104 points by s73ver_ 279 days ago
I don't understand the value of this company. What services do they provide that existing internet companies don't provide at a lower price and higher level of quality in its separate service lines (personal loans, student loans, mortgages)?
In offering so many products, what economics of scale do they bring over established banks and credit unions? If there are any newly discovered efficiencies, they certainly aren't passed down to the consumer as the rates I've been quoted for their loan products are terrible; it's shocking that they get any organic business at all.
They call themselves "a new kind of finance company" but there's literally nothing new to benefit the consumer. If anything, they've taken multiple steps back because they're a 1990s boiler room down to their culture, their management, and especially their channel of sales: they masquerade as an "tech company," but really they're just a web form that prints leads to their sleazy call center.
If you tick the boxes of the specific demographic they're going after (High Earners, Not Rich Yet - as they call them at SoFi) and you make the mistake of giving them your information by applying for any one of their products, all the mini-Belforts at the company will relentlessly pitch you over the phone to trust them to manage all of your wealth... for a princely return of 1.18%.
They have no defensible moats, they have no IP, they have no talent on staff. Their Chief Technical Officer is the CEO's wife, who has a 1 year remote degree from Stanford and no prior experience in software. Seemingly her job is just to stand around and pretend everything is "normal" while her husband sexually assaults girls half her age in the room across. How sad.
Speaking as someone who has multiple loans from SoFi (consolidated credit card debt, and then re-financed a couple of times as my credit score improved), getting a loan from them was remarkably painless.
Their online application was easy to use, and once it was approved, an electronic deposit for the amount simply appeared in my bank account a couple of days later. The interest rates were low, the terms were easy to understand, and there were no gotchas like front-weighted interest or unexpected fees.
If another company exists that will happily give me a hassle-free, unsecured loan for $50,000 at 5-6% interest, via an easy to use online form, and then deliver the funds in only a couple of days... please, by all means, let me know!
A couple of those companies don't specialize in student loan refinancing.
SoFi started as a student loan refinancing institution for low-risk professional pools with Stanford and Harvard alumni. As someone who refinanced their student loans recently with SoFi and shopped around, I can tell you I got the best rate from SoFi.
You seem adamantly opposed to SoFi though. Despite the unfounded accusations in your rant, why are you?
Personally, I don't know if "has the best rate" is strong enough to warrant the moniker, "a new kind of finance company," but that's just me.
The real criticism is that they take out the repayers and leave the govt with the defaulters aka privatize the profits and socialize the losses. it will eventually undermine the student loan program.
That is not unique to SoFi by any means.
Seems like the right answer here is to make the government not accept refinancing that doesn't pay back all the loan?
So your problem with Sofi is their marketing motto?
If we literally judge every financial company by their slogan, then we'll be here a while.
Well, your only defence of the company against the parent of this thread was that they got you the best rate after shopping around. I'm pretty sure that "they don't have the best rate" is not an issue that the parent poster takes with the company, so I find it kind of odd that this is your rebuttal.
Ok, but what does that have to do with SoFi's slogan?
https://www.earnest.com is a nearly identical company as well.
There's https://www.bestegg.com too, they send me like 1 mailing a week and I get mailings from other very similar companies, as well as established banks, several times a week.
I do not know if it's a saturated market yet but it sure seems like it.
I currently have ~$10,000 in credit card debt at 0% interest, no I don't want to refinance that, thank you! (I got the money sitting in a CD when the interest free period runs out.)
> If another company exists that will happily give me a hassle-free, unsecured loan for $50,000 at 5-6% interest,
If there aren't any, that should tell you something. Their business is not likely sustainable. Good for you if you got those terms, and there aren't any hidden surprises, but that rate with no security seems well below what prudent lending demands.
Their business is not likely sustainable.
The interest that banks give on your deposited cash is essentially zero, so even 5-6% leave a decent margin. Not everyone aims to make 25% a year, quite a few want to retain their wealth. This can be a tiny % of their allocation.
(Yeah, I know not all is paid back, salaries, heating bill and all.)
They reduced my student loan payment and cut the term in half at the same time. I was able to complete the application and have a decision in less than two days, and the funds were transferred two days later.
They're also much easier to get substantial unsecured term debt through at a lower price than, say, Prosper or Lending Club.
