Public.com’s commitment to transparency and fair pricing has set it apart from other online brokers, but you may be wondering, “What’s the catch?” With so many investment platforms offering commission-free trading and other benefits, it’s understandable to question whether a platform like Public.com is too good to be true.
One area where Public.com differentiates itself is in its avoidance of payment for order flow (PFOF), a common practice in the brokerage industry that has been criticized for creating potential conflicts of interest between the broker and its customers.
By avoiding this practice, Public.com aims to provide greater transparency and customer trust, but how does this affect the platform’s overall legitimacy? Let’s take a closer look and answer the question, “Is Public.com Legit?”.
Learn More About Public.com
Company Background
Public.com is a financial technology (fintech) company that was founded in 2019. The company is based in New York City and was founded by Jannick Malling, Matous Tlapak, and Sean Hendelman. Prior to founding Public.com, the three co-founders had experience working in the fintech industry, including at companies like Robinhood and TransferWise.
The idea for Public.com was born out of a desire to create a more transparent and community-driven investment platform. The founders wanted to create a platform that would allow users to invest in the stock market without the barriers of high trading fees and complex financial jargon. They also wanted to create a social aspect to investing, creating a public community where users could learn from and engage with other investors.
To that end, Public.com offers fractional share investing, and commission-free trading of stocks and ETFs, (mutual funds are not offered). Also a social feed where users can follow other investors and share insights and ideas and educational resources to help users learn more about investing.
Since its founding in 2019, Public.com has received significant funding from investors, including a $65 million Series C funding round in 2021. The company has also been recognized for its innovative approach to investing, winning awards like the 2021 Webby Award for Best Mobile App in the Financial Services & Banking category.
Public.com is a relatively new player in the fintech industry, but it has quickly gained a following among investors looking for a more transparent and community-driven approach to investing in the public markets.
No Payment For Order Flow (PFOF)
Payment for order flow (PFOF) is a common practice in the brokerage industry, but it has also been criticized for creating a potential conflict of interest between the broker and its customers. For example, Robinhood, a popular investment app, has faced scrutiny for using PFOF and its potential negative impact on customers.
In 2021, Robinhood agreed to pay a $65 million settlement to the SEC for allegedly misleading customers about its use of PFOF. The SEC found that Robinhood was not achieving the best execution for its customers’ trades, and that it had misled customers about the true nature of its revenue sources. Some experts have argued that the use of PFOF can incentivize brokers to prioritize their own profits over the best interests of their customers.
Public.com’s approach to generating revenue is refreshingly altruistic. By not engaging in PFOF, Public.com is putting its customers’ interests first and providing greater transparency and confidence that trades are executed in their best interest.
The optional tipping and securities lending are innovative approaches that align with the company’s values and customer interests. Additionally, Public.com’s premium offering, Public Digital, provides users with additional features and benefits for a reasonable fee.
Is Public.com Really Free?
But the question remains: how does Public.com make money? The answer may surprise you – by being transparent and innovative!
Public.com has chosen to generate revenue through optional tipping, securities lending, and interest on uninvested cash balances, all of which are relatively transparent and may even benefit its customers in some cases, at a detriment to the company.
Who Is Public.com Best For?
Public.com is an investment platform that is best suited for passive investors who want to invest in a taxable individual brokerage account. With its simple and easy-to-use interface, commission-free stock and ETF trading, fractional share offerings, and a social community, Public.com provides an accessible option for those who are looking to invest in the public markets.
The platform also provides educational resources that can help beginner investors understand the stock market and make informed investment decisions. With access to thousands of stocks and ETFs, analyst ratings, price targets, and other research tools to help investors make informed investment decisions.
Public.com does not have a minimum investment, making it a great option for those who want to start small and build their portfolio over time. The platform’s focus on fair pricing and execution quality, along with its commitment to not participating in payment for order flow, make it a trustworthy and transparent investment opportunity for passive investors.
Public.com may not be the best choice for day traders, as the platform does not offer margin trading for all investors and may not provide advanced trading features or research tools that some active investors require.
The platform is designed with a focus on long-term investing and community-driven investing, which may not align with the needs for those day trading who prefer to make frequent trades and take advantage of market volatility.
Strengths:
- Commission-free trading of stocks and ETFs
- Fractional shares and a social community that is helpful for everyday investors
- Access to alternative assets like cryptocurrency trading (crypto trading)
- A focus on fair pricing and execution quality
- Well written educational content using simple to understand language
- Access to analyst ratings, price targets, and other research tools
- Innovative revenue streams that align with the company’s values and customer interests
Weaknesses:
- Limited account types – Does not offer certain types of accounts, such as retirement accounts like Roth IRA, Traditional IRA, or Joint accounts.
- Margin trading is not available for all investors
- May not be the best choice for investors looking for more advanced trading features or research tools
- While Public.com does not charge commission fees for trading stocks and ETFs, there may still be other fees associated with certain actions
- Limited investment options compared to other platforms.
Final Thoughts – Is Public.com Legit?
After taking a closer look at Public.com, it’s clear that the platform is a legitimate investment option for many users. With its focus on fair pricing, execution quality, and transparency, Public.com offers an accessible and community-driven approach to investing that appeals to both beginner and experienced investors.
While Public.com is not entirely free, the platform’s innovative revenue streams, such as optional tipping and securities lending, align with the company’s values and customer interests. Additionally, Public.com’s commitment to not participating in payment for order flow (PFOF) sets it apart from some of its competitors and provides greater transparency and confidence to its customers.
However, it’s important to note that Public.com may not be the best option for investors looking to day trade, with limited advanced trading features or research tools.
Public.com is a solid option for passive investors who are looking for a simple and transparent way to invest in the stock market. With its focus on fair pricing, execution quality, and community-driven approach, Public.com remains a legit investment platform that is worth considering for those looking to invest in the stock market. Click here to get started today!