How TD Ameritrade upgraded its research experience with crowdsourced earnings data

Individual investors are being treated to an investment platform upgrade cycle that closes the gap between the tools available to them and professional investors. TD Ameritrade has rolled out a series of changes to its thinkorswim trading platform that significantly improve its earnings analysis.

One big change is via its year-long partnership with Estimize, a fintech upstart that crowdsources earnings estimates from 3000 professional and amateur investors. Estimize’s consensus estimates have been proven to be more accurate than comparable sell-side data sets over 74 percent of the time. thinkorswim users can now view a stock’s projected range of earnings and revenues provided by the upstart.

“There’s been a lot of interest in crowdsourcing among our users,” said Chesley Spencer, product manager in the active trader group at TD Ameritrade. “For a number of years, we’ve seen investor interest and discussion in our social network, myTrade. The logical next step was to start crowdsourcing.”

Adding more earnings analysis gives investors a single visual of historical expectations versus actual results. TD Ameritrade has also added options market metrics like historical implied volatility to give clients a view of how the options market has responded to earnings cycles. Earlier in 2016, thinkorswim incorporated LikeFolio’s data that tracks social media conversations around specific products, so users can visualize trends in the frequency of social posts.

This upgrade comes amid a general commitment to increase innovation at the largest online broker by trading volume. New CEO Tim Hockey committed to boosting tech spending at TD Ameritrade by 25 percent. “We were the original fintechs,” he said in an interview. “Part of my task will be to literally get the organization back on our front foot when it comes to investment in cutting-edge technology.”

Like many other financial service firms, TD Ameritrade continues to see its users shifting their usage patterns to mobile.

As customers spend more time on smaller devices, their expectations of what the mobile experience should provide has also changed. Users don’t use mobile just to check stock prices anymore. They want to use mobile investing apps as full-fledged platforms — from account openings to doing research to making trades. “It’s been a rock-steady, year over year climb over the past decade,” said Spencer.

That’s provided an interesting challenge at the product level. Historically, mobile apps were just stripped down versions of online brokers’ desktop platforms that could fit on a small screen. But now, as investors want more from their mobile apps, that thinking has reversed itself to making the on-the-go experience as full-featured as possible.

“All of what we’ve done on desktop is now available on mobile,” explained Spencer. “It’s not so much having two platforms, but one experience that our users access through their mobile devices and computers.”


5 trends we’re watching this week

5 trends in finance this week

[alert type=yellow ]Every week at Tradestreaming, we’re tracking and analyzing the top trends impacting the finance industry. The following is a list of important things going on we think are worth paying attention to. For more in depth trendfollowing, subscribe to Tradestreaming’s newsletters .[/alert]

1. Is the marketplace lending industry in trouble? Here’s what we know. (Tradestreaming)

Trouble may be a bit strong but suffice it to saw, the business going forward looks a lot different than the fast-growth era we just emerged from. Here’s what’s going on.

See also:

  • Professional marketplace lending association aims for clarity, transparency (Tradestreaming)
  • Marketplace lender, Prosper ends Citi securitization pact (Nasdaq)
  • Online lenders dial back marketing in response to softer investor demand (WSJ)
  • Institutional investors taking leap into marketplace lending (BusinessWire)

2. Wall Street’s top bitcoin projects (Tradestreaming)
Less than 1% of internet users are currently using bitcoin, but incumbent financial institutions are busy testing blockchain technology.

3. Asset managers, prepare to have your business disrupted (Institutional Investor)
The combination of new tech, shifting demographics, and client needs is bringing a sea change to the asset management industry.

4. LendKey deploys $1 billion in capital to borrowers (Finextra)
LendKey, a tech company that helps incumbent FIs manage private label online lending offerings, announced it has powered more than $1 billion in lender capital to borrowers.

5. Selling Data: The emerging role of finance’s Chief Revenue Officer (Tradestreaming)
Selling financial data is sexy again and because of that, we’re seeing examples of a new role forming: the Chief Revenue Officer. As revenue production enters the C-suite, we take a closer look at 5 things that drive success.

Selling Data: The emerging role of finance’s Chief Revenue Officer

new role of chief revenue officer

The financial industry is no stranger to data — both buy-side and sell-side institutions have a long history of buying data, even if it was only through a monthly subscription to a Bloomberg terminal.