I'm afraid your scenario isn't possible or you've been taken advantage of for your lack of financial fluency.
There is no way your loan payments were reduced and the remaining term cut in half at the same time, unless your original interest rate was above 20-25%.
I'm chuckling so hard right now. You have no idea what the principle, terms or rates involved are yet feel the need to make assertions about possibilities and my knowledge of finance. It's an incredible representation of a certain kind of know-it-all nonsense.
I'm sure the SoFi salesperson was also chuckling when you signed off on a magic loan that supposedly made half your principle disappear.
Anyone with a calculator can tell the numbers don't add up. You're either embellishing or you got scammed.
Neither the interest rate nor the term of the loan affect the principle. These only change the monthly payment amount. It's possible to have a lower monthly payment with a shorter term, depending on the interest rate.
I think you mean principal.
Eh, there's always the possibility they were pulling an Uber - using VC cash to subsidize unprofitable margins to try to corner a market.
Who said half the principle disappeared?
Would you mind just stating what the debt was, what your payments were, what your interest rate was and what the term was compared to now?
It's kind of a silly fight, and I'm sure it would help educate a lot of people reading about what is possible.
Post some particulars then. Maybe not of your terms but something like it to see how to reduce the payment and cut the term in half.
That's easy: let the new rate be r' and the original rate be r.
Then choose r'/r < 1/2 by a sufficient amount. For example: let (P; r; t) be ($100,000; 8%; 30 years). The payment is around $740/mo. Now take (P; r; t) equal to ($100,000; 3%; 15 years). The payment is around $700/mo.
You can adjust for the fact that some months of repayment already occurred so the term reduction is to a new term greater than half the remaining periods on the existing loan and the present value (i.e. new principle) is smaller and bump r' up accordingly to achieve the same result.
Either way it's hardly "impossible" and actually quite easy to do if there's a significant difference between the original loan conditions and the refinance/consolidation.
The power of compound interest! For anyone else wishing to double check sidlls math:
Sure but who is going to lend you $100,000 at 3% for 15 years, with no asset securing the loan?
Again, the specific numbers of your situation would go a long way to shutting up the skeptics here. Either your initial rate was absurdly high, or you're exaggerating.
If he's an MD or Engineering Phd from Standford, that's the security that SoFi originally innovated on right?
my knowledge of finance
I'm glad I wasn't the only person saying "wait.. what?" over that one.
He had to have received a large rate reduction or made a massive payment on the principle. I don't see how the math would work out otherwise.
Or there's a balloon payment at the end of the term, hidden in the fine print.
Look at the types of loans they have. Their target market is people in a crisis, students, and people with a lack of financial fluency.
People make horrible financial desicions and a lot of companies profit off of them.
You are incorrect. This is called refinancing and happens frequently. It's possible SOFI assumed his/her debt at a lower interest rate which in some scenarios could mean a lower payment and lower term. The lower rate could be due to a variety of factors including overall interest rates, a change (or different viewpoint) in creditworthiness of the debtor, etc.
Your ego and lack of financial fluency is showing - this scenario is entirely possible.
> Seemingly her job is just to stand around and pretend everything is "normal" while her husband sexually assaults girls half her age in the room across.
This is really a low blow and completely uncalled for. I would expect such comments on reddit or Facebook, but not here.
What I know is
Student loan is quite inefficient, people going to University of Phoenix with low job acceptance rate majors get the same/similar interest rate with people going to Stanford for Computer Science. One side is way more likely to pay back than the other. That side is the horse, while the other one is the burden to the portfolio.
There are for-profit schools which spend 70% or more of their budget to solely marketing. I don't see they are producing good workforces.
Long term value: driving the masses to correctly study things that have higher chances of concretely contributing to society on short - medium term. I think it's quite valuable.
SoFi's way to survive is to collect high quality borrowers which risks are smaller than the average of the student loan portfolio.
Let's say govt gave all 8% (idk the real numbers) for everyone, but there are good students/alumnis in it whose risk are calculated actually as 4%, SoFi would refinance the loan with 5%. 1% margin is for SoFi.
Borrower is happy, SoFi is happy, student loan system gets a slap of reality in the long run & people would realize the inefficiency of the loaning system.
