Most custodians and brokerage firms operate securities lending programs, and Altruist is no different.
While opening your account, you will be asked whether you’d like to opt into this program or not. Before we get to whether or not you should, here’s a bit of an overview of what securities lending is.
Securities lending involves temporarily transferring securities, such as stocks or bonds, from one party (the lender) to another (the borrower).
The borrower typically needs these securities to cover short positions, facilitate trading strategies, or meet collateral requirements. In return, the borrower provides collateral, usually in the form of cash or other securities, to the lender and pays a lending fee.
This activity can be somewhat abstract. If you’re relatively new to markets, that’s sort of scary on its own. But the risks of allowing your securities to be lent out are extremely limited. And in many cases, the firms sponsoring these securities lending programs share the extra income with clients.
In the case of Altruist, those fees are not shared with our clients. So while we do not see a tangible harm to participating in this program at this time we also don’t mind if our clients opt out of it.
