Good question. Here's the difference. When you withdraw money from Charles Schwab and there's no cash in your account, it creates a margin debt. You then have to pay that margin debt back manually, and you pay interest until you do. With Financial Choice, we automatically sell your investments to cover your withdraws so you don't build up that margin debt.
fhrow4484|4 years ago
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)
jklein11|4 years ago
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.