In the next phase after they have gathered the good borrowers, SoFi needs to nurture them to ensure their productivity, while offering other finances if needed. This is still not materialized yet I think. But, acquiring good borrowers & continuously serving them is the holy grail of the business I think.
My high level understanding is that at the start, they tried to target people who were the high "ROI" segment of customers that traditional lenders were lending to. They identified client segments who had better default numbers than the overall debt pool they were placed in, carved them out, and extended them better terms (but terms that would still make SoFi money).
Another way to frame this is that they tried to properly "price" mispriced securities (which in this case are individuals with loan terms with worse terms than their financial profile should beget them). Students working towards advanced degrees from elite institutions were seen by the traditional lending market as higher risk than what SoFi deduced that they should be "priced" at.
Traditional banks need scale in their businesses an order of magnitude or two compared to a startup. There were quite a few startups whose business model is "we will carve away the most profitable (but small in size) segments of a big bank's client base, and serve those people better".
This is a random thought, I'm not sure where this can or should go, but this article made me think of universal healthcare. One of the arguments for a single-payer is that it takes the burden of understanding healthcare and health insurance issues from employers.
One of the general issues with corporate structure is that corporations are machines that are to prioritize profits above all else, hence, their turning a blind eye to his issues. This is because a CEO isn't just an administrator for a money making organization, but is a caretaker of culture, ethics, and morality of a company. Work is so much a part of our lives that a person in a supervisor position over us actually has a lot of power in other aspects of our lives: food, shelter, healthcare, future work opportunities, even access to a social life given our work centered culture; and this gives them power to leverage it to hurt others.
This isn't to alleviate any of his guilt, but somewhere in here is a larger comment on our culture and how many jobs should not be the "best welfare program" (or shelter program, or food program, or social program, or networking program, or etc.) that our lives should not be dominated by work only.
It's not a good argument for single payer health care, because any alternative to employer-provided health insurance would do that. But I do agree that would be beneficial.
Seriously, how are these people raising so much money?? Scandals & impropriety of one sort or another among execs are becoming par for the course in SV, and yet investors seem perfectly happy to throw cash at any half-baked "disruptive" idea (where "disruptive" simply means "brick-and-mortar business moved entirely to an app").
Are investors really that dumb?
Sunk cost fallacy. Investors put in $100 million in 2011 when the mere concept of Fintech would give venture capitalists chubs. Back then, it wasn't so clear that millennials and personal finance are like water and oil -- and that you would need more than a landing page and a webform to drive organic growth.
SoFi would also feed investors both false information (as mentioned in the article), and inflated user growth numbers fueled by their freedom as a "startup" to spend insane amounts of money on customer acquisition with no regard for profitability.
Basically, SoFi spent all their money convincing people through advertising that they were "a new kind of finance company", all without actually creating anything new.
Turns out the company stops growing if you stop giving them money, and VCs didn't want to lose their $100 million commitment or admit that the company was DoA, so along came more rounds of funding.
There you go, that's the path to a $4 billion tech valuation with no actual tech product.
Arc of the story in three phases; all from one magazine:
> "About 10 SoFi executives met to discuss the situation; it was then that some of them learned Mr. Cagney had not actually secured the $90 million for the loan product, according to people who were at the meeting. Some attendees said they were dismayed at the possibility that they had made material misstatements to investors."
The litany of business misdealings detailed in this article makes me wonder how SoFi hasn't been fined out of existence by now.
Can the startup employees sues such founders for screwing with their stock option value?
There's an argument that basically every crime involving a company or officers of a company is a financial crime, so theoretically the SEC could bring securities charges...
That might make more sense if Fiduciary Duty was ever prosecuted (in the general sense) in reality.
I dunno... this article is certainly colorful but I can only imagine there is some embellishment going on here. No facts or evidence to support any of it. And just to clarify, there isn't actually any sex in this particular CEO's sex scandal?
But believe me, this was a wine-soaked orgy of a frat house. Used condoms in the staircase, sex in the parking lot level crazy.
Why are the investors involved with this company, specifically the board members, that allowed the sexual harassment to go on unchecked not being named and shamed? It was their job to keep the CEO in check.
If they looked aside, in the pursuit of a unicorn, then they shouldn't be allowed to pass off all blame to the CEO. What were they doing? Where is their accountability in all this?
