Do-it-yourself thematic investing
Motif CEO Hardeep Walia on how the online broker enables advisers to invest in ideas, and the support it has attracted from Silicon Valley, Wall Street and Sallie Krawcheck.
The original concept was two friends at a coffee shop,
talking about investing trends in the technology world. We're talking
about the rise of mobile internet, the rise of cloud
computing, the tablet takeover computing, and we wanted to invest
in those trends and this was 2008, 2009. These trends
were just starting to build up and there were no
mutual funds or ETS. There was no easy way. You
take something like the mobile internet, for example. You ask
individual investors, "How do you invest in the mobile internet?"
They'll say, "Well, I'll buy Apple." Oh, that's not really
the mobile internet, or if they're unlucky, they'll say they'll
buy a RIM. What we wanted to do is give
people a real good exposure to the mobile internet. That's
actually the first motif that we built and we wanted
to include cellphone tower companies, chip companies, screen companies, the
operators, and the manufacturers. There were no fund products and
to buy all those stocks would cost you a lot.
And through that, we discovered that there was an easy
way to put ideas to work and mobile internet was
a good example. So, what a motif is, a mobile
internet motif? It is a 30-stock portfolio that is thematically
weighted. We do a lot of effort on our weighting
methodologies and they're designed to give you exposure to the
underlying idea and you can buy these 30-stock portfolios weighted
intelligently for the cost of a single stock transaction, $9.95
to buy 30 stocks in real-time. There are no management
fees. So, our customers and our advisors think of these.
They're not funds, thankfully. You actually own the underlying assets
here. But they're kind of like a customizable no-fee ETF.
In fact, Motley Fool asked us, when we first launched,
whether motifs will do the ETFs what the ETFs are
doing to the mutual funds. It is this low-cost intelligent
we are investing. And since we launched our first motif
mobile internet, we've expanded beyond to give you exposure to
ideas like shale gas, but an idea is an idea.
It could be a model. We have a quantitative easing
strategy in Japan as a motif. We've got an asset
allocation. My professor at Yale, David Swensen, has written a
lot of books on Ivy League endowments. We built an
Ivy League endowment motif for him and it could be
simply an asset allocation model that doesn't change. These are
all motifs, but they're all built on this concept of
understanding what you're investing in, low-cost investing where we described
as Peter Lynch meets Jack Bogle, great investing ideas, but
it's really hard to pick stocks and we are an
online broker that doesn't want you to pick individual stocks.
We want you to invest in the ideas and that's
what motifs are. Everyone is looking for innovation, and to
be very blunt, especially on the retail space, there's been
very little innovation. So, at some respect, it was easy.
You actually go and solve a hard problem where you
can trade real-time 30 stocks thematically weighted. We actually make
high margins doing that where some of the big folks
can't make money selling you a single stock for $9.95.
We've got a set of proprietary technology that took us
awhile to build. Many people can acknowledge our business model.
I think there are a couple of things. I think
in Silicon Valley, it's always been about innovation. It's always
been about, "How do you innovate in financial services?" It's
just a highly regulated business and that's a part of
the business that Silicon Valley has always traditionally struggled with.
How do you deal with these regulatory environments? I think
dealing with Wall Street, I think, you know, the Goldman
Sachs deal was-- we are very grateful for it 'cause
it wasn't just about the money. We could have raised
another 25 million from some VCs. The way they provide
it was high IQ experience in building products and running
trade algorithms and that was the attraction of the deal
with Goldman Sachs. And you know, recruiting Sallie Krawcheck, Arthur
Levitt was not easy, but I think, you know, you
have to ask them why they join. I would guess
it would be something because what we're doing fundamentally in
the case of Arthur Levitt's case is good for the
retail investor, and in Sallie Krawcheck's case, it's good for
the retail investor and good for the financial advisor. And
I think it was the same principles we talked about,
you know, low-cost investing, transparent, very easy to understand. It
is not like any product that you've ever seen before.
And I think the product ultimately sells itself.