The ‘Grifin’ App Wants You to Invest Every Time You Shop. Don’t.
Grifin may be the next WallStreetBets after a viral TikTok video sent it to the top of the iOS App Store — but experts warn against its model
Earlier this month, a new investing app called Grifin went viral on TikTok and shot to the top of the iOS App Store overnight. Launched in November and backed by $2 million in funding, the app aims to make the stock market more approachable by enabling its users to “magically invest $1” in brands that they’re already buying from.
“The moment you buy a cup of coffee at Starbucks, you get to invest $1 in Starbucks stock. You shop on Amazon, $1 goes to Amazon,” said Grifin co-founder and CEO Aaron Froug in the viral TikTok video, adding that the name stands for “The Greatest Revolution in Finances Now.” The video has been viewed around 14 million times.
Experts tell OneZero they do not recommend this approach to investing, echoing warnings from the GameStop and r/wallstreetbets saga about buying single stocks. And while Grifin is presented as free and simple, when they sign up for the app, users are actually getting into business with several financial institutions, hit with various fees, and giving up significant amounts of sensitive personal and financial data.
Unless you read to the bottom of Grifin’s website, it’s not clear that the $1 is a new charge on top of your purchases — it’s not simply folded into your transactions. Rather, the company withdraws $1 from your bank account whenever you shop at a brand you’ve selected and invests it for you automatically, which is already causing confusion among some users. (You can set monthly limits and turn off investments for companies you don’t want to invest in.)
“We are aware that some of the messaging used in our marketing has not made it clear that the $1 from each purchase is withdrawn from your bank account and invested in the stock,” Froug tells OneZero. “We are listening to the feedback and trying to update and clarify as we go.”
“I’m concerned about what happens once Grifin has the hard-earned cash of its users.”
In the company’s terms of service and 10 other user legal documents totaling over 80 pages, OneZero discovered that, among other fees, you’re charged an asset-based fee each month. This means the more you spend in your daily life, the more Grifin transfers from your bank account to your Grifin account — adding up to a bigger cut for the company.
The documents also state that by using the app, you’re legally appointing the company as your investment adviser and granting its “third-party providers the right, power, and authority to act on your behalf to access and transmit your personal and financial information.” Additionally, they clarify you’re actually buying fractional shares, which are nontransferable and don’t grant the shareholder any voting rights. The Advisory Agreement states that “trading in fractional shares has unique risks and limitations that you should understand prior to participation.”
“I’m concerned about what happens once Grifin has the hard-earned cash of its users,” says Ken Zendel, CEO of the National Association of Investors, a nonprofit organization geared toward investor education.
In addition to the obscured terms, Zendel says he’s wary about the automated process, which results in users purchasing stock regardless of its price.
“This can be dangerous,” he says, “Take Hertz, for example. Recently, Hertz, whose stock is still traded, revealed a proposal to exit bankruptcy which will wipe out all existing shareholders. So, a Grifin app user who is renting a car from Hertz, and thereby auto-investing in Hertz, would be guaranteed to lose all of their investment.”
There’s also the fact that a company isn’t necessarily a good investment just because you bought something from it. Dan Egan, managing director of behavioral finance and investing at financial advisory company Betterment, called Grifin’s approach a “self-centered view of markets.”
“That translation of ‘I’m spending money here, so this would be a good stock to invest in’ doesn’t hold very well,” he said. When asked if he’d recommend investing this way, he said, “In fact, like as a very general principle, you’d say the opposite.”
Unlike Robinhood, Grifin itself isn’t a broker. You’re actually investing through DriveWealth and Interest Financial, and between Grifin and these institutions, the user legal documents lay out the collection — and in some cases, sharing — of sensitive personal data.
This includes your Social Security number, driver’s license number, billing information (such as credit card number and billing address), financial information (such as bank or brokerage account numbers, types of investments), preferences information (such as product wish lists, order history, and marketing preferences), and demographic information (such as age, education, gender, interests, and zip code).
The terms of service also lay out the collection and use of data related to credit and employment: “You are giving us your express written consent to obtain consumer reports (including credit reports) about you and other information, including credit and employment information about you from one or more consumer reporting agencies (including credit bureaus) and to review and act on those reports and information. You authorize us to obtain reports from third parties concerning your financial situation, credit standing, business conduct, or reputation.”
Additionally, the legal documents include a clear admission that the company’s revenue model comes at a cost to users, stating, “When we act as your investment adviser, we have to act in your best interest and not put our interest ahead of yours. At the same time, the way we make money creates some conflicts with your interests.”
Consumers’ general concerns about privacy are growing, particularly following greater awareness around the data practices of tech giants like Facebook. In a recent survey conducted by The Harris Poll on behalf of cyber safety software provider NortonLifeLock, which surveyed more than 10,000 adults from 10 countries, around two-thirds said they’re more alarmed about their online privacy than ever before and have opted not to use certain apps and services solely based on their privacy policies. In the comments of Froug’s TikToks about Grifin, some of the most common questions are about why certain information is required to use the app and if the platform is secure enough to protect such sensitive data.
OneZero spoke to cybersecurity and emerging technologies advisor Joseph Steinberg about the security measures Grifin touts, which include 256-bit encryption and secure socket layer technology (SSL). He said there are many other essential actions required beyond what’s listed, and there’s not enough information to know if the company is taking appropriate measures. Grifin later confirmed it offers two-factor authentication through Plaid and uses the company’s API to make all banking and credit card connections.
Both Zendel and Egan said they appreciate that the company is taking a creative route to make investing more approachable. But Egan stressed that beginners who invest in single stocks often lose money quickly and come to feel they can’t win, which turns them off from the stock market entirely.
“If you want to help somebody get started investing, doing it in a complicated, shrouded-cost way where they have high transaction costs they can’t see and invest in concentrated positions with a higher chance of losing money — that sounds like a great way to set somebody up for a really bad first experience and hurt their wealth growth in the long run,” he said.