Loyal3 Review – Is Fee Free Investing for Real? Maybe

How do you pick a brokerage firm?

Is it based on a funny commercial or the latest print ad you saw?  (I hope you take your retirement more seriously than this!)

Or it is based on a careful analysis of costs, investment options, and overall value?

Here’s the deal: Not all brokerage accounts are the same. Many are similar in investment options and cost leaving only marketing to differentiate them.  Every once and a while you run across a new brokerage that really is running their business significantly different than their competitors.

Loyal3 is one of those firms.  Read on and find out what they are all about and if they are for real in our Loyal3 review.

What is Loyal3?

Loyal3 is a brokerage firm with a different take on investing.

This is not your traditional brokerage firm to open up a Roth IRA, buy some shares in a mutual fund, and let those funds sit for 35 years.  Let’s look at some of the key aspects of having a Loyal3 account to determine whether or not this is something you should use for your portfolio.

fee free investing with Loyal3

What Investments Can I Select?

This is the first of two things that make Loyal3 significantly different from every other brokerage firm out there.

Here are your investment options:

  • a limited number of popular company stock shares
  • IPOs

That’s it.

No mutual funds, no exchange traded mutual funds, no bonds, and (as of this writing) just 55 stocks out of the thousands available across all of the stock exchanges.

This might strike you as odd, and it is.  Loyal3 is a “social stock” company rather than a tried and true brokerage firm.  Offering a limited number of stocks is a bit weird, but there’s a method to the madness.

What is the Fee Structure?

Here’s the method to the madness: Loyal3 doesn’t charge you anything to trade.  No commissions.  No fees.  Zilch.

Compare this to every other brokerage firm and Loyal3 wins every time.  Other firms charge $4, $7, $8.99 or more per trade on your investments.

However, the reason for free trades is because Loyal3 doesn’t complete your transaction immediately.  They use batch trading to keep their costs low.  There is also no fee to transfer your account to another brokerage firm if you choose to do so.  (Most brokerage firms charge $50 to $100 to do this.)

Head over to Loyal3 Now

How Does Loyal3 Batch Trading Work?

Here’s how the company works:

  • Say, for example, you decide you want to invest $500 in Berkshire Hathaway and $500 in Starbucks.
  • You login to Loyal3 and select the stocks to purchase as well as the amounts. (Alternatively you can set up monthly automatic contributions.)
  • Loyal3 combines your order with those of other users.  When enough orders are combined for it to make sense to purchase a group of shares on the stock exchanges, the transaction goes through.  The combination of all of the orders is called batching.
  • This means it could be 1-3 days before your transaction actually goes through.

A few days later the shares post in your account and you officially own them.  Since the transactions aren’t on a per share cost basis but instead a total amount of money invested this means you will end up with fractional shares.

For example, let’s say Amazon is trading a $311 but you want to invest $500 into the firm.  In a traditional brokerage firm you could only buy 1 share ($311) or 2 shares ($622).  With Loyal3 you can buy 1.6 shares of Amazon.

There is price risk with this model because you could want to buy shares of Amazon today at $311, but it takes 2 days for the transaction to go through.  During that time Amazon’s price might jump to $320 meaning you are buying slightly fewer shares at a higher price.

However, the pricing issue only impacts people who want to trade in real-time and those where the stock price changes dramatically in a short period of time.  This model keeps trading costs incredibly low for Loyal3; they may even wait until they can swap shares between users within Loyal3 without having to go to an exchange at all.

What Types of Accounts Can I Open?

In my opinion this is the biggest downside to Loyal3.  You can’t open a Roth IRA, Traditional IRA, or any other type of retirement account.  All of the accounts are regular taxable brokerage accounts.

This is the ultimate beginners account: simple, fee-free, and no tax advantages.

Loyal3 is for Beginners… with IPOs?

Loyal3’s pricing structure is designed to attract beginner investors.  They know that investing can be complicated.

Deciding on an investment firm, reading through the costs, and making a decision can be so complicated that is prevents new investors from ever opening an account.  It’s extremely attractive to be able to get started with investing and not have to worry about any fees at all.  Add in that you can fund an account with an automatic monthly contribution and newbie investors have no reason not to hop on in.

However, there’s one thing that has me scratching my head.

Loyal3 also lets users participate in IPOs if they have a minimum of $350 in their account.  I would advise most investors, especially beginners, to completely avoid IPOs.  Initial Public Offerings are complicated and risky; it seems at odds with the rest of the business strategy to allow this.

Is Loyal3 Right For You?

I wouldn’t personally use Loyal3, but that’s because I am comfortable with the financial markets and managing retirement accounts.  I prefer to avoid taxable investment accounts, too.

That having been said, Loyal3 is an interesting take on getting started with investing.

The target is on inexperienced investors that want to put their money into companies and brands they know.  The 55 stocks Loyal3 allows you to invest in are all very popular brands: Amazon, Apple, Best Buy, Coca Cola, McDonalds, Starbucks, and so on.

You can’t beat fee-free.

You can argue about the price risk of not buying at the immediate price available right when you want to perform the transaction, but over a long period of time this impact should be negligible.  Sometimes the price will be higher when the transaction goes through.  Sometimes the price will be lower.

In 30 years it won’t be a significant percentage difference on your portfolio.

Start investing with Loyal3

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Published or updated October 1, 2014.


  1. Nice piece Kevin, I had heard of them and this provided a nice explanation. That said I can see NOTHING remotely redeeming here. No transaction fees are nice but that is no reason to get involved with this firm. In my opinion if you are going to invest then invest based on some sort of plan, not via the limited offerings by some novelty firm like this. This must be the financial services version of the carnival freak show.

  2. GoPro IPO is very exciting & I will continue to be a fan & supporter.

    Loyal3 is very disappointing!

    I do not intend to do anymore business’s with Loyal3.

  3. I’ve been investing with Loyal3 since the beginning and had some pretty good results. I just wrote an article about how I racked up 100,000 miles and $200 with Loyal3.

  4. It’s very expensive to both buy and sell shares with LOYAL3. You get the worst lowest price on sell for the day and highest price on buy, again for the day. If the stock fluctuates $1 during the day you can lose as much as $100 – or an average of $50 per trade.

    • Thank you for your comment, Kumare. If what you wrote is true, this is indeed a very BIG drawback, which would actually cost you much more than paying a low transaction fee. Based on what you wrote, I will NOT proceed with Loyal3 unless they change this BIG disadvantage. If they are making money from the spreads involved, then to me, this amounts to deceptive advertising (i.e., that their trading is FREE).

What Do You Think?