Reddit recently hosted an Ask Me Anything (AMA) session with Hardeep Walia, Founder and CEO of Motif Investing, and former SEC Chairman (1993-2001) and Motif Investing Board Member, Arthur Levitt. There were some pretty interesting exchanges that I thought were worth highlighting for anybody who uses Motif Investing and who is interested in investing as a whole.
Topics of discussion include:
* International expansion plans for Motif
* Views on mutual funds and bond funds
* How much money Arthur Levitt has in his checking account
* How can the middle class navigate the investing landscape better
* Thoughts on high frequency trading, Bitcoin, Vanguard, the SEC, and 401k regulation
ARTHUR LEVITT AND HARDEEP WALI BIOS
Arthur’s Bio
I am former SEC Chairman Arthur Levitt, Chairman of the American Stock Exchange, Founder of American Business Conference and Levitt Public Affairs Center at Hamilton College. I have worked for four U.S. Presidents. I am a former entrepreneur: founded a broker-dealer that became Smith Barney and the Congressional newspaper Roll Call. I am also a member of Foreign Policy Association and American Society of Arts & Science. I am a Board Member at Bloomberg LLP and Motif. And an Advisor to Affirm, Peer IQ, Block Chain, Bitpay, Mirror. I am a Williams College graduate and served two years in the Air Force. I authored the best-selling book, Take On The Street: What Wall Street and Corporate America Don't Want You to Know: What You Can Do to Fight Back.
Hardeep’s Bio
My name is Hardeep Walia and I am the Founder and CEO of Motif Investing. Motif Investing is a next-generation online broker that is pioneering thematic investing for individuals and financial advisors. Motif was voted #1 World’s Most Innovative Company in Personal Finance for 2015 by Fast Company and was 4th ranked on CNBC’s list of Most Disruptive Companies in 2014. I am a regular guest on CNBC and I blog for Yahoo! Finance. I’m an active member of FINRA’s Small Firm Advisory Board. I also sit on FINRA’s Technology Advisory Committee. Prior to starting Motif Investing in 2010, I was an executive at Microsoft and served as General Manager of their Enterprise-Services business. I hold Bachelors degrees in Economics and Engineering from Yale University and an MBA from the Wharton School of Business.
QUESTIONS & ANSWERS WITH ARTHUR LEVITT AND HARDEEP WALIA
Questions focused on Motif Investing
Q (denvikh): Does Motif have plans to trade on international (non-US) exchanges? What I mean: will it be possible (eventually) to include stocks in my Motif that are only traded on these non-US exchanges? There are many solar stocks for example that are traded in HK exchange only.
A (Hardeep): We are starting to open up Motif to international residents by late summer I am hoping. It depends on international regulators. Opening up international markets to US residents will depend on how the first phase goes. Hopefully next year in specific markets. Right now markets on our first wave are Hong Kong, UK and Australia. You can invest in international markets through US listed international stocks and ETFs.
Q (istanu): When do you plan on supporting trading securities like bonds (not bond ETFs) and mutual funds on Motif Investing? Thanks.
A (Hardeep): We just received permission to do mutual funds from FINRA. Honestly, I am not a big fan of mutual funds but our customers have been asking for them so we are looking into right now. Bonds will come later–we need to do this. We need some scale here to be competitive. Lots of opportunity here.
Q (sk3889): Hardeep, what impact do you think Motif is having on new ETF launches, specifically smart beta ones; and how do you think the ETF industry sees Motif, do they see it as another SV obsession or something, that perhaps down the line will steal their lunch, (once costs come down, which I am assuming they will)?
A (Hardeep): Motley Fool calls us the “ETF Killer”. I think we will coexist with ETFs. In fact we can help spur growth of the industry. Most ETFs fail in the first few months because they can't hit their break-even point. They also take too long to launch. We are already working with ETF companies to launch what they call “outcome driven models”. We are launching a whole host of smart beta motifs for advisors. We are also thinking about licensing out our indexes to ETF companies–we are in discussions with a few right now.
Q (astern): Do you plan on providing support in Motif Investing for automatic dividend reinvestment?
A (Hardeep): Yes–we are working on it. We have to solve the automated handling of corporate actions first. That is a REALLY hard problem. We are very close to completing this. Dividend reinvestment is next.
Q (akhiljain): What steps is Motif taking for financial and investing education so that more people invest in an informed way understanding the risks and rewards?
A (Hardeep): We are going to be launching an investor education center this summer. We are also going to be launching new products to help investors understand risk. For all our motifs, we measure relative valuation and volatility. … We are already licensing our platform to teach 6th graders investing for free.
Q (istanu): Motif Investing is truly evolutionary from all other online brokerages. It has been a financially disruptive technology. How are you going to make Motif Investing revolutionary?
