There’s a new investing firm in town, and it is just as intolerant of fees and in-accessibility to financial instruments as ever. Say hello to Motif Investing. A recent article on SF Gate by Kathleen Pender introduced it to a larger audience and it caught my attention. They’re turning investing into a social event, and that’s catching everyone’s attention.
Motif is undercutting discount brokers, which typically charge $7 to $10 per trade or up to $300 total for a basket of 30 stocks and exchange traded funds. Some discount brokers offer a selection of ETFs – which are funds that trade like stocks – with no commission. Many traditional mutual funds can also be purchased without a “load” or commission. But virtually all mutual funds and ETFs charge an annual fee. Motif charges no annual fee. And unlike funds, investors can modify their portfolio. They can add, subtract or change the weighting of securities for $4.95 per security or $9.95 for multiple changes.
This reads like the script that Schwab used years ago to undercut the wire houses. Schwab put its services “online” (which back then was not exactly self-service) and saved direct investors a boatload by allowing them to circumvent the brokerages and their fees and trade stocks directly. Of course the mechanics are all different now—what was electronic trading is now social investing—but the message is the same: screw the old way, check this out and save a lot of money.
Pender goes on to state that:
“Instead of emerging markets or international bonds, Motif has funds based on concepts like tablet takeover or water shortage. It’s easier for less sophisticated investors to wrap their heads around,” says Grant Easterbrook, an analyst with Corporate Insight.
So what gives here? Are we just cycling through the same ideas now, and just putting them into a new track suit? Or is there something else going on here?
So what’s the deal?
According to Crunchbase:
Motif Investing is an online broker that lets you invest in a world of big ideas. The company, based in Silicon Valley, is changing the face of online investing through an innovative, transparent social platform that allows individuals and investment advisors to invest in stock and bond portfolios built around everyday ideas and broad economic trends — and even create brand-new motifs from scratch. Motif is a registered broker-dealer and a member of SIPC. The company’s investors include Foundation Capital, Goldman Sachs, Ignition Partners and Norwest Venture Partners. Board members include former SEC Chairman Arthur Levitt and former Wall Street executive Sallie Krawcheck.
I will just add some color around the board members noted there.
- Sallie Krawcheck is a past executive at Bank of America and Citigroup. She was formerly president of Bank of America’s Global Wealth & Investment Management group and was also chief executive and chairman of Citigroup’s Global Wealth Management. In short, she’s connected, and connected to wealth.
- Arthur Levitt Jr. is a past chairman at the SEC from 1993 to 2001. I’m not sure there’s much else you would need to add here, but after that he joined The Carlyle Group as a senior advisor. And then we wrote a best-selling book about fighting Wall Street.
Ok, that all sounds pretty glossy, but the gist is that Motif allows individual investors and investment advisors to create and invest in portfolios that they can create and name any way they choose. And it’s working. Portfolio names like “Discount Nation”, “Home Improvement”, and “Biotech Breakthroughs” are pretty plain in comparison to those like “Caffeine Fix”, “Too Big to Fail”, and my favorite so far “Frack Attack”.
Each portfolio is comprised of a list of up to 30 stocks and/or ETFs with relative weights assigned to each. When you choose to invest in a specific portfolio, you are given an option to modify both the stocks included in that and their relative weightings. And the minimum investment is only $250. Motif is a broker dealer, so what that means is they can handle the gritty details of how this all makes sense so you don’t have to worry about what it means to buy fractional shares. All you need to concern yourself with is the kind of investment you want to make, and then go make it.
Want to invest in the top 30 cloud computing investments? Go right ahead. Want to create an index for every company with CEOs born in Missoula? Do it. Have a hankering for companies that import Havarti? Sure, why not? Motif is banking, literally, on the fact that if just one person is looking for a specific flavor of investment, there’s a good chance that more are either out there, or will be. And ultimately, they’re taking a straight service cut off of every transaction, so the more the merrier.
For instance, let’s say someone created a portfolio called “PB&J”, comprised of Proctor & Gamble (PG), Best Buy (BBY) and Johnson & Johnson (JNJ) with relative equal weighting of 33%, 33% and 33%. Now let’s say that catches our eye, but we have an aversion to big box retailers. So we can choose to remove BBY, replace it with our favorite, affordable growth stock Berkshire Hathway (BRK-B), and then decide that we want to rely more heavily on the dividend-paying stocks (PG and JNJ). So we can then change the relative weighting to PG @ 40%, BRK-B @ 20%, and JNJ @ 40%.
Make it pop
So here’s the kicker. Now we’ve got a machine that allow people to dream up portfolios of any imaginable flavor and kind, but how do we really make this baby sing? Make it social. And that’s what Motif did.
Even before you send any money anywhere, you can search the existing portfolio catalog and look for one that calls your name. And if it doesn’t then you can go building your own. Once you’ve done that, share it with anyone you like. Your friends. Your family. Or no one at all. Choose to keep your portfolio hidden from the masses and reap the rewards of “All things starting with A”. Or if you choose to share it with the world, just make it a publicly visible portfolio, and there you go. You’re in. Boom.
The bottom line
Motif is bucking the trend by providing investing capabilities to the little guy at a lower cost. It’s not a new theme, but it’s a good’n. No longer do you need to wait for some hotshot portfolio manager to dream up that ‘Pizza my retirement” portfolio you’ve been thinking about for ages. Now you can go out there and make it yourself. And not only that, you can turn your friends, family and the whole dang world onto your epiphany in a heartbeat if you choose. All from your browser.
Life and technology have changed since the discount brokerage was new, but the sentiment hasn’t. We always want to stick it to the big guy, even if he owns our existing retirement. And now we want to do it on Facebook.