Review of: Stockpile
Reviewed by: Kevin Mercadante
Last modified: September 20, 2017
Stockpile is a unique stock broker that allows users to purchase small amounts of household-name stocks through gift cards. It's a great way to get young people interested in investing, although the costs can add up.
Stockpile is an online stock broker with a bit of an unusual twist. That’s because — in addition to letting its users buy and sell stocks like a regular brokerage — the service also sells gift cards that can be used toward the purchase of stocks and exchange-traded funds (ETFs).
This unique service was created by CEO Avi Lele. The story goes that he was looking to buy Christmas presents for his nieces and nephews. He wanted to give them something more substantial and longer lasting than toys. He thought that stocks would be a good idea but found the process too frustrating and pricey. He gave up on that effort and bought some toys anyway.
But the idea never left his mind. And that’s how Stockpile came to be. Individual stocks can be too expensive and cumbersome to purchase one share at a time. So Stockpile offers gift cards toward the purchase of stock.
Those gift cards can now be purchased through the Stockpile website. They are also available at select retailers, including grocery stores.
|Stock Trades||$.99/trade or $2.99/first gift card stock + 0.99/additional stock|
|Investment Types||Stocks, ETFs|
|Accounts Available||Taxable, Custodial|
|Access||Website, iOS App, Android App|
|Customer Service||Phone: M-F 9A-6P ET; Email|
How Does Stockpile Work?
By offering small amounts of stocks — commonly referred to as “fractional shares” —
and making investing in household-name companies accessible to a broad audience, Stockpile fills the gap left by Loyal3, which shut down unexpectedly in May 2017.
There are two parts to Stockpile’s gift card program. The first is buying the gift cards, and the second takes place when the recipient exchanges the card for stock.
Buying Stockpile Gift Cards
Stockpile gift cards are available toward the purchase of stock in hundreds of well-known companies — including Google, Amazon, Apple, Berkshire Hathaway, the Bitcoin Investment Trust, Disney, Cisco, McDonald’s, Microsoft and Netflix.
The cards are issued by Stockpile Gifts, Inc., and can be purchased either as e-gifts or as physical gift cards. They have no expiration date, so they can be redeemed at any time.
When you’re on the Stockpile website, click “Buy” at the top of the page. This takes you to the stock selection page.
Once there, you can check the stocks that you want to purchase gift cards for. After choosing the stocks, click “Next” at the bottom and you’ll be brought to the Choose Amount page. That’s where you select the dollar amount you want on the gift card.
Now you select the amount of the card: $25, $50, $100 or another amount. Once you’ve done that, click “Next” and you’re brought to the recipient page. Here, you provide the recipient’s name and email address and also add your name as the giver. You can also leave an optional gift message. Once you have completed the page, you can click the “Checkout” button.
At the checkout page, you’ll have the option to pay by credit card, debit card or PayPal. You will pay for the cost of the gift card, plus the gifting fee, which covers the trading commission and the credit or debit card fee. Your payment of these fees at purchase means that the recipient will get a gift card for the full amount.
In addition to the purchase of cards, the Stockpile website also has some excellent educational material. The material is presented in simple terms that can be easily understood by an investment novice or even a child.
The cards are also available in select stores. These include major retailers, such as Kmart, Kroger, Lowe’s and Toys“R”Us. (Check availability at specific stores, as not all stores in the same chain will carry the cards.)
As easy as it is to purchase a Stockpile gift card, redeeming it for actual stock isn’t nearly as simple.
In order to redeem a gift card, the recipient must open a brokerage account with Stockpile. Since the recipient is often not of legal age, the parents will have to open a custodial account in his name. Since the gift cards never expire, the recipient could simply wait until he turns 18 to open an account. But that may be far in the future. In the intervening years, the gift card may be lost or forgotten. Or the company may even go out of business or discontinue the program.
Anyone can purchase a Stockpile gift card. But only U.S. citizens and residents can open a Stockpile brokerage account and redeem the cards for stock. Fortunately, if the recipient can’t redeem the gift card for stock or chooses not to, the card can be swapped for a retailer gift card. The gift card can also be used to purchase a stock other than the one actually listed on the card.
The brokerage account is held through Stockpile Investments, Inc., a registered broker-dealer, FINRA member and SIPC participant. All trades are settled and cleared through Apex Clearing Corporation, which is also a member of both FINRA and SIPC.
The account requires no minimum balance, and there are no monthly fees in order to keep the account active.
