New Online Broker Aims to Lure Investors Back to the MarketPosted by admin on June 04, 2012
New York Times, 6/4/12 —
Even as ordinary investors shy away from the stock market, a new online broker is entering the fray, and it has received backing from some big names on Wall Street.
Motif Investing, a firm based in a San Mateo, Calif., that officially opened for business on Monday, allows investors to buy a bucket of stocks centered on a theme, like cloud computing or income inequality. The company bills itself as an online evolution of investment clubs.
“We want to empower people to take ideas in their daily life that are hitting them, and put them to work,” said Hardeep Walia, Motif’s co-founder and chief executive, who once oversaw investments and acquisitions for Microsoft.
The initiative has attracted some prominent Wall Street backing. Sallie L. Krawcheck, who led Bank of America’s wealth management division until a management shake-up in September, has joined Motif’s board of directors. Arthur Levitt Jr., a former chairman of the Securities and Exchange Commission, and Jerry Gramaglia, a former president and chief operating officer of E*Trade, are both serving as advisers to the company.
“One challenge for investors is that many would like to invest in themes or in concepts that they believe in, but it can be a real challenge to do so,” Ms. Krawcheck said in an e-mail on Sunday. “Motif offers an interesting blend of new technologies to solve this and empower people to invest behind ideas.”
The company, which has been in a testing phase since January, will charge a flat fee of $9.95 for a so-called motif, a portfolio of up to 30 stocks based on themes like “seven deadly sins,” which includes tobacco, liquor and gambling stocks. Users can buy a prepackaged portfolio or create their own.
Mr. Levitt, who currently works as an adviser for Goldman Sachs and the Carlyle Group, said the platform offered a way for investors to diversify their holdings.
“The principal problem with retail investing is investors picking their own securities rather than going for low-cost funds or portfolios such as this,” Mr. Levitt said in an interview.
Motif also includes a social aspect, allowing investors to share portfolio ideas with “circles” of friends on the site. One of the themed portfolios, “lots of likes,” aims to mine the collective wisdom of social media users by including a group of companies that have the most “likes” on Facebook.
The start-up, whose venture capital backers include Norwest Venture Partners, Foundation Capital and Ignition Partners, said it had raised $20 million last summer, following a $6 million financing round in the fall of 2010.
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