Motif Investing: Revolutionizing the Online Trading and Investment Industry
Date: Thursday , April 03, 2014
A lot can happen over coffee. Hardeep Walia, Founder & CEO of Motif Investing, an online investing company that lets people invest in ideas and trends will agree wholeheartedly. It was over breakfast that he convinced Gary Cohn, President and Chief Operating Officer of Goldman, Sachs & Co to invest in his unique venture that has created a highly cost effective platform that lets people invest in motifs or portfolios of 30 stocks which are built around an idea or an industry trend. The company raised a whopping $25 million series C funding lead by the investment banking giant in April, 2013. This deal brought the company\'s cumulative funding to a staggering $ 51 million, a herculean feat for any young start-up. The other investors to put their trust in the company are Ignition Partners, Foundation Capital and Norwest Venture Partners. A keen strategist Walia did not approach every investor to fund his dream project. \"Instead of knocking on every investor\'s door, we chose to approach a select few who had a deep understanding of the industry,\" adds Walia. The strategy worked and within two years of being in business the company is poised to take the industry by storm.
So, was it a stroke of luck that worked in favour of the company or was it strategic planning and a unique idea that did the trick? It was a combination of all these. Walia who is a passionate investor himself came up with the novel concept of Motif by taking a look at the challenges that the industry and investors faced. \"Everywhere around the world, people are discussing and coming up with great investing ideas. However there is no easy way to turn every idea into an actionable investment. Even when there is, the cost is often prohibitive,\" explains Walia. Motif identified this gaping hole and solved the problem by building a user friendly intuitive platform that allows individual investors to invest in a professionally built basket or motif of 30 stocks. The concept of a motif is rather simple and similar to an Exchange Traded Fund (ETF). It is a carefully researched and intelligently weighted portfolio of up to 30 stocks that reflect real-world trends and investment ideas. Be it the latest economic, industrial and political swings or the most popular investing strategies, Motif Investing has a motif for it.
The platform puts users or investors in a favourable position as they not only gain powerful investing ideas but also have complete control over their portfolio. People can see exactly what stocks and ETFs are present in each motif. Users also have full control to either customize a motif or build one right from scratch.
The Price is Right
The idea to build Motif Investing had been brewing since 2010, a time when the markets were recovering from the stock market crash of 2008-09. Walia realized that it was not a favourable time to be an investor. \"2008 was a terrible year for investors. Not only did they lose trillions of dollars in net worth but they had to pay out billions of dollars in management fees. We knew we had to change that,\" says Walia. The company hit the nail on the head by making the process of investing highly cost effective.
Unlike ETFs, motifs have no management fees. With other brokers, an investor has to pay around $10 per stock. However, with Motif Investing, investors can trade in 30 stocks for that same price. The platform provides users with two options. They can add, delete or change the weightings as they like, then buy the entire customized motif for a commission of only $9.95 regardless of how many stocks they have changed. Alternatively, users can also buy or sell each individual stock in a motif owned by them for just $4.95 in commission per stock. Every time a user trades on a motif created by another investor, the owner of the motif earns a reward, making the process a win-win situation for everybody. \"Our main motive is to empower investors and with our cost effective platform we are doing just that,\" adds Walia.
Making Investment Social
Walia also brought all the pieces of the puzzle together by making the entire process fun and social. He understood that investing fundamentally is a social process. People like to talk, discuss, receive and give opinion on investing ideas. Cashing in on this concept Motif Investing has added a social twist to their platform. Users can interact with fellow investors to gain knowledge, discuss strategies or spread knowledge. Either ways, the users benefit.
This methodology has also been beneficial for the company in ways more than one. For starters, it has helped increase the number of motifs on their platform dramatically. The team of experts at Motif Investing took almost a year to come up with 120 motifs. But within six months, the users had created and shared over 35,000 different motifs. There are more motifs now than there are ETFs and mutual funds combined in the U.S. This innovation has also helped the company in terms of customer acquisition. A regular online broker can pay up to $700-$1000 for customer acquisition. Motif Investing on the other hand gains users based on word of mouth which costs next to nothing. This approach has helped the company to scale up rapidly without incurring high costs.
Future of Financial Advisors
Although the company is doing great with the current model but Walia has grand plans for the future. \"We are going to be a much bigger company in the next few years and we will focus on cracking a lot of strategic deals with established players to help us scale,\" Walia says. In keeping with that the company has recently launched another platform exclusively for Registered Investment Advisors (RIAs) that will transform the way they conduct business and interact with clients. The Motif Advisor Platform streamlines how advisors build, monitor, and rebalance model portfolios around various asset classes so that they can provide the highest level of service to clients. It automates formerly mundane, labor-intensive processes so that advisors can devote more time to what really matters -- sound investment research and quality client communications.
It is a one of a kind platform to provide these simple yet powerful tools for advisors so that they can focus on their clients rather than technology. It enables advisors to share market insights and portfolio updates through user-friendly social functionality. Not only can advisors make use of tools to create, monitor and rebalance portfolios, they can now communicate with clients effortlessly. The Motif platform is intuitively social, making it as easy to use as Facebook or Twitter so that advisors can engage with tech-savvy clients in an appealing and unobtrusive way.
Motif Investing has truly made thematic investing a simple, fun and interactive process \"We want to be the Microsoft of the financial services industry,\" says Walia about his vision of the company\'s future. Given the company\'s high profile backers, unique idea and love for what they do, they are on to a great start.