JP Morgan, Motif Investing open up IPO investing

motif investing and jp morgan launch ipo trading

Since its launch, Motif Investing has championed creating low-cost, high-value portfolio creation tools for individual investors.

Founder and CEO of Motif, Hardeep Walia joined me on the Tradestreaming Podcast early in the company’s maturation cycle to talk about how Motif fits into the historical narrative of opening up investing tools and tech to individual investors:

So, what we do is we create indexes around these ideas and we focus on making investing very intuitive. It is as simple as, “I see something, an idea that I want. I want to put money to work and I don’t necessarily want to spend tons of time messing around with research in stocks, because I believe the index will do its job.” Then, we have very sophisticated investors who say, “You know what, just give me a starting point for a portfolio of stocks that actually act on these ideas,” and that’s what Motif is.

Motif announced today that it would take another step to opening up a traditionally opaque part of the investing world: IPOs. As part of a partnership with JP Morgan, the online broker is offering everyone access to IPO shares with as little as a $250 investment.

The new partnership “will broaden access to IPOs to more individual investors,” said Michael Millman, Co-Head of Americas Equity Capital Markets and Head of Technology Investment Banking at J.P. Morgan, in a statement. “Motif’s innovative and easy to use platform is a cutting-edge, differentiated way for issuers to reach investors.” J.P. Morgan will be encouraging its IPO companies to participate in the Motif program. Source

Motif appears serious in bringing its style of investing to the IPO market and it looks like JP Morgan may be the first of bulge bracket firms that bring offerings to the startup online broker.

IPO markets: Profitable, broken, and in need of fixing

IPOs have traditionally been a black box of the brokerage industry. “Book building” for IPOs, the process through which brokers went out to their clients to match supply and demand for shares, was completely opaque. Because IPO shares frequently pop after they list for trading, shares of top offerings were frequently reserved for the best customers of brokerage firms (high net worths and hedge funds).

In sought-after IPOs, it was very hard for general investors to get their hands on them. Because of such scarcity, investors requested larger than appropriate allocations for their portfolios in the hope that they’d end up with a better size allocation when the brokerage firms cut back their customers back . Because of this dynamic, in lackluster public offerings, investors frequently got “stuffed” with more shares than they really wanted.

The IPO process is one of the last holdouts in the face of digital disruption and that’s because IPOs play an important role in the brokerage business — they were a way for the brokerage firms to reward their best customers. Investment banks frequently underprice shares on their floats, providing quick profits to buyers of shares. The other side of this coin is that companies going public leave money on the table because of this underpricing. Investment banks come out looking good and brokerage firms are lauded by their customers.

Historically, there have been various attempts at disrupting the IPO process, including:


[x_icon_list_item type=”dollar”]Dutch auctions: Investment bank, Hambrecht pioneered a form of dutch auction for IPOs, something it calls OpenIPO. In this model, the investment bank collects bids from all interested investors, big and small, and groups them by how much each is willing to pay for a share. Its bankers then count down from the top bid until they reach the highest price at which the selling company could sell all of the shares it wants to offer. The company can choose that price or, for various reasons, a lower one. Hambrecht then sells at the chosen price all the shares that were bid at that price or higher. One of the most famous IPOs to implement the OpenIPO process was Google, but few companies have really followed suit.[/x_icon_list_item]

[x_icon_list_item type=”dollar”]Equity crowdfunding platforms: With various new regulation in place (2012’s JOBS Act), the market has been kind of waiting to see equity crowdfunding platforms (like AngelList, CircleUp, and OurCrowd have popularized) perform the role of taking a private company into the public realm. It hasn’t quite happened, as regulation still relegates participation on crowdfunding platforms to accredited investors. It will take some more time before the general public will get a chance to transact in private companies.[/x_icon_list_item]

[x_icon_list_item type=”dollar”]Direct to consumer: There are a few firms like Cutting Edge Capital that working on Direct Public Offerings, a takeoff of the IPO but simpler and more accessible to general companies looking to list on a local exchange. Paperwork, filings are all easier to get going and it enables a company to market its securities to a local audience. Other firms, like Loyal3 , are creating investment platforms that make ease the IPO marketing for consumer brands and help them provide shares to loyal customers. Companies like GoPro and GoDaddy have used Loyal3 to distribute shares to their customers.[/x_icon_list_item]



Motif Investing’s approach is to create a personalized investing experience around individual investors. Individual investors can create thematic portfolios (called, motifs) and trade them with one click for a low fixed fee. Motif customers can share and implement company-built motifs or use those shared by others on the platform.

Who knows, maybe an IPO Motif is in the works.

[x_share title=”Share this Post” facebook=”true” twitter=”true” linkedin=”true” email=”true”]

[x_author title=”About the Author”]

Motif Investing puts creative investors in business

Motif Investing is quietly growing its arsenal of institutional investors (Goldman Sachs invested recently in Motif), an A-list board of investors (former SEC chief Arthur Levitt joined recently), awards (best of show at Finovate), and its share of innovative new products.

Though CEO Hardeep Walla as much hinted at this possibility when I interviewed him for my podcast, Motif Investing introduced today a way for investors to make money from their ideas.

Called the Creator Royalty Program, this new product enourages investors to create their own portfolios (called, motifs) and pays them when another investor invests in their motif.