A (Hardeep): We spent most of last year migrating our system to BNY's Pershing platform. It put us in a great position to scale in the US and globally. But it did slow down our product/feature launches. You will start to see some revolutionary products launched in the next few months. Stay tuned…
Q (PassedPawn007): Hardeep, was it hard to find the 1st round investors for Motif Investing?
A (Hardeep): We got super lucky. Took us about five weeks end to end. Stressful but wasn't as hard as I thought. Subsequent rounds are easier than your first.
Personal Questions For Arthur Levitt
Q (GoneJahaman): How much money is in your checking account right now?
A (Arthur): I have $220,000 at JP Morgan.
Q (AnotherFinanceGuy00): Of all the innovative companies out there why did you pick Motif?
A (Arthur): The major reason I agreed to advise and then serve on the board of Motif was because of the quality of the founder. His persistence made all the difference to me.
Q (RochesterJosh) Can there be a healthy environment where both Wall-Street executives AND lower-to-middle classes can get ahead? Or will it always be one is rising while the other is falling.
A (Arthur and Hardeep): Yes I believe that in a healthy economic environment management know there cannot be long lasting success unless there is balance. Some firms don't touch this, the smart firms do something about it.
Q (UTMed) How can a lower to middle class person navigate the intricacies of the financial market (to earn for retirement by investing) without devoting their lives to the process? Also, do you see the financial sector as over regulated, under regulated, or just right?
A (Arthur) No I do not believe that the financial sector is over regulated. It's based on full disclosure and that's the best way to protect investors. But nothing is better for investors than being certain they know what they are doing and put emotionalism aside. Remember that most individuals are better off investing in passive, low priced funds than picking stocks. I am dead set against stock picking except for the most experienced investors.
Q (GoldenChrysus): “What do you think of Vanguard?”
A (Arthur): Arthur….Boy I love Vanguard. Jack Bogle is an American icon. He is the symbol of integrity and decency in the mutual funds market and made really great changes that have benefited investors. I would say that 80% of my present securities portfolio is invested with Vanguard.
Q (MorleyDotes): When the Twitter earnings were leaked the stock started to get crazy then trading was stopped. Who orders a stock trade stoppage and what is the criteria for stopping trading?
A (Arthur): The exchanges can order a stop to trading in a security and the criteria is usually that there is not enough information to indicate the cause of unusual sell or buy orders. Arthur
Q (uscEE): What is your take on high frequency trading and some of the ‘gaming the system' that comes along with it? Do you have an opinion on the future of where HFT will go? Thanks.
A (Arthur): I believe that High Frequency trading is going to be quite different in several years Probably because of regulation and part because of changes in technology. There will be a new game.
Questions on Mutual Funds, 401k, Bitcoin, The SEC And Top Investing Books To Read
Q (BitCoinNation23): Which way do you think the Supreme Court will judge on expensive mutual funds and employee accounts?
A (Hardeep): I think so much innovation is needed in the 401K space. Something I am personally very passionate about. I am hoping the Supreme Court rules in favor of the employees. It will shake up the industry and make it even easier for motif to play in this space. I am watching closely.
Q (sister bliss): I’m interested to know where you think Bitcoin will be in 5 years time?
A (Arthur): It’s clearly here as an important vehicle. Cryptocurrency in some form or other is going to evolve. I’m not certain whether it will be bitcoin as it is now or some evolutionary form but the banks are now buying in and international needs are growing. I am a strong supporter of bitcoin.
Q (akhiljain): Arthur, Hardeep, which is your favorite book to learn about investing? What’s your biggest personal learning in investing?
A (Hardeep): Unconventional Success by Dave Swensen. He was my professor Yale and I did my senior thesis with him. Brilliant investor and more importantly a brilliant human being.
A (Arthur): My book, Take on the Street.
A (Hardeep): That too… :)
Q (bambam): What other than the chronic under-staffing of enforcement personal at the SEC is the biggest challenge to enforcing the current laws on Wall Street? And what would you suggest be done tomorrow to protect retail investors from flash-boy style trading.
A (Arthur): I feel very strongly that political interference has hurt our system. The oversight committees of Congress who owe their careers to protecting the investors of America are shilling for their campaign contributors instead and are cutting resources for regulators and frustrating all investor protection issues.
INVESTING IN THE FUTURE
Pretty insightful stuff right? I'm surprised Arthur has $220,000 in his JP Morgan checking account. But then again, that's probably a very small percentage of his net worth sitting in cash. What's also interesting is that Arthur still keeps so busy at 84. Once you've had such a long and distinguished career, how do you say “no” to joining the boards of promising companies? Surely, being a special adviser to disruptive firms is a whole lot more than playing golf all day.
Not only do I consult for Motif Investing about their online content, I'm actually an investor as well through my investment in Renren via my Motif Investing portfolio. Renren was the lead investor in Motif Investing's $40 million Series E funding in January, 2014 and I decided to buy at the end of January due to its various investments in fintech companies that look to be valued at greater than RenRen's then market cap.