One other important point is that the gift recipient is likely to use the gift card to purchase fractional shares. He can hold the shares with Stockpile, but fractional shares cannot be transferred to another broker.
Gift E-Card Purchase
There is a base price of $2.99 for the first stock, plus $0.99 for each additional stock, plus 3% for the credit or debit card fee.
As an example, if you were to purchase a $50 e-card toward the purchase of Apple stock, you would pay $2.99, plus $1.50 ($50 x 0.03) for the credit/debit card fee, for a total fee of $4.49.
If you were to purchase a gift card good for $50 toward the purchase of Apple stock plus $50 toward the purchase of Google stock, you would pay $2.99, plus $3.00 ($100 x 0.03) for the credit/debit card fee, plus $0.99 for the second stock, for a total fee of $6.98.
The purpose of paying the credit/debit card fee at the time you purchase the gift card is to make sure the recipient receives the full face value of the card.
Physical Gift Card Purchase
If you want a physical (plastic) card, instead of the above fees, you will pay a single fee of $4.95 for a $25.00 card, $6.95 for a $50 card, and $7.95 for a $100 card. These fees cover the cost of using a credit/debit card and printing the plastic card.
Gift Card Redemption
When the recipient opens a Stockpile account, she can then redeem the card for the purchase of stock. Once again, she can use the value of the card to purchase either the stock listed on the front of the card or a completely different stock of her own choosing.
If the card balance is insufficient to purchase an entire share of stock in a company, it will be used to purchase a fractional share. When the recipient decides to sell the stock, Stockpile will charge a fee of $0.99.
There are no annual management fees in connection with a Stockpile brokerage account.
How Does Stockpile Stack Up?
There are two services going on with Stockpile: the brokerage service and the stock gift card service.
As a broker, Stockpile is very bare-bones. In this case, it’s much like Robinhood, which is geared toward Millennials and offers none of the tools and extra services other stock brokers provide. Also, like Robinhood, you can invest only in stocks and ETFs — there are no mutual funds or options to be found. And neither service offers retirement accounts such as IRAs.
However, the brokerage service offers $0.99 trades for buying and selling, which might be the lowest fee structure anywhere. When you add the fact that there is no account minimum required and no annual fee, Stockpile looks like a solid brokerage service.
The stock gift card service is Stockpile’s main hook, and it’s a reasonable service on that count.
If you focus solely on the cost to acquire a single share of stock — or more particularly, a fractional share of that stock — through a gift card, Stockpile looks questionable. After all, you will pay $4.49 for the purchase of a $50 gift card, and then the recipient will pay $0.99 for the purchase of that share/fractional share. That’s $5.48 on a $50 purchase, which represents an almost 11% transaction cost.
But that actually misses the point of this service. The basic benefit is to provide the recipient with a gift that is longer lasting than a toy. If the recipient uses the gift card to purchase a fractional share of stock, it could become a gift that continues to grow as the years pass.
Like other apps geared toward young people — such as microsavings services Acorns or Stash — Stockpile may not provide the functionalities that more sophisticated investors are looking for. But it certainly serves its purpose for newbies looking for a relatively uncomplicated way to get started investing.
Pros and Cons
- Low Trading Fees — Both buying and selling costs only 99 cents per trade.
- Fractional Shares — Through the gift cards, Stockpile routinely allows the buying and selling of fractional shares.
- No Minimum — No minimum account balance is required.
- No Annual Fees — Stockpile doesn't charge any annual fees.
- Very Limited Account Selection — Stockpile offers only individual and custodial accounts. There are no joint accounts or IRAs.
- Very Limited Investment Selection — More than 1,000 stocks, ETFs, and ADRs are available... but there are many thousands on the exchanges. No bonds, options or mutual funds are available.
- No Real-Time Trading — Trades executed before 3 p.m. will settle the same day, after 3 p.m.m trades will be executed the next business day.
- U.S. Residents Only — Stockpile is not open to non-U.S. residents.
It’s hard to say if Stockpile is a stock gift card service with a brokerage service, or if it’s a brokerage service with a stock gift card service (the company definitely emphasizes the former!). The stock gift card service is an innovative idea because it allows you to buy gift cards for a flat dollar amount which can be used to purchase stock, including fractional shares. The cost to do this is fairly high, but reasonable considering the alternative of trying to purchase a single share of stock anywhere else. The brokerage would best be termed a limited brokerage service, since the accounts and investments available are very limited, as are the investment tools provided. But at $0.99 per trade, it might very well be the lowest-cost trading platform available anywhere.