According to the WSJ:

“Under a “Creator Royalty Program” that Motif is set to announce Thursday, people who craft their own motifs can collect $1 for each person who subsequently invests in it. A user who creates a housing-market motif, for example, also would collect royalty payments when other users personalize the motif to add a little more Home Depot stock, and a little less weighting on mortgage brokers.

“Our idea is to let people monetize their ideas,” said Motif Co-Founder and CEO Hardeep Walia.”

This can clearly attract attention beyond individual investors. I know investment advisors are beginning to find value in the thematic investing service and its 1-click, low price portfolio building. But affinity groups could begin to brand portfolios that represent their interests. Not only does Motif Investing encourage investors to share their ideas, it compensates them for doing so.

Other online platforms that pay investors for ideas

Motif isn’t the only place investors can go to make money off their stock ideas. In an earlier post, I addressed this potential revenue model versus starting a hedge fund. Here are just a few ways people can get paid for their investment ideas:

  1. Seeking Alpha’s Premium Program: Seeking Alpha has been building a content warchest over the years and has upped the ante with a program that pays contributors a share of the ad revenue generated by their articles.
  2. Collective2: Collective2 (see my interview with the founder) is a marketplace of investment strategies. Individuals can create and trade a portfolio and investors can auto-trade those strategies they find interesting. System creators get paid a subscription fee when that occurs. (Check out my system: the Tradestreaming Hedge Fund Guru Strategy, up almost 70% over 2 years).
  3. Zignals: Zignals is very similar to Collective2 but if Collective2 has the user interface of Craigslist, Zignals is more like Microsoft. And that’s partly because Zignals is built on MSFT’s Silverlight technology. The sleek site has a lot more tools for designing portfolio: charts, alerts, screeners, etc.
  4. Currensee and etoro: These next generation forex trading sites both allow talented traders to open up their activity to others to follow. In return, they make money by doing this. If you have a good track record, you can make some serious change as you can also profit as part of a carry — if you’re profitable in your trading strategies, you can make a percentage of the money you make your followers.
  5. Start your own investment newsletter: This isn’t as turn-key revenue as some of the other options but certainly viable. It’s as easy a building a small website, sending periodic emails, and collecting a subscription payment.

Did I miss any?

Anyway, Motif is doing great things and building an investment platform that combines the low-cost do-it-yourself ethos with the interactivity and transparency of social. And now, the incentives to build, share, and profit from investment ideas just feels right…like Motif is headed in the right direction.

(If you’re interested,  I composed this beginner’s guide to Motif Investing a while back.)

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.

Beginner’s Guide to Motif Investing

The investing landscape has changed tremendously over the past few years — mostly in ways that directly benefit individual investors.

  • Transparency is increasing
  • Fees are decreasing
  • Brokers are being phased out in favor of Registered Investment Advisors
  • Assets are moving from expensive, actively managed mutual funds to low cost, passively managed exchange traded funds (ETFs)

It’s this last piece that is going to serve as the focal point for this post. In fact, assets invested in U.S. ETFs just exceeded $1 trillion.

ETFs growing like weeds, investors struggle to keep up

If ETFs have evolutionized (it’s not really a revolution) our investment choices, information and commentary on how to use ETFs haven’t quite kept pace. Investors struggle to understand exactly what an ETF’s strategy is and how it’s managed.

Heck, professionals are drowning in trying to make sense of all the new ETF offerings.

A new platform, called Motif Investing, may be changing all this…

Continue reading “Beginner’s Guide to Motif Investing”

Investing in ideas – with Motif Investing’s Hardeep Walia

There’s no lack of good investing ideas.

We all come across good, compelling investment themes in our work lives, at home, at the store.

Where we struggle as investors is finding the appropriate investing vehicle to capture our ideas. That’s where Motif Investing comes in.

Join me and co-founder/CEO of Motif Investing, Hardeep Walia for a discussion of the new investment platform, idea-driven investing, and the future of finance.

Listen to the FULL interview

About Hardeep

Hardeep is the cofounder and CEO of Motif Investing. He’s an successful entrepreneur and spent 6 years at Microsoft.
Continue reading “Investing in ideas – with Motif Investing’s Hardeep Walia”

Will the future of wealth management really be “virtual”?

I’ve been chatting with a few friends over the past couple of days about which model will prevail for wealth management in years to come.

2 sides to the argument

Essentially, there are 2 sides to the argument:

  1. virtualists: The virutalists are banking on a future where investment advisors will prospect, deliver advice, and service clients over virtual channels (Internet, phone, chat, video conference). This is a boundary-less marketing environment and doesn’t put a premium on marketing to a local clientele.  That’s a world where there’s no tennis, no kids’ bar mitzvas, and certainly, no shoulder-crying on your advisor when markets go bad.
  2. ol’ skoolers: This camp doesn’t envision a world where the delivery of financial services changes very much from what it’s been traditionally. Advisors have adopted email and websites and yes, are beginning to use social networks but ultimately, it’s a face-to-face business. You may buy diapers online but you’ll never really buy financial services online.

It might be easy to dismiss the ol’ skoolers as just that — financial dinosaurs who just can’t face the digital future of the business. We’ve got plenty of analysis like this from kasina pointing to the future and it appears to be digital: Continue reading “Will the future of wealth management really be “virtual”?”