Motif users can play portfolio manager
and earn royalties

Startup brokerage planning new online platform for advisers

By Trevor Hunnicutt

Oct 3, 2013 @ 10:17 am (Updated 4:32 pm) EST

motif, investing, stocks, basket, online trading

Motif Investing Inc launched a program Thursday that pays people to play fund sponsor and portfolio manager, and the startup brokerage is planning to roll out an online platform for advisers later this year.

Motif, which allows users to create, share, buy and sell baskets of stocks, has been drawing buzz from advisers and a few boldface names, as well as at techie confabs like Finovate, where it won a Best of Show award last month.

The company and its users already have created more than 15,000 Motifs, as the baskets of up to 30 stocks are known, that can be traded together or re-balanced for a single $9.95 commission. (Individual stocks can be traded for $4.95, and the minimum investment is $250.)

(Plus: Check out this video with Motif's co-founder Hardeep Walia.)

Now users will be able to earn royalties — $1 — every time someone purchases their Motif, company officials said this week.

In December, the startup plans to roll out a platform that enables advisers to create Motifs, share them on the web, and manage a client portfolio made entirely of Motifs. The service currently is being tested.

Many Motifs make deeply specific bets on sectors. On Oct. 2, the most popular baskets were:

• “Biotech Breakthroughs,” which generated 56% returns over the last year and has large exposure to biotechnology health firms Amgen Inc. and Gilead Sciences Inc., among others.

• “Cleantech Everywhere,” which is long Tesla Motors Inc. and so-called green energy firms, up more than 115%.

• The self-explanatory Chinese Solar Motif (233% return).

The startup has drawn $51 million in venture capital funding from firms including The Goldman Sachs Group Inc. and the backing of heavy hitters on Wall Street such as Arthur Levitt Jr., the former Securities and Exchange Commission chairman, and Sallie Krawcheck.

Hardeep Walia, Motif's co-founder, said Ms. Krawcheck, a former executive in Citigroup Inc.'s and Bank of America Corp.'s wealth management divisions, quelled his initial doubts about whether advisers would support the product. Ms. Krawcheck did not respond to a request for comment left with her firm.

“I play around with a lot of adviser tools, and quite frankly they're ugly, clunky and boring,” said Mr. Walia, the company's chief executive officer. “There's a lot of innovation in Silicon Valley — all of them want to replace the adviser. We want to work with the adviser.”

Motif and its senior competitor, broker-dealer FOLIOfn Investments Inc., have breathed new life into an old trend: the brokerage that uses the Internet and heavy discounts to carve away at a business used to charging higher commissions, according to Grant Easterbrook, senior research associate at consulting firm Corporate Insight.

It remains to be seen whether advisers and their clients will take to the Motif as a replacement for professionally managed and often highly diversified investments like mutual funds or plain old stocks, but the firm already counts advisers among its fans.

The firm pointed InvestmentNews to one such admirer, Ross Almlie, who works at TCI Financial Advisors LLC.

Mr. Almlie said he reached out to the firm after reading an article last year. He sees Motif as a way to better engage his clients, who lack an understanding of what's “under the hood” of an exchange-traded or mutual fund. He welcomes the possibility that thematic investing could lead to exotic or faddish investment ideas.

“I'd rather have them get excited about their investment — even in an irrational sense — than to not care about their investments at all,” Mr. Almlie said. “If they can understand the process of what an adviser goes through, they'll respect our profession more. They'll respect the fact that we make mistakes sometimes, and they'll be more forgiving.”

Mr. Almlie has incorporated Motif in a mathematics and financial literacy program he offers area middle school students, in which students compete with other schools for frozen yogurt and bragging rights.

Another adviser who has been working with Motif, Jamie Harpst, president and investment manager of Infresh Financial Network LLC, said he likes Motif enough that he expects to conduct 90% of his clients' business on the website within a year.

Some advisers will be inclined to keep their Motifs private, limited to their own clients, while others will open them up to the public to promote new business, Mr. Walia said.

“We're a platform; we're not trying to force anyone to any particular model,” he said.