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Hi Financial Samurai,
“Updated for 2019 and beyond. Motif is still alive, but they are having trouble making money. They haven’t raised any new funding in over two years, so I fear their time is limited.”
What do you think prevented Motif from raising new funding after its initial success?
Is it this downfall trend you see for the fractional investment brokerages overall or specifically Motif?
Thank you
It’s tough to say exactly, but when Charles Schwab cut its trading fees to zero, that is a tough one for Motif to swallow Given I don’t think They have aggressively diversified their revenue towards banking.
Motif was great for the little investor with its fractional trading and low commissions. But now it’s harder to differentiate.
The online brokerage business is tough! Without a steady pipeline of funding money coming in, it’s hard to grow rapidly if you’re a business is lost making. That said, the company is still around so perhaps it’s operating profit breakeven.
See: https://www.financialsamurai.com/how-online-brokerages-make-money-charging-zero-trading-fees/
Hi Financial Samurai
If you are not super familiar with this method of investing what would you suggest reading in order to operate your funds in a profitable manner on Motif.
I have not invested in Motif yet, but I think their presense in the investing landscape has been a positive thing (along with others like Lending Club, Prosper, Personal Capital, Betterment, etc). All of those companies have pushed out more information and made it easier for the average person to invest. I think its great that they can innovate, make money, and help average people gain access to investments, too.
Ah AMA ask me anything. I never would have guessed that’s what that stands for. Cool! I didn’t realize that Reddit does so many AMAs and stuff. That’s really neat that q&a was live and they answered so many questions. Looks like a lot of exciting things in the pipes for Motif. They have a great business model. Low-cost investing makes such a big difference in the long run. I read somewhere that the average investor spends something crazy like $150,000 in fees over their lifetime. I don’t want that to be me!
Hi Financial Samurai,
I love reading your posts. I started investing last and have recently started an account in Lending Club. Your posts are very educational especially for rookie’s like me. I never had the courage to comment on your site until now.
Anyhoo, I was wondering, what do you think of MOTIF investing? Also do you have a lot invested in them? I am considering investing with them after I achieve my goals in Lending Club.
Thanks,
Jason
Hi Jason,
I think Motif Investing is revolutionizing the online brokerage model with its low-cost pricing and ability to easily build your own portfolio. Before I would pay $7.95 a trade to buy or sell one security. Now I can build up to a 30 position portfolio for $9.95. That lowers the barrier to investing for tons of people now. You can start investing for as little as $250.
I like how they’ve created a couple hundred professionally built motifs for investors to buy as well. They will rebalance the motifs for you, and you can elect to follow the rebalance or not. I’ve met with the entire research department multiple times, and creating and managing the motifs is their main goal. But not only that, there’s a whole active community of motif investors who’ve created their own motifs, which you can also buy.
Being able to start investing with a low amount of money and low commission rate allows investors to LEARN more about investing without fear of doing a lot of damage. The portfolio creation idea also helps LIMIT the temptation for retail investors to trade around their stocks. That was one of my biggest problems when I traded: too much trading. I haven’t traded a single stock in my motif since its inception end of January, and I’m glad I didn’t as it was outperforming the S&P 500 by almost 5% at one point.
To answer your final question, I started off with $10,000 to create my own portfolio.
Here is my Motif Investing Review post if you want to learn more.
Best,
Sam
Awesome. Sorry for my typos. Thank you.
On the bank account question. He answered specifically and used the poor question to not have to reveal much. The question was “how much do you have in your bank account”. Not “what is your current cash position”. So he answered that he has 220k in JP Morgan. Notice he also only named one account. And it was just below the FDIC insurance. He probably has a number of other accounts as well. But that wasn’t the question. It was “account” singular. Bureaucrats are the best at slight of hand with semantics. You don’t become the SEC chairman by chance.
Automatic dividend reinvestment would be a nice add on. As for Arthur still working at 84, as long as the work is engaging, fun, and has a purpose I think most people, myself included will continue to work past it being an economic necessity.
If Arthur has a networth of 65 million his $220,000 is only .3% of his networth in cash. That would mean for someone who had a networth of 1 million would only need $3,000 in cash that’s pretty small! Great article and I love Motif it has been a great tool to broaden my investment portfolio without getting killed with trading fees. Keep up the great work Sam!
Is his net worth $65 million? If so, that’s pretty big bucks for a former SEC Chairman. Lots of good opportunities as an advisor and board member after holding such a high level position. Glad you’re broadening your investment portfolio in a low cost manner. Let’s hope the markets stay relatively steady and don’t fall off a cliff once rates start rising.
Related: How To Invest And Profit In A Rising Interest Rate Environment
Client of ours was a former sec chairman and his net worth was $100mm++
Amazing. Well, there aren’t that many former SEC chairman, so I guess we can figure out who that is!
Around 40 former that are still alive