As new business models appear in finance, revenue models are following suit. Selling data is becoming cool again and that means, for some firms, generating revenues becomes a priority.

We recently sat down with Jeremy Baksht, the chief revenue officer for Estimize. His firm crowdsources sentiment data around stocks (like earnings and revenue expectations) and sells this information to financial institutions. His title says a lot about his role and mandate — it’s not just sales. He’s also tasked with customer development, scaling the sales organization, driving adoption of paying customers, and, to a certain extent, contributing to product development.

Baksht, who joined the firm mid-2015, draws parallels between building a sales operation for a young financial data firm to his experience as an investment banker at Citi working with firms like GE, Northrop Grumman, and Carlyle in Asia and Europe.

He shared 4 key things for executives to focus on when scaling revenues in today’s financial markets:

Identify target customer segments

For Baksht, his job was somewhat clearer because when he joined Estimize, the firm already had a head of sales who focused on selling into hedge funds. Bakst’s job was to sell to other segments. And to do this, he had to quickly identify viable customers.

He soon targeted options trading brokerages as potential clients: “Large brokers are very interesting for us,” Baksht commented. “Our data can help options traders going in and out of strategies around earnings announcements. In this way, we’re a more modern whisper number. ” Estimize now counts 2 of the 5 largest options brokerages as clients. These firms count 6 million accounts in total with 1 million of them active.

The next category the chief revenue officer identified as a potential market segment was the sell-side. For sell-side clients, it became clear that the firm’s data could be a differentiator for equity sales teams. What Estimize has done is work with sell-side firms to become contributors to Estimize’s data as well as potential clients. Once a bank’s analysts are included in Estimize feeds, equity sales teams can see where their analysts are in relation to the rest of the market and use this to market their firm’s ideas. For now, sales, research, and trading (SRT) clients generally don’t pay to access Estimize data but Baksht doesn’t see a reason they wouldn’t become paying clients of the firm in the future. For now, he’s content to get the sell-side contributing to Estimize data and beginning to consume it as well.

Create beachhead clients

Baksht eventually closed his first deal with BCA Research which became his firm’s first non-hedge fund client. BCA is a nearly 70-year old independent provider of global investment research that focuses on macroeconomic data. By tying up with Estimize, the research provider can offer its clients an indication of certain stocks tied to a macro strategy that were most likely to beat expectations. Estimize is the micro to BCA’s macro strategy, providing actionable recommendations to its clients.

Estimize’s CRO also sees some challenges selling in to large financial clients. A market that is increasingly gravitating to index products is also quick to sour on bigger-than-life stock pickers. He cites Bill Ackman, who’s made billions for himself and clients over the years, but is having a tough recent bout with the market. “There’s a growing skepticism among institutional money managers,” Baksht said.  “We’re seeing more and more fallen angels crack on their own mistakes, making it harder to sell data [intended to beat the market]. It’s hard to see a human beating smart algorithms over time.”

Professionalizing the product

Baksht also found a way to work with large buyside firms like Steven A Cohen’s Point72. Buyside firms are interested in Estimize as a stock screening input into their investment decisions, but they’re also interested in the workflows the product team has created. For example, when speaking to a director of research at a fund like Point72, Baksht makes sure to emphasize that his software can be used as a compliance tool, as well.

In this capacity, Estimize can be used by a client to analyze its team of stock pickers. “We log the analysts and see where they fall out vis-a-vis their peers,” Baksht commented. “We provide compliance tracking and ranking to track teams of analysts. It’s a kind of paper trading — to see whether an analyst is right or wrong.” Baksht said some clients see his firm’s software as a development tool: if stock pickers aren’t doing their job to the best of their capacities, a firm can step in and coach performance.

Create incentives to build-in product reliance

It’s here that Baksht’s background in M&A helps him play the long game. His experience as an investment banker working on M&A transactions with industrial firms instills him with a form of patience to work through the entire sales cycle. “I’ve worked on deals with 5 year cycles and know how to be patient,” he admitted. “I get past common objections — they don’t bother me. I can grind it out over years, applying rigor, patience and discipline from other industries. I don’t have the same biases [as other sales professionals in financial data] — I have a fresh view and fresh legs.”

