregistered firms. Check out the background, including registration or license status, of anyone recommending or selling an investment using the free simple search tool on Investor.gov.

How to trust on investment app? ›

  1. It's transparent about how it makes money. Trustworthy investment apps are typically transparent both about how they charge fees and how their advisors earn money. ...
  2. It's registered with the SEC and/or FINRA. ...
  3. It helps you make smart decisions. ...
  4. It offers customer support. ...
  5. It has a high Better Business Bureau rating.
Feb 2, 2021

How do I know if I'm investing correctly? ›

A yearly evaluation of your investments, at roughly the same time each year, is often enough. An annual review can keep you engaged in your holdings while tracking the progress of your investment goals. It can also help you know when your asset allocation has shifted and it's time to rebalance your holdings.

What is the best investment right now? ›

11 best investments right now
  • High-yield savings accounts.
  • Certificates of deposit (CDs)
  • Bonds.
  • Money market funds.
  • Mutual funds.
  • Index Funds.
  • Exchange-traded funds.
  • Stocks.
Mar 19, 2024

How to spot a fake trading platform? ›

Check if the platform is registered with a recognized regulatory body. The absence of regulatory oversight increases the risk of fraud. Poor Website Design and Information:Scam platforms often have poorly designed websites, with limited information on trading strategies, terms and conditions, or company details.

What is the most trusted investment app? ›

Best investing apps to help you make money
  • Betterment – Best app for automated investing.
  • Invstr – Best app for education.
  • Acorns – Best app for saving.
  • Wealthbase – Best app for trading games and contests.
  • Wealthfront – Best app for portfolio management.
  • Fidelity Investments – Best app for managing money all-in-one.

Which app is safe to invest money? ›

Comparison of the Best Investment Apps for Beginners in India
Investment AppKey FeaturesUser Ratings
UpstoxUser-friendly interface, advanced charting tools4.5/5
ZerodhaRobust trading platforms, in-depth market analysis4.7/5
Angel BrokingResearch tools, advisory services, investment reports4.3/5
6 more rows
Jan 24, 2024

How can I invest without getting scammed? ›

  1. Use www.BrokerCheck.finra.org to check if a broker is a licensed or if someone has complained about them.
  2. Read about and understand any investment before you give someone your money. ...
  3. Get the name and company information of the salesperson offering an investment.

How do you know if an investment is safe? ›

How To Spot An Investment Scam
  1. Key Takeaways. All investments carry risks. ...
  2. Check For Red Flags. ...
  3. High Returns At Low Or No Risk. ...
  4. Pressure Tactics. ...
  5. Offer Of Commissions. ...
  6. Fictitious Track Records. ...
  7. Check That The Entity Is Regulated. ...
  8. Check On The Company's Background.

What is the biggest investment mistake? ›

Common investing mistakes include not doing enough research, reacting emotionally, not diversifying your portfolio, not having investment goals, not understanding your risk tolerance, only looking at short-term returns, and not paying attention to fees.

How do you test an investment? ›

My customary audit tests include:
  1. Confirming investment balances agreeing them to the general ledger.
  2. Inspecting period-end activity for proper cutoff.
  3. Using an investment specialist to value complex instruments (if any)
  4. Vetting investment disclosures with a current disclosure checklist.

What is the 3 portfolio rule? ›

A three-fund portfolio is an approach to portfolio management that focuses on using three funds to invest in three asset types, typically U.S. stocks, international stocks, and bonds. This strategy is popular among the “Boglehead” community, who follow investing principles championed by Vanguard founder John Bogle.

Where to invest $1,000 right now? ›

Here are eight of the best ways to invest $1,000 to help grow your money over time.
  • Pay down high-interest debt. ...
  • Build an emergency fund. ...
  • Stash your money in a high-yield savings account. ...
  • Put your cash in a certificate of deposit (CD) ...
  • Contribute to an individual retirement account (IRA) ...
  • Get your 401(k) employer match.
Mar 7, 2024

How to grow 5000 dollars? ›

Here are seven of the best ways to invest $5,000:
  1. S&P 500 index funds.
  2. Nasdaq-100 index ETFs.
  3. International index funds.
  4. Sector ETFs.
  5. Thematic ETFs.
  6. Real estate investment trusts (REITs).
  7. Investing with the greats.
Mar 1, 2024

What is the most safest investment right now? ›

  1. U.S. Treasury Bills, Notes and Bonds. Risk level: Very low. ...
  2. Series I Savings Bonds. Risk level: Very low. ...
  3. Treasury Inflation-Protected Securities (TIPS) Risk level: Very low. ...
  4. Fixed Annuities. ...
  5. High-Yield Savings Accounts. ...
  6. Certificates of Deposit (CDs) ...
  7. Money Market Mutual Funds. ...
  8. Investment-Grade Corporate Bonds.
Mar 21, 2024

How do I know if an investment company is legit? ›

Use www.BrokerCheck.finra.org to check if a broker is a licensed or if someone has complained about them. Read about and understand any investment before you give someone your money.

How do you know if a broker is scamming you? ›

Let's look at 5 indicators of a forex broker scam that will help you identify these common scam techniques:
  • Check your Broker's Regulatory Info. ...
  • Check Regulator's Website Database and Quality. ...
  • The Broker Guarantees High Immediate Returns. ...
  • The Broker Does Not Respond to Queries. ...
  • Read the Clients' Reviews.
Mar 7, 2024

How will you verify investment? ›

The auditor can verify investments through various procedures, including transaction verification, physical inspection, examination of valuation and disclosure, and analytical review procedures. However, the nature, timing, and extent of audit procedures to be performed depend on the auditor's professional judgment.


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