Is Ally Invest legit? And who are they?

Whether a financial provider like Ally Invest is legit a very relevant question one can have. After all you trust Ally Invest with your investment money and savings. It is also a very common question, we get this asked a number of times.

One thing worth bearing in mind: all the brokers that you find on BrokerChooser are regulated by at least one top-tier financial authority. So in this basic sense Ally Invest is of course legit. Additionally, there are other factors you can take into account when you check the legitimacy of Ally Invest, e.g. if Ally Invest is listed on any exchange, provide two-step login, disclose transparently its financial result, etc.

Here, we've collected and summarized the common questions on broker legitimacy, enabling you to decide for yourself whether you consider Ally Invest legit in your individual circumstances. We also compared Ally Invest with two similar brokers.

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When you assess a stock broker it's best to think through the following aspects:

• What authority or authorities regulate the broker? In other words who can you turn to if something goes south?
• How much protection do you have?
• For how long Ally Invest has been in operation?
• Is it publicly traded itself?
• How transparent is it?
• How much do they protect your account from unauthorized access?
• What auditor audits the brokerage?

As you see there are a number of aspects above. But not all of them were created equal.

We think the most important feature is to be regulated by at least one trustworthy authority.

Comparing regulators

First and foremost, to gather a wider knowledge about one broker's legitimacy, you should check the regulators of it. For this purpose, we sum up below the most important things to know about regulators and how to interpret them for your individual case.

Ally Invest is regulated in the following countries and provides the following investor protection:

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Don't forget that regulators are not created equal. Investor protection can also vary from authority to authority. There are top-tier regulators whose excellence lies within their features such as the presence of segregated accounts, the range of protection tools or the investor protection amount itself. Check out a few of the top-tier regulators in the table below. Most brokers reviewed by BC fall below one of the following four regulators:

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As you could see, Ally Invest is regulated by SEC and provides the SIPC investor protection scheme. SIPC protects against the loss of cash and securities in case the broker goes bust. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash. A non-US citizen with Ally Invest is treated by the SIPC the same as a US resident in case something goes bad. These amounts are substantially higher than what most European investor protection schemes offer.

Not all investments are protected by SIPC. In general, SIPC covers notes, stocks, bonds, mutual funds and other investment company shares, and other registered securities. It does not cover instruments such as unregistered investment contracts, unregistered limited partnerships, fixed annuity contracts, currency, and interests in gold, silver, or other commodity futures contracts or commodity options.

There are some brokers that provide additional insurance because they have private insurance (e.g.: eToro through Lloyd's, among the US brokers Charles Schwab and Ally have similar setups), which means that you have an extra legitimacy net above the regulatory. It's worth checking it out when you're choosing your broker.

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The subsequent bullet points are rather supplementary, “nice to have” features. Ticking them definitely adds to the legitimacy of an online broker, but not having them is not necessarily a big red flag.

Banking background

It's a good sign that Ally Invest has a banking background, what can be considered as a legitimacy net. Even if it's not required by law that a struggling broker must be saved by its parent bank, in most cases you can count on this happening, so a banking parent is another layer of security.

Broker listed on stock exchange

Ally Invest is listed on the following stock exchange: New York Stock Exchange, which is a good sign for legitimacy.

Why is being listed on the stock market useful? For two reasons:

• Listed companies by and large have stringent reporting requirements
• If something really goes wrong with the broker, you'll be able to tell it from the (rapidly falling) share price of the broker in most cases. In this unlikely scenario, you'll have time to move your funds and securities to another broker.

Annual financial statements on website

While most of the people don't read financial statements, it's a promising sign for legitimacy that Ally Invest publishes these regularly. Financial statements can be considered as financial reports, which generally contain information about a brokerage's income, profit and loss, retained earnings and cash flows.

Mobile two-step authentication

Ally Invest doesn't provide two-step authentication when logging in, which is not so pleasing, since it might be easier for hackers to compromise clients' accounts.

Broker ownership transparency

Ownership structure of Ally Invest is public, everyone can check the owners of the company on their website, which adds to their legitimacy scores.

Broker management transparency

Ally Invest is transparent about their management structure, which means that anyone can see who is in charge of management issues at the brokerage.

Broker is audited by the Big Four

Ally Invest is audited by one of the so-called Big Four auditors (KPMG, PWC, Deloitte, EY).

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Now that we have gone through the most frequent and - as we think - most important legitimacy aspects of Ally Invest, we can say that Ally Invest is great in legitimacy, since it fulfils most of the important criteria mentioned above. We hope that you feel armed enough with information for your future decision. In case you're still unsure, use our broker finder and meet the best online broker that suits your needs.

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