He’s confident that getting a firm to use Estimize will lead to good things in the future. Firstly, any firm consuming Estimize data, in any form, becomes a potential contributor of data in the future. If his company intends to professionalize crowdsourced data, getting more and more professionals contributing their data improves the product.

Baksht also incentivizes usage. He’s been willing to give sell-side institutions access to his product in return for contributing their analysts’ coverage of stocks. More, Estimize encourages professional clients to de-anonymize their estimates when they submit them to the earnings database. Being able to use an analyst’s name and firm around an earnings or revenue estimate is valuable for the data and Baskht has exhibited a willingness to find the right subscription price point for clients in return for their contributions. In this way, sales can not only drive revenues back to a firm selling data — it can also improve the product along the way.

Computers vs. Humans: Who wins the investment game?

computers vs humans: who's the better investor

We’ve entered an era in investing where we read daily about billionaire stock pickers who’ve built large fortunes off their uncanny ability to invest in winners. There’s an entire cottage industry of websites that track all the investment moves of large fund managers in the hope for gleaning the next big homerun investment. Books like John Reese’s Guru Investor have deconstructed the strategies these top investors use so that investors at home can play along.

Here’s Estimize’s founder, Leigh Drogen on the humanness of great investing:

But here’s where it gets interesting. The best humans are still leaps and bounds better at investing than the best computers and the quantitative analysts behind their algorithms. Why? Because we’re just starting to scratch the surface of artificial intelligence in investing, and algorithms are still relatively dumb and inflexible. The best humans are still incredible at pattern matching and adjusting when correlations fall apart. Call it intuition, call it whatever you want, humans still have something extra that computers don’t (for now).

There is still something innately human about being able to identify and manage a great investment. No matter how good computers are at this point, they can’t recreate that special something.

On the other hand, much of today’s investing is happening via algorithms, via machines programmed to do what humans can’t — stick to an investment strategy. Trading volume in certain markets, like government bonds, is estimated to be 90% comprised of algorithms. That means buying and selling is happening machine-to-machine.

Machines can do something that behavioral finance experts know that humans just aren’t built to do: turn off their emotions and stick to a strategy. Algorithmic platforms enable quick filtering of investment candidates against standardized investment criteria and removes extraneous pressures and can make quantitative sense of conflicting signals.

So, which is it? Experts tend to say it’s a little bit of both. It’s the confluence of machines and humans that makes for the best, most successful investing. It’s the computer-enabled research and strategy building that enables a human, in spite of all his or her biases, to pull the trigger, when and where he or she determines is most appropriate.

According to Matthew Klein, the founder and CEO of Collective2, a platform for humans to devise, test, and manage algorithmic trading strategies, new investors should stick to the type of investing that plays to our strengths:

So if I were asked to give advice to some young hot-shot kid MBA at Harvard wondering what kind of investing field to pursue, I would say: Focus on the stuff that requires physical carbon. Do stuff that requires that you stand up at a podium and deliver a speech. Be a short-seller like Andrew Left who can scare the bejeesus out of investors by emailing a really cheesy PDF file to people in your rolodex.

To explore this concept further, Tradestreaming recently invited machine-human investing experts Matthew Klein, CEO of Collective2 and Leigh Drogen, CEO of Estimize to a frank conversation on the relative merits of algorithmic investing and stock picking.

View Can A Computer Do It Better? on Dealbreaker.

Top 12 Investing Tools of 2012

2012 was in many ways uneventful for those of us looking at the investing tools space.

Maybe it was general yawning at the stock market and less participation/caring about investing.

Or maybe it was because little capital flowed to new, innovative investment tools this year (a few existing companies like Betterment raised money).

That said, many of the existing investing tools in the marketplace are maturing. Products are getting easier to use and in general, gaining in popularity.

Here’s a group of 12 tools (you’re welcome to add more below) that I believe were worth your attention this past year (I’ve interviewed many of the founders of these companies on my podcast). They are a smattering of new tools (like SmartAsset) and older ones (Lending Club just celebrated its 5th year anniversary) that keep getting better with time.

