A Financial Services Startup I Wanted to Hate
I read this TechCrunch article on Motif and immediately scoffed. “Okay,” I thought, “It’s an ETF provider which makes up words and has some fancy design sense to appeal to hipsters and young people. Under the hood it’s just some actively-managed BS packaged with some hefty management fees. Oh, and I see they have a fixed-income fund to capitalize on the bond mania. Yeah, that seems awesome.”
But I clicked through to the site, just because, and actually liked what I found. Rather than selling trendy and expensive actively-managed ETFs, each equity “motif” is a package of equities that are bought in given proportions. They are fairly blocky, since you are buying whole equities rather than units in a fund and so there’s a minimum buy of $250. Furthermore, the commission is fixed at $9.95 for any level of investment (as far as I can tell)…which is much, much cheaper than the commissions on 30 stocks. So presumably Motif’s fee is coming on their cut of the commissions after whatever bulk fee they’re paying to trade in large volumes. I actually kind of like this concept – it’s an easy way to get diversified sectoral exposure without paying any management fees or going through the effort of picking stocks yourself.
On the other hand, unsurprisingly their fixed-income offerings are just packaged-up bond ETFs. Way less cool.