Motif, a brokerage platform that offered investors portfolios of stocks around business themes, is closing, according to a letter from the firm’s co-founder and CEO, Hardeep Walia, provided to users on Friday and shared with WealthManagement.com. Client assets held by the company will be transferred to Folio Investing on May 20.
Motif was founded in 2012 with the idea that users could create their own baskets of stocks around themes and share them with others. It worked to expand its initial thematic trading feature into something more recognizable to today’s robo advisor services. Its robo-esque monthly subscription service, Motif BLUE, was launched in 2016 and provided “automated investing and rebalancing” along with unlimited trades.
The abrupt closure comes a little more than a year after Motif announced a lineup of five new thematic exchange traded funds it had developed in conjunction with Goldman Sachs Asset Management. The fintech has a long-standing relationship with Goldman Sachs, among other investment banks, with Walia having “convinced Goldman Sachs, JP Morgan and others to invest $86 million in my startup,” according to a 2014 Reddit post. “Only in Silicon Valley can you raised $26M off twenty pages of PowerPoint,” he wrote in an “Ask Me Anything” post. “It doesn’t happen anywhere else.”
That same year, Motif won Best of Show honors at the FinovateSpring fintech competition. The company eventually raised $126.5 million, according to Crunchbase.
Walia, who previously worked in executive roles at Microsoft and has been named to who’s who lists at Goldman Sachs, Forbes, CNBC and Fast Company, did not immediately respond for comment. A spokesperson for Goldman Sachs Asset Management was not immediately available over the weekend.
Motif could be one of the first major casualties of widely available commission-free trading, according to David Goldstone, head of research for Backend Benchmarking. "The adoption of commission-free trading by the major discount brokers has taken away the competitive advantage of some trading fintech applications," he said. "Motif had an innovative approach but ultimately did not appeal to enough people or find a profitable business model."
On Monday, Goldman Sachs Asset Management issued a statement that it was discussing serving as index provider for the five ETFs associated with both Motif and the asset manager. The move would be subject to approval by the ETFs’ board of trustees and Goldman Sachs Asset Management does "not expect any interruption to the management of the ETFs at the present time."
Social media posts began trickling in as the news broke, reflecting the impact Walia and Motif had on the industry. “Sad to see this one go,” wrote Aaron Schumm, founder and CEO of Vestwell, a tech firm focused on offering and administering retirement plans. “I really liked what they had built.”
Motif was a "daring idea that will be further validated as the industry evolves," added Jud Mackrill, CMO at Carson Group, in a social media post.
In an era of fee waivers for exchanged traded funds, charging a subscription fee for a portfolio stands out. Walia acknowledged that its “pre-made portfolios,” which it called “Motifs,” had been imitated by Folio and branded as “Ready-to-Go Folios.”
“Many of the solutions you are familiar with at Motif will now be available to you as a Folio customer,” he told users in the letter. Motif negotiated a price discount with Folio, from $29 down to $19.95 per month. Account transfer fees will also change under the new brokerage firm.
As of late March, Motif Investing’s wholly owned subsidiary, Motif Capital Management, had $868 million in assets under management, according to regulatory filings.