Titan’s Clayton Gardner: ‘We want to make sure we’re building cars, not faster horses’
- While most robo-advisers have embraces passive investment strategies, Titan has taken a contrarian approach.
- Its clients turn to the investment app for reasonably-priced hedge fund strategies.
In the wake of investment firm Vanguard’s success, robo-advisers continued to usher in an era of indexed, passive investing. Titan is a contrarian investment platform which offers investment strategies used by hedge funds to retail investors.
Titan co-founder and co-CEO Clayton Gardner joins us to discuss why he built a financial technology firm centered around active investing and what type of investors and clients this approach appeals to. Titan has also grown using organic and referral customer acquisition strategies which combine incentivizing users to share Titan with their friends by reducing the AUM fees clients pay Titan — sometimes down to zero. Titan’s users are unusually active and involved in investing, even if they count on Titan to make their allocation and investment selection decisions.
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The following excerpts were edited for clarity.
Bringing active strategies to robo-adviser clients
Our mission and thesis has been very contrarian in our space for the past 10 years in that we strongly believe that in the value of active management for certain types of clients. That's opposed to other robo-advisers that pumped passive investing as the end-all-be-all.
I started investing when I was 12, investing some of my chore money. After losing a lot of money when the world blew up in 2008, I promised myself to learn what it takes to invest properly and not rely on tips from other people. I ended up working in hedge funds and private equity firms and saw how top investors allocate capital.
Passive investing for active clients
My co-founder was top of his class, worked at Goldman Sachs, but wasn't fully invested. There seems to be a massive divide of people that work in the industry, gone to business school, but don't know how to invest their own money. Titan takes the investment experiences and products available to the 1 percent and we're making them available to the masses.
I would characterize our core customer as a young professional, specialists in their domains. So, they value being top of their craft but they don't have the time or the resources to apply that approach to investing. They don't want to forfeit to average returns or invest in a black-box strategy, but they don't have the time or experience to do it for themselves. Maybe a traditional passive robo-adviser is too average whereas a DIY brokerage like E*Trade or Robinhood is maybe too hands on -- we fill that void for these folks.
Our clients want to be the smartest person in the room and they think about how they can be the smartest person in the room. It isn't about IQ or where they went to school -- in investing, it comes down to how well they know the companies they own. Can they explain the bull case as well as they can articulate the bear case? These specialists have similar aspirational aspects to their investment strategies.
The investment app
We're an SEC-registered investment adviser. People have probably heard of Wealthfront and Betterment, which use software to create a portfolio and rebalance it for investors, automating financial planning and passive investment strategy. But why isn't software being used better in the active investing space?
We have one financial product with retail investors from all walks of life -- a classic example of using software to retrofit an industry that's been around for awhile but hasn't caught up.
Acquiring new customers
Our acquisition is primarily an organic strategy. We think backwards -- where our target clients spend time today. There are a lot of trade publications, newsletters, and blogs that are read by our clients. Paid social can be attractive for certain parts of the market. But we work hard to get word of mouth and referrals.
We want people to understand what they're investing in. Investment content for active investment strategies has been underutilized. It's mission critical to make good investment decisions but it's super fragmented. The content we create in-house gets forwarded and shared with others. It's a big driver for us. We have a view on a lot of daily stories -- newsletters, videos, blogs, carousel images -- that drive our customers' money.
Success with referrals and incentives
The elephant in the room in traditional financial services is fees. Most folks don't understand the total fees they pay. We wanted to make sure our referral program rewarded people but also scratched the itch around fees, allaying skepticism around asset management. We charge 1 percent of AUM per year. We're willing to give our product away for free for life if someone refers four friends -- for every friend you share with, you each get 25 percent off your fees. We've run the math, it's sustainable and it makes economic sense for us.
The future of the platform
As an early stage startup, you have to balance between doing things that are innovative and keeping up with competitive parity. If it's table stakes, you don't have to have the best product in the industry. There are a number of features and products like debit and credit cards that we're thinking about.
We think about what the top one percent has at its disposal in terms of investment strategies. We're democratizing hedge funds right now, but what about private equity and private markets broadly? We can think about international equities and obviously, there are alternative asset classes like cryptocurrency. In a few years, when you sign up at Titan, you'll be able to invest like the top endowments and money managers.