Curious as to what you think — full disclosure: I was an early hire at Seeking Alpha and still own woefully too few shares and I’ve consulted to Wall Street Survivor and Lending Club.

Top 12 investing tools of 2012

(in no particular order)

  1. SmartAsset: So smartly designed and so necessary, it’s a shame SmartAsset didn’t launch years ago. It’s like a Web 2.0 financial calculator that provides personalized advice to help answer the most common of financial decisions like “should I rent or buy?“.
  2. QuantBlocks: QuantBlocks is a cool and powerful platform to help design and test quantitative trading strategies. The best part is that it doesn’t require any programming expertise. It’s just drag-and-drop simple.
  3. Seeking Alpha Pro: Recently launched, the price-point (around $200/mo) and the quality of the research on Seeking Alpha Pro makes it primarily for professional investors. Of higher quality than general posts on SA, Pro is intended to raise the bar of Seeking Alpha’s exclusive content and cement its role as the open destination to head online for stock research.
  4. Wall Street Survivor: Wall Street Survivor is the investor’s CodeAcademy. It’s designed for beginners and intermediate investors alike. WSS provides very specific, action-based missions for learning the ins-and-outs of investing.
  5. Motif Investing: Motif Investing is a platform for idea-driven investing. If you’re looking to create a low-cost portfolio of stocks around a specific idea, Motif is pretty interesting.
  6. SprinkleBit: SprinkeBit has bold goals and that’s to provide a one-stop-shop for younger investors. It combines the social sharing and learning with a brokerage platform.
  7. Reading the World: Russel Redenbaugh’s new newsletter is based upon decades of experience with policy-driven investing. It examines big macro trends and how government/economic policy impacts such movements.
  8. OurCrowd: There are a lot of crowdfunding platforms waiting for the JOBS Act to really hit but OurCrowd is already up and running and funding some top Israeli startups. For accredited investors only, investors can build a startup portfolio with increments as small as $10k.
  9. Lending Club: The peer lending network just celebrated its 5 year anniversary and $1B in assets. Together with smaller competitors, the peer lending industry is underwriting about $100M in loans every month now. LC Notes are becoming de rigeuer in diversified income portfolios (where else can you find high single digit, low double digit returns right now?).
  10. Estimize: Crowdsourcing really works and that’s true for earnings information. Estimize has shown that it’s frequently more accurate than Wall Street when it comes to financial estimates.
  11. StockRover: StockRover is a financial data portal that was built by a techie investor for others like him. If you enjoy deep diving into the data and doing great stock screens, StockRover is really powerful.
  12. Kivalia: Investors with assets in retirement accounts get the short end of the stick. They lack good advice. Kivalia is changing that with an advice layer on 401ks that tells investors what and when to buy — down to advice on which mutual funds they should own.

[listly id=”2hk” layout=”full”]

What tools/platforms did you enjoy this year? Let me know.

Dueling investing apps: How to best forecast earnings

P2P Lending's Developing Debt Market

In investing, earnings drive stock prices. The thing is, though, for many higher growth firms, it’s really hard to determine just how likely a firm is to hit its stated targets.

An earnings miss — or even a hint of one – can be disastrous to share prices.

So, investors spend a lot of time listening to this analyst and that pundit explain his expectations for earnings.

The truth is, very few of these guys get it right.

A better way to get earnings estimates: crowdsource ’em

Most of the time we use analyst consensus earnings — an average of all the different Wall Street opinions.

The problem with using an average is that earnings estimates on certain stocks diverge pretty significantly and taking the average isn’t an entirely accurate way of trying to gauge earnings.

There are a couple of ways to do this better/smarter right now.

Continue reading “Dueling investing apps: How to best forecast earnings”

Stock Twits, Estimize, and the future of social investing – with Leigh Drogen

Leigh Drogen played an integral role in StockTwits‘ success. Now, he’s on to his own startup, Estimize, which takes aim at improving financial estimates with a decidedly social approach.

Drogen shares his own experience and history as an investor and now entrepreneur as he’s one of the most vocal proponents of using a mix of social media communications to enhance the investing process.

He’ll share his vision of social investing and how Estimize should help investors become more accurate.
Continue reading “Stock Twits, Estimize, and the future of social investing – with Leigh Drogen”