Most weekdays at 6 a.m., Ming Jia, the 25-year-old manager of trading at Betterment, is already awake at her apartment in Jersey City, N.J., logging in to her Bloomberg terminal to chat with friends in London and catch up on the global markets.
The former Credit Suisse foreign exchange options trader no longer cares about the “June 31, $1.25 euro-dollar strangle” or other trades that she says sound like bad serial killer monikers. But she’s still in tune with things like Federal Reserve meetings, Brexit votes or anything else that might cause securities to whipsaw.
Jia is on the team of overseers of all transactions at New York-based Betterment that manages $17.5 billion for over 400,000 customers. She babysits the automated advice platform or so-called robo advisor’s portfolio management software, algorithms that take in thousands of inputs each day and in turn execute trades, automatically rebalancing client allocations and mitigating tax hits. The company does not share specific details about those inputs or its own trading volume.
After a first look at markets early in the morning, Jia checks in with co-workers on Slack and, with new software development skills she’s picked up since joining Betterment, begins writing SQL queries on the system’s proposed trades for when the market opens. She is the human fail-safe ensuring the automated investment process is working as it should.
To be sure, Betterment’s software is not in danger of going rogue; It can’t decide to abandon exchange traded funds or clients’ allocations and begin, say, trading options.
But Betterment, a registered investment advisor, is responsible for delivering good trading execution for its clients, and even the most sophisticated computer could be tripped up by market whims. For example, the computer might suggest selling shares of an ETF at too low or high a price relative to its liquidity on a particular day and time.
“The computer knows what the optimal result is. I know what the reality is,” Jia told WealthManagement.com.
Before noon, Jia arrives at Betterment’s office near Union Square. Between meetings each day, she continues to monitor the company’s trade execution and sometimes takes calls from customers with the most technical questions—which is an ironic twist.
At Credit Suisse, Jia started as a macro product sales analyst but was not known for patience with customers. One day, after a notable asset manager (she would not say who) called her complaining about a trade, Jia told him he could call back when he calmed down, then hung up the phone. After that, the bank decided she might be better suited for trading, which fit with her skill set and required less customer contact, she said.
Betterment customers, especially the RIAs that use Betterment for Advisors, typically come with good questions, Jia said. But there are definitely small subsets that annoy her, like customers who complain about trade timing.
“They will say, ‘Hey, you could've done better if you had waited 20 minutes and tax-loss harvested me at the lows of day,’" Jia said. “My usual response is, ‘OK, why are you so special? You go in and you break that out. Do your own trading.’”
Jia understands the sensitivity some advisors and clients have on price if they are tax-loss harvesting, but the real value in Betterment is lost on these clients, she said. Betterment is not an alpha-generating money manager; it’s an investment enabler.
“I just don't think [Betterment] gets enough recognition. People are always talking about outperforming the benchmark. What about making the benchmark accessible?” she said.
Betterment is designed to keep investors away from the consequences of their worst habits.
For instance, Betterment limits investors to only one allocation change per day. There is a small but vocal contingent of retail investors that feel constrained by that, and they are not afraid to lodge their complaints. The robo advisor doesn’t want to be draconian, Jia said, but investing, to Betterment, means buying and holding, not trying to time allocations to the market’s whims.
Of course, client accounts automatically rebalance whenever their prescribed allocations veer off course by 3%, usually, or when their risk profile changes.
But even then, a lot can happen that requires a steady hand. It's Betterment's policy, stated in its filings with the Securities and Exchange Commission, to pause trading during the first and last 30 minutes of each session–when bid/ask spreads might be less favorable for clients.
Halting trades has gotten Betterment into trouble in the past. Before Jia joined the firm, Betterment was widely criticized for turning off trading for a few hours in the immediate aftermath of the U.K.’s June 2016 Brexit vote. Some advisors were upset that the decision on how to handle their clients’ portfolio was essentially taken out of their hands. But the firm defended the decision, saying the extreme volatility in the markets on that morning following the vote was not a good environment for buy-and-hold investors to make changes.
Jia agrees. She herself has paused trading midsession, for instance during the day of a Federal Reserve meeting. That ensures the automated trades aren’t being made in an excessively volatile environment. That can also have the added effect of protecting clients from the instinct to panic and execute trades inside that environment.
“I literally just look at the spreads and tickers, and our secondary tickers. When they go back to normal, compared to historical average, I turn trading back on,” she says. “It's like I'm literally a monkey pressing buttons. But I'm a monkey that knows numbers.”
After the market closes, Jia, along with others, including the team of five developers that work on trading software, assess the day’s activities. The query-writing and evaluation process is never-ending. “It's not that we don't trust our system,” she said, but the trading is too consequential to not have the constant feedback loop to examine how it’s working in real time.
By 7 p.m., Jia is headed home or to the gym. Even there, it’s hard to keep her attention away from markets, but she’s not bashful about it. Once at FlyBarre class, a high-repetition fitness class, a classmate accused Jia of “betraying the instructor" for being on her phone.
“Um, I'm a trader,” she replied.