Most people at that level do not change their behaviour unless they have a financial downside. If we keep looking at CEOs while the board/investors/VCs are not called out, nothing is going to change.
I had been meaning to refinance my student loans with them, but now I have second thoughts. However, they seem to have better customer service than their competitors such as Darien Rowayton Bank. Just wondering about the company's finances.
What does it matter? If they refinance your loan, and then go out of business, your loan is still a contract and you'll just make the payments to whomever ends up buying the loan portfolio.
1. They were having sex in vechicles.
2. There was nepotism in hiring.
3. The founder "hit" on employees. The founder also has a hedge fund in the city? What a guy. Quite the go getter. BOD gave him the boot, but will be at the end of the year.
4. The Vice President supposedly paid women to loose weight, and he kicked garbage cans. (He denied everything, except kicking the cans. 'There's So much stress in a start up!'
5. I still don't know what the company does, nor care. I don't know what allegations are true, or false.
6. Moral of story--don't say anything off color, sexually suggestive at work. That goes for females too. Don't have sex at work--ouch! Gotta be hard being a CEO in this bubble? So many difficult rules! So much stress for the Founder! (I hope this dudes wife has a prenup? Then again I'm still not exactly sure what crime he committed, other than being a privileged white male, with poor social skills?
7. I'm still kind interested in his hedge fund. I'm astonished over the money certain white males can accumulate in America.
8. If I owned any company. My first speech would be, "Don't use this bubbly job as a place to socialize." And that's the rub. So many people use that bubbly job as their hatching ground for socializing. My ex went to work daily in SF, and complained the gay men at work wouldn't hit on her. I once told her that if she's using work to socialize, it's pathetic. She read me the riot act. Never said anything about her job again. I need to say this-- San Francisco runs very low on available straight men to socialize with. I've seen women throw themselves at average dudes. Average in all categories. For one--stop it. To the guys who get the big egos; stop it. Or, keep it up, and get kicked out of your own company.
Anyone else notice that this guy's wife (June Ou) is also Asian?
So we have Dave McClure of 500 Startups, Justin Caldbeck of Binary Capital, and now SoFi's CEO. And I'm sure there are a dozen others.
Am I the only one who takes objection to associating a creeper CEO with everyone else who is happily getting laid at SoFi? Isn't there a difference between mutually agreed upon sex vs. unwanted advances? Just because others are shitting where they eat doesn't mean you have to. It happens in every company. The bigger the company, the more it happens.
The problem here is that there's a distinct balance of power that a CEO can take advantage of. People may feel extra pressure to maintain their position in companies as a result.
I actually had similar thoughts reading the article as the OP. Not sure why it was flagged.
This case seems totally different from consensual relationships per se (e.g., bonuses to employees for losing weight is clearly inappropriate, among many other things reported on in the article), but there was something about the coverage in this article that seemed off the mark to me. There were enough problems to report on that I didn't like the implication that it was all equally problematic. Equating serious problems with more minor ones obscures discussion of what matters.
> Not sure why it was flagged.
The conversation has become a lost cause for reason on HN. Follow the mob....
> Equating serious problems with more minor ones
Whats the problem with employees having sex in a car or car park at all? One assumes it was not directly in
On what planet outside of 'frat' movies do people have sex obviously in front of random co-worker going to drive home. Lets take what is said here in context.
Firsty one must assume it was all hearsay and gossip, the statement itself is nonsensical unless the carpark was full of trees?
It is obviously also a selective statement with the person not actually claiming to have seen it themselves.
Like, it defies all logic, but people eat up these crazy narratives to mob follow, even if it goes against their base morals.
Sex is ok. It's not an evil sin. So what if a story went around about two people having sex, possibly in the carpark. Dam those young people and their hormones, shaking fist.
Should someone even suggest it's ok, flag them down into the ground, sex rhymes with sexual harassment, it must be bad.
My company gives incentives for losing weight, stopping smoking, and other "healthy living" criteria. What's inappropriate about it?
What if I'm already in a good shape and don't smoke? If a company gives incentives for being healthy it is fine. Otherwise, it is quite demotivating for others.
"... caught colleagues having sex with supervisors..." which is also a problem. It seems like overall the culture was toxic.