Securities Income Program from Ally, any Good?

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Trust_In_TylerDurden
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Securities Income Program from Ally, any Good?

Post by Trust_In_TylerDurden » Fri Jul 31, 2020 1:33 pm

Got this from Ally, this morning "Enroll in our Securities Income Program and you could increase your income with shares you already own"

their marketing video is here:
https://players.brightcove.net/60566652 ... 4410204001

a few questions:

* How safe is this?
* They said you get paid interest instead of dividends, so how do I know which one will produce more income?
* Has anyone used any "Securities Income Programs" . What was your experience/returns?
* Does Vanguard provide this?


Our Securities Income Program could be an efficient way to earn income by lending eligible securities held in your portfolio.

Step 1: Enroll
Consent to participate upon eligibility. We'll auto-enroll you once you qualify so you can start earning without doing anything else.
Illustration of a loan document

Step 2: Loan
We'll see if you have any securities that could be loaned out to other traders and pay you interest while they're being borrowed. They're your shares, though, so you can sell at any time.

Step 3: Earn
We'll deposit any interest earned into your account mid-month.

sycamore
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Re: Securities Income Program from Ally, any Good?

Post by sycamore » Sat Aug 01, 2020 1:35 pm

Trust_In_TylerDurden wrote:
Fri Jul 31, 2020 1:33 pm
...
* How safe is this?
* They said you get paid interest instead of dividends, so how do I know which one will produce more income?
* Has anyone used any "Securities Income Programs" . What was your experience/returns?
* Does Vanguard provide this?
...
I don't have an Ally account nor any experience with their SIP. Never heard of Vanguard providing the same thing.

Regarding the question on interest vs dividends, Ally has a FAQ and one answer says
You'll receive a substitute payment of cash instead of your regular dividend payment if your security is on loan. This may result in a higher tax consequence for that security because dividend income is taxed at a different rate...
So any payment you get is treated as income, i.e., not a qualified dividend that you would normally get (assuming the company pays dividend in the first place). This is a consideration if you hold the shares in a taxable account.

It could be worth it, or not. Hard to say without knowing a typical payment for lending out your shares. Sounds like it depends in large part how scarce the shares are (depends on #shares issued, float, short-seller interest). Hopefully others with experience will chime in.

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cos
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Re: Securities Income Program from Ally, any Good?

Post by cos » Sat Aug 01, 2020 5:32 pm

If the interest you receive outweighs the additional taxes you pay on "disqualified" dividends, you should absolutely do it. If this is a Roth IRA or you don't receive much in the way of dividends, then this is almost definitely the case. Lend away!

Explorer
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Re: Securities Income Program from Ally, any Good?

Post by Explorer » Sat Aug 01, 2020 8:15 pm

I wonder if other brokerages have similar programs.. never heard of it before.. but glad Ally is making it clear and simple and more importantly asking for your CONSENT.

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indexfundfan
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Re: Securities Income Program from Ally, any Good?

Post by indexfundfan » Sun Aug 02, 2020 10:58 am

Explorer wrote:
Sat Aug 01, 2020 8:15 pm
I wonder if other brokerages have similar programs.. never heard of it before.. but glad Ally is making it clear and simple and more importantly asking for your CONSENT.
Interactive Brokers has this. You get to keep 50% of the fees.
My signature has been deleted.

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whodidntante
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Re: Securities Income Program from Ally, any Good?

Post by whodidntante » Sun Aug 02, 2020 11:08 am

Explorer wrote:
Sat Aug 01, 2020 8:15 pm
I wonder if other brokerages have similar programs.. never heard of it before.. but glad Ally is making it clear and simple and more importantly asking for your CONSENT.
Yes, there are other brokers who offer this. Fidelity, Firstrade, IB all offer it, probably some others as well. I don't think your shares will be loaned unless you carry margin debt or you sign a lending agreement. Did some broker loan your shares and send you payment in lieu of dividends when you did not fall